Social Credit

Social Credit is a socio-economic philosophy wherein consumers, fully provided with adequate purchasing power, establish the policy of production through exercise of their monetary vote.cite book |title=Credit-Power and Democracy |last=Douglas |first=C.H. |year=1933 publisher=The Social Credit Press |location=Melbourne, Australia |pages=89-91 ] In this view, the term economic democracy does not mean worker control of industry.cite book |title=Credit-Power and Democracy |last=Douglas |first=C.H. |year=1933 |publisher=The Social Credit Press |location=Melbourne, Australia |pages=4-9 ] Removing the policy of production from banking institutions, government, and industry, Social Credit envisages an "aristocracy of producers, serving and accredited by a democracy of consumers."cite book |title=Credit-Power and Democracy |last=Douglas |first=C.H. |year=1933 publisher=The Social Credit Press |location=Melbourne, Australia |pages=95 ]

The term Social Credit, as a formal name, originated from the writings of British engineer and originator of the Social Credit movement, Clifford Hugh Douglas (1879-1952), who wrote a book by that name in 1924. According to Douglas, the true purpose of production is consumption, and production must serve the genuine, freely expressed interests of consumers. Each citizen is to have a beneficial, not direct, inheritance in the communal capital conferred by complete and dynamic access to the fruits of industry assured by the National Dividend and Compensated Price.cite book |title=Credit-Power and Democracy |last=Douglas |first=C.H. |year=1933 publisher=The Social Credit Press |location=Melbourne, Australia |pages=4, 108 ] Assuming the only safe place for power is in many hands, Social Credit is a distributive philosophy, and its policy is to disperse power to individuals. Social Credit philosophy is best summed by Douglas when he said, “Systems were made for men, and not men for systems, and the interest of man which is self-development, is above all systems, whether theological, political or economic.” [cite book |title=Economic Democracy, Fifth Authorised Edition |location=Epsom, Surrey, England |last=Douglas |first= C.H.|year=1974 |publisher=Bloomfield Books |isbn=0904656063 |pages=18 ]

Economic theory

Douglas disagreed with classical economists such as Adam Smith and David Ricardo who divided the factors of production into land, labour and capital. He also disagreed with Karl Marx who claimed that labour created all wealth. Douglas believed the “cultural inheritance of society” was the primary factor in production. Our cultural inheritance is defined as the knowledge, technique and processes that have been handed down to us incrementally from the origins of civilization. Consequently, we do not have to keep “reinventing the wheel”. “We are merely the administrators of that cultural inheritance, and to that extent the cultural inheritance is the property of all of us, without exception.” [Douglas, C.H. (January 22, 1934). " [http://www.alor.org/Library/MonopolisticIdea.htm#1a The Monopolistic Idea] " address at Melbourne Town Hall, Australia. The Australian League of Rights: Melbourne. Retrieved on February 28, 2008.] Douglas also criticized classical economics because it was based upon a barter economy; whereas, the modern economy is a monetary one.

The nature of money and credit

To the classical economist, money is a medium of exchange. This may have once been the case when the majority of wealth was produced by individuals who subsequently exchanged it with each other. But in modern economies, division of labour splits production into multiple processes, and wealth is produced by people working in association with each other. For instance, an automobile worker does not produce any wealth (i.e., the automobile) by himself, but only in conjunction with other auto workers, the producers of roads, gasoline, insurance etc.

In this view, wealth is a pool upon which people can draw, and the efficiency gained by individuals cooperating in the productive process is known as the “unearned increment of association” – historic accumulations of which constitute what Douglas called the cultural heritage. The means of drawing upon this pool are the tickets distributed by the banking system.

Initially, money originated from the productive system, when cattle owners punched leather discs which represented a head of cattle. These discs could then be exchanged for corn, and the corn producers could then exchange the disc for a head of cattle at a later date. The word “ [http://www.billcasselman.com/unpublished_works/cow_words_one.htm pecuniary] ” comes from the Latin “pecus,” meaning "cattle". [Citation |last=Pollock |first=Fredrick |publication-date=1996 |title=The History of English Law Before the Time of Edward I |publisher=Lawbook Exchange Ltd |pages=151 ] Today, the productive system and the distributive/monetary system are two separate entities. Douglas demonstrated that loans create deposits, and presented mathematical proof in his book "Social Credit". [cite web |url=http://www.mondopolitico.com/library/socialcredit/p2c1.htm |title=The Working of the Money System |accessdate=2008-02-27 |author=C.H. Douglas |work=Social Credit |publisher=Mondo Politico] Bank credit comprises the vast majority of money, and is created every time a bank makes a loan. [cite web |url=http://www.bankofcanada.ca/en/backgrounders/bg-m2.html |title=The Bank in Brief: Canada's Money Supply |accessdate=2008-02-28 |publisher=Bank of Canada] Douglas was also one of the first to understand the creditary nature of money. The word credit derives from the Latin "credere", meaning "to believe". "The essential quality of money, therefore, is that a man shall believe that he can get what he wants by the aid of it." [Citation |last=Douglas |first=C.H. |publication-date=April 22, 1927 |title=Engineering, Money and Prices |place=Institution of Mechanical Engineers |publisher=Warning Democracy |pages=15 |url=http://www.alor.org/Library/Warning%20Democracy.htm#1a |accessdate=2008-02-28 ]

Money should not be regarded as a commodity but rather as a ticket, a means of distribution of productionDouglas, C.H. (February 13, 1934). " [http://www.alor.org/Library/TheUseofMoney.htm#1a The Use of Money] " address at St. James’ Theatre, Christchurch, New Zealand. The Australian League of Rights: Melbourne. Retrieved on February 28, 2008.] "There are two sides to this question of a ticket representing something that we can call, if we like, a value. There is the ticket itself – the money which forms the thing we call 'effective demand' – and there is something we call a price opposite to it."Douglas, C.H. (February 13, 1934). " [http://www.alor.org/Library/TheUseofMoney.htm#1a The Use of Money] " address at St. James’ Theatre, Christchurch, New Zealand. The Australian League of Rights: Melbourne. Retrieved on February 28, 2008.] Money is effective demand, and the means of reclaiming that money are prices and taxes. As real capital replaces labour in the process of modernization, money should become increasingly an instrument of distribution.

Douglas also claimed the problem of production, or scarcity, had long been solved. The new problem was one of distribution. Douglas criticized the banking system on two counts:
# for being a form of government which has been centralizing its power for centuries, and
# for claiming ownership to the money they create. The latter he claimed was equivalent to claiming ownership of the nation. [Douglas, C.H. (November 24, 1936). " [http://www.alor.org/Library/Dictatorshipbytaxation.htm#1a Dictatorship by Taxation] " address at Ulster Hall, Belfast. The Australian: Melbourne. Retrieved on February 28, 2008.] Money, Douglas claimed, was merely an abstract representation of the real credit of the community, which is the ability of the community to deliver goods and services, when, and where they are required.

The A + B theorem

In January 1919, "A Mechanical View of Economics" by C.H. Douglas was the first article to appear in the "New Age", edited by A.R. Orage, critiquing the methods by which economic activity is typically measured:

:"It is not the purpose of this short article to depreciate the services of accountants; in fact, under the existing conditions probably no body of men has done more to crystallize the data on which we carry on the business of the world; but the utter confusion of thought which has undoubtedly arisen from the calm assumption of the book-keeper and the accountant that he and he alone was in a position to assign positive or negative values to the quantities represented by his figures is one of the outstanding curiosities of the industrial system; and the attempt to mold the activities of a great empire on such a basis is surely the final condemnation of an out-worn method." [Citation |last=Douglas |first=C.H. |publication-date=1919 |title=A Mechanical View of Economics |periodical=The New Age |series=1373 |publication-place=38 Cursitor Street, London |publisher=The New Age Press |volume=XXIV |issue=9 |pages=136 |url=http://dl.lib.brown.edu/pdfs/1140814692791748.pdf |accessdate=2008-03-14]

In 1920, Douglas presented the A + B theorem in his book, "Credit-Power and Democracy", in critique of accounting methodology pertinent to income and prices. In the fourth, Australian Edition of 1933 Douglas states:

:"A factory or other productive organization has, besides its economic function as a producer of goods, a financial aspect—it may be regarded on the one hand as a device for the distribution of purchasing-power to individuals through the media of wages, salaries, and dividends; and on the other hand as a manufactory of prices – financial values. From this standpoint, its payments may be divided into two groups:"

::Group A - "All payments made to individuals (wages, salaries, and dividends)."

::Group B - "All payments made to other organizations (raw materials, bank charges, and other external costs)."

:"Now the rate of flow of purchasing-power to individuals is represented by A, but since all payments go into prices, the rate of flow of prices cannot be less than A+B. The product of any factory may be considered as something which the public ought to be able to buy, although in many cases it is an intermediate product of no use to individuals but only to a subsequent manufacture; but since A will not purchase A+B; a proportion of the product at least equivalent to B must be distributed by a form of purchasing-power which is not comprised in the description grouped under A. It will be necessary at a later stage to show that this additional purchasing power is provided by loan credit (bank overdrafts) or export credit.”"cite book |title=Credit-Power and Democracy |last=Douglas |first=C.H. |year=1933 publisher=The Social Credit Press |location=Melbourne, Australia |pages=22-23 ]

Beyond empirical evidence, Douglas claims this deductive theorem demonstrates that total prices rise faster than total incomes when regarded as a flow.

Compensated Price and National Dividend

Douglas proposed to eliminate this problem by increasing consumer purchasing power with credits which do not appear in prices in the form of a price rebate and a dividend. Formally called a "Compensated Price" and a "National (or Consumer) Dividend", a National Credit Office would be charged with the task of calculating the size of the rebate and dividend by determining a national balance sheet, and calculating aggregate production and consumption statistics.

The price rebate is based upon the observation that the real cost of production is the mean rate of consumption over the mean rate of production for an equivalent period of time.

The physical cost of producing something is the materials and capital that were consumed in its production, plus that amount of consumer goods labour consumed during its production. This total consumption represents the physical cost of production. Since less inputs are consumed to produce a unit of output with every improvement in process, the real cost of production falls over time. As a result, prices should also fall with the progression of time.

Based on his conclusion that the real cost of production is less than the money distributed in production, the Douglas price rebate (Compensated Price) stems from the ratio of consumption to production. Since consumption over a period of time is typically less than production over the same period of time in any industrial society, the real cost of goods should be less than the financial cost.

For example, if the money cost of a good is $100, and the ratio of consumption to production is 3/4, then the real cost of the good is $100(3/4)=$75. As a result, if a consumer spent $100 for a good, the National Credit Authority would rebate the consumer $25. The good costs the consumer $75, the retailer receives $100, and the consumer receives the difference of $25 via new credits created by the National Credit Authority.

The National Dividend is justified by the displacement of labor in the productive process due to technological increases in productivity. As human labor is increasingly replaced by machines in the productive process, Douglas believed people should be free to consume while enjoying increasing amounts of leisure, and that the Dividend would provide this freedom.

Further, labor displacement in the productive process implies that overhead charges (B) increase in relation to income (A), because "'B' is the financial representation of the lever of capital”.cite book |title=Credit-Power and Democracy |last=Douglas |first=C.H. |year=1933 publisher=The Social Credit Press |location=Melbourne, Australia |pages=25 ] In these terms, any attempt to stabilize or increase income is met with rising prices. If "A" is constant or increasing, and "B" increases due to technological advancement, then "A+B" (prices) must also increase. As the Phillips Curve suggests, inflation and unemployment are trade-offs, unless prices are reduced from monies derived from outside the productive system.

In his pamphlet entitled, "The New and the Old Economics", Douglas describes the cause of "B" payments:

:"“I think that a little consideration will make it clear that in this sense an overhead charge is any charge in respect of which the actual distributed purchasing power does not still exist, and that practically this means any charge created at a further distance in the past than the period of cyclic rate of circulation of money. There is no fundamental difference between tools and intermediate products, and the latter may therefore be included.”" [cite book |title=The New and the Old Economics |last=Douglas |first=C.H. |isbn=0858550040 ]

In 1932, Douglas estimated the cyclic rate of circulation of money to be approximately three weeks. The cyclic rate of circulation of money measures the amount of time required for a loan to pass through the productive system and return to the bank. This can be calculated by determining the amount of clearings through the bank in a year divided by the average amount of deposits held at the banks (which varies very little). The result is the number of times money must turnover in order to produce these clearing house figures. In a testimony before the Alberta Agricultural Committee of the Alberta Legislature in 1934, Douglas said:

:"“Now we know there are an increasing number of charges which originated from a period much anterior to three weeks, and included in those charges, as a matter of fact, are most of the charges made in, respect of purchases from one organization to another, but all such charges as capital charges (for instance, on a railway which was constructed a year, two years, three years, five or ten years ago, where charges are still extant), cannot be liquidated by a stream of purchasing power which does not increase in volume and which has a period of three weeks. The consequence is, you have a piling up of debt, you have in many cases a diminution of purchasing power being equivalent to the price of the goods for sale."Citation |last=Douglas |first=C.H. |publication-date=1934 |title=The Douglas System of Social Credit: Evidence taken by the Agricultural Committee of the Alberta Legislature, Session 1934 |publication-place=Edmonton |publisher=Legislative Assembly of Alberta |pages=90 |accessdate=3/8/2008 ]

According to Douglas, the major consequence of the problem is exponentially increasing debt. Further, society is forced to produce goods that consumers either do not want or cannot afford to purchase. The latter represents a favorable balance of trade, meaning a country exports more than it imports. The former represents excessive capital production and/or military build-up. But not every country can pursue this objective at the same time, as one country must import more than it exports when another country exports more than it imports. The long-term consequence of this policy is a trade war, typically resulting in real war – hence, the Social Credit admonition, "“He who calls for Full-Employment calls for War!”", expressed by the Social Credit Party of Great Britain and Northern Ireland, led by John Hargrave. Excessive capital production is only a temporary correction, as the cost of the capital typically appears in the cost of consumer goods or taxes, further exacerbating future gaps between income and prices. Military buildup necessitates either the violent use of weapons or a superfluous accumulation of them.

Critics of the A + B theorem and rebuttal

Critics of the theorem argue there is no difference between A and B payments, and Social Credit policies are inflationary. These criticisms are based upon the quantity theory of money, which states that the quantity of money multiplied by its velocity of circulation equals total purchasing power. Social Crediters deny the validity of this theory. Following is a brief explanation of the quantity theory of money:

:MV = PQ, where::M = quantity of money in the hands of the public,::P = average level of prices, and::Q = quantity of output (that is real national product or real national income).:Thus,::PQ = national product, measured in nominal (dollar) terms, and::V = income velocity of money.:That is, the average number of times that the money stock (M) is spent to buy final output during a year. Specifically, V is defined as being equal to PQ/M

:Suppose that the money stock is $20 billion. Assume that, in the course of a year, the average:dollar bill and the average chequing deposit are spent twelve times to purchase final goods and services. In other words, V is 12. Then, total spending for final output is $20 billion times 12, or $240 billion. In turn, this total spending (MV) equals the total quantity of goods and services (Q) times the average price (P) at which they were sold.

:But how can the same dollar be used over and over to purchase final goods? Very simply. When you purchase groceries at the store, the $50 paid does not disappear. Rather, it goes into the cash register. From there, it is used to pay the farmer for fresh vegetables, the canning factory for canned goods, or the clerk's wages. The farmer or the clerk or the employee of the canning factory will in turn use the money to purchase goods. Once more, the same money is used for final purchases. The same dollar bill can circulate round and round." [cite book |title=Economics First Canadian Edition |last=Blomqvist |first=Ake |coauthors=Paul Wonnacott, Ronald Wonnacott |year=1983 |publisher=McGraw-Hill Ryerson |isbn=007548515X |pages=247-248 ]

The Alberta Social Credit government published in a committee report what was perceived as an error in regards to this theory : “The fallacy in the theory lies in the incorrect assumption that money 'circulates', whereas it is issued against production, and withdrawn as purchasing power as the goods are bought for consumption." [cite web |url=http://www.geocities.com/socredus/compendium/alberta-march-1945.txt |title=The Alberta Post-War Reconstruction Committee Report of the Subcommittee on Finance |accessdate=2008-03-01 |work=Simple Text |publisher=]

All money is created as a debt that needs to be repaid; consequently, money does not circulate, but instead operates in an accounting cycle. If a retailer receives money from a customer for its product, the total sum of this money is neither profit, nor income. A retailer has debts to repay, or it must replace working capital. These sums are subtracted from revenues when determining profits. Neither is the profit entirely income, as taxes must be paid, and a portion may be re-invested back into the business.

In this view, only a small percentage of money received by retailers actually distributes as income that can then be spent on goods or services. The remainder is either used to repay debts, replace working capital, or re-invested back into the firm. The fallacy is that the same dollar can "circulate round and round". Every loan creates a deposit, and every repayment of a loan destroys a deposit. [ Rt. Hon Reginald McKenna former Chancellor of the Exchequer, and Chairman of the Midland Bank, addressing a meeting of the shareholders of the bank on January 25, 1924 (recorded in his book, “post-War Banking”)] As such, money does not "circulate round and round" but is created and destroyed through the creation of loans and their repayment. Money is a directional flow, either creating costs, or cancelling them. If money is created in such a way that it cancels costs (i.e. the Social Credit price rebate), then an increase in the money supply can lower prices to consumers. [cite book |title= Introduction to The Monopoly of Credit |last=Dobbs |first=Geoffrey |year=1979 |publisher=Bloomfied Books |isbn=0904656012 |pages=xviii ]

Other critics argue that if the gap between income and prices exists as Douglas claimed, the economy would have collapsed in short order. They also argue that there are periods of time in which purchasing power is in excess of the price of consumer goods for sale.

Douglas replied to these criticisms in his testimony before the Alberta Agricultural Committee:

:"What people who say that forget is that we were piling up debt at that time at the rate of ten millions sterling a day and if it can be shown, and it can be shown, that we are increasing debt continuously by normal operation of the banking system and the financial system at the present time, then that is proof that we are not distributing purchasing power sufficient to buy the goods for sale at that time; otherwise we should not be increasing debt, and that is the situation."Citation |last=Douglas |first=C.H. |publication-date=1934 |title=The Douglas System of Social Credit: Evidence taken by the Agricultural Committee of the Alberta Legislature, Session 1934 |publication-place=Edmonton |publisher=Legislative Assembly of Alberta |pages=90 |accessdate=3/8/2008 ]

Incomes are paid to workers during a multi-stage program of production. According to the convention of accepted orthodox rules of accountancy, those incomes are part of the financial cost and price of the final product. For the product to be purchased with incomes earned in respect of its manufacture, all of these incomes would have to be saved until the product’s completion. In the real world, earned incomes are typically spent on past production to meet the present needs of living, and will not be available to purchase goods completed in the future --goods which must include the sum of incomes paid out during their period of manufacture in their price. This does not liquidate the financial cost of production inasmuch as it merely passes charges of one accountancy period on as mounting charges against future periods. In other words, supply does not create enough demand to liquidate all the costs of production: Social Credit denies the validity of Say's Law in economics.

Political theory

C.H. Douglas defined democracy as the “will of the people”, not rule by the majority,cite web|url=http://www.alor.org/Library/NatureofDemocracy.htm#1a |title=The Nature of Democracy |accessdate=2008-04-13 |author=C.H. Douglas |publisher=Australian League of Rights] suggesting that Social Credit could be implemented by any political party supported by effective public demand. Once implemented to achieve a realistic integration of means and ends, party politics would cease to exist. Traditional ballot box democracy is incompatible with Social Credit, which assumes the right of individuals to choose freely one thing at a time, and to contract out of unsatisfactory associations. Douglas advocated what he called the “responsible vote”, where anonymity in the voting process would no longer exist. "The individual voter must be made individually responsible, not collectively taxable, for his vote."cite web |url=http://www.alor.org/Library/RealisticConstitutionalism.htm#1a |title=Realistic Constitutionalism |accessdate=2008-02-28 |author=C.H. Douglas |publisher=Australian League of Rights]

Douglas considered the constitution an organism, not an organization.cite web|url=http://www.alor.org/Library/RealisticConstitutionalism.htm#1a |title = Realistic Constitutionalism |accessdate=2008-04-13 |author=C.H. Douglas |publisher=Australian League of Rights] In this view, establishing the supremacy of common law is essential to ensure protection of individual rights from an all-powerful parliament. Douglas also believed the effectiveness of British government is structurally determined by application of a Christian concept known as Trinitarianism: "In some form or other, sovereignty in the British Isles for the last two thousand years has been Trinitarian. Whether we look on this Trinitarianism under the names of King, Lords and Commons or as Policy, Sanctions and Administration, the Trinity-in-Unity has existed, and our national success has been greatest when the balance (never perfect) has been approached."cite web |url=http://www.alor.org/Library/RealisticConstitutionalism.htm#1a |title=Realistic Constitutionalism |accessdate=2008-02-28 |author=C.H. Douglas |publisher=Australian League of Rights]

Opposing the formation of Social Credit Parties, C.H. Douglas believed a group of elected amateurs should never direct a group of competent experts in technical matters. [Douglas, C.H. (March 7, 1936). " [http://www.alor.org/Library/Approachtoreality.htm#1a The Approach to Reality] " address at Westminster. Australian League of Rights: Melbourne. Retrieved on February 28, 2008.] While experts are ultimately responsible for achieving results, the goal of politicians should be to pressure those experts to deliver policy results desired by the populace. According to Douglas, "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. Once the idea is grasped, the criminal absurdity of the party system becomes evident." [Douglas, C.H. (October 30, 1936). " [http://www.alor.org/Library/Tragedyofhumaneffort.htm#1a The Tragedy of Human Effort] " address at Central Hall, Liverpool. Australian League of Rights: Melbourne. Retrieved on 2008-02-28.]

ocial Credit history

C.H. Douglas was a civil engineer who pursued his higher education at Cambridge University. His early writings appeared most notably in the British intellectual journal "The New Age". The editor of that publication, Alfred Orage, devoted "The New Age" and later "The New English Weekly" to the promulgation of Douglas's ideas until his death on the eve of his BBC speech on Social Credit, November 5, 1934, in the "Poverty in Plenty" Series.

Douglas’s first book, "Economic Democracy", was published in 1920, shortly after his article "The Delusion of Super-Production" appeared in 1918 in the "English Review". Among Douglas’s other early works were "The Control and Distribution of Production", "Credit-Power and Democracy" and "Warning Democracy and The Monopoly of Credit". Of considerable interest is the evidence he presented to the Canadian House of Commons Select Committee on Banking and Commerce in 1923, to the British Parliamentary [http://www.cooperativeindividualism.org/douglas-c-h_exchange-with-keynes-1930.html Macmillan Committee on Finance and Industry] in 1930, which included exchanges with economist John Maynard Keynes, and to the Agricultural Committee of the Alberta Legislature in 1934 during the term of the United Farmers of Alberta Government in that Canadian province.

The writings of C.H. Douglas spawned a worldwide movement, most prominent in the British Commonwealth, with beachheads in Europe and activities in the United States where Orage, during his sojourn there, promoted Douglas’s ideas. In the United States, the New Democracy group was headed by the American author Gorham Munson who contributed a major book on Social Credit titled "Aladdin’s Lamp: The Wealth of the American People". While Canada and New Zealand had electoral successes with “Social Credit” political parties, the movement in England and Australia was primarily devoted to pressuring existing parties to implement Social Credit. This function was performed especially by Douglas’s Social Credit Secretariat in England and the Commonwealth Leagues of Rights especially in Australia. Douglas continued writing and contributing to the Secretariat’s journals, initially Social Credit and shortly thereafter The Social Crediter (which continues to be published by the Secretariat) for the remainder of his lifetime, concentrating more on political and philosophical issues in his later years.

Political history

In early years of the movement, Labour Party leadership resisted pressure from Trade unionists to implement Social Credit, as hierarchical views of Fabian socialism, state-socialism, economic growth and full employment, were incompatible with the National Dividend and abolishment of wage slavery suggested by Douglas. In an effort to discredit the Social Credit movement, one leading Fabian is said to have declared that he didn’t care whether Douglas was technically correct or not – they simply did not like his policy!

In 1935 the first “Social Credit” government was elected in Alberta, Canada under the leadership of William Aberhart. A book by Maurice Colborne entitled "The Meaning of Social Credit" convinced Aberhart that the theories of C.H. Douglas were essential for Alberta's recovery from the Great Depression. Having counseled the previous United Farmers of Alberta Provincial Government, Douglas became an advisor to Aberhart, but withdrew shortly after due to strategic differences. Aberhart sought orthodox counsel to restore order in Province finance, and the strained correspondence between them was published by Douglas in his book, "The Alberta Experiment". [cite book |title=The Alberta Experiment |last=Douglas |first=C.H. |year=1937 |publisher=Eyre and Spottiswoode |location=London ]

While the Premier wanted to balance the provincial budget, Douglas argued the whole concept of a "balanced budget" was inconsistent with Social Credit principles. Douglas stated that, under existing rules of financial cost accountancy, balancing all budgets within an economy simultaneously is an arithmetic impossibility. [Citation |last=Douglas |first=C.H. |publication-date=July 28, 1932 |date=July 28 |year=1932 |title=The Fallacy of a Balanced Budget |periodical=The New English Weekly |pages=346-7 ] In a letter to Aberhart, Douglas stated:

:"This seems to be a suitable occasion on which to emphasise the proposition that a Balanced Budget is quite inconsistent with the use of Social Credit (i.e., Real Credit – the ability to deliver goods and services 'as, when and where required') in the modern world, and is simply a statement in accounting figures that the progress of the country is stationary, i.e., that it consumes exactly what it produces, including capital assets. The result of the acceptance of this proposition is that all capital appreciation becomes quite automatically the property of those who create an issue of money [i.e., the banking system] and the necessary unbalancing of the Budget is covered by Debts."

Douglas sent two other expert Social Credit technical advisors from the United Kingdom, L. Denis Byrne and George F. Powell. But all attempts to pass Social Credit legislation were ruled ultra vires by the Supreme Court of Canada and Privy Council in London. Based on the monetary theories of Silvio Gesell, William Aberhart issued a currency substitute known as prosperity certificates. But these scrips actually depreciated in value the longer they were held, [cite web |url=http://www.glenbow.org/exhibitions/online/libhtm/prosp.htm |title=Prosperity Certificate |accessdate=2008-02-27 |author=Glenbow Museum |publisher=Glenbow Museum] and Douglas openly criticized the idea:

:"Gesell's theory was that the trouble with the world was that people saved money so that what you had to do was to make them spend it faster. Disappearing money is the heaviest form of continuous taxation ever devised. The theory behind this idea of Gesell's was that what is required is to stimulate trade - that you have to get people frantically buying goods - a perfectly sound idea so long as the objective of life is merely trading." [cite web |url=http://www.alor.org/Library/Approachtoreality.htm#1a |title=The Approach to Reality |accessdate=2008-02-27 |author=C.H. Douglas |publisher=The Australian League of Rights ]

Under Ernest Manning, who succeeded Aberhart after his untimely death, the Alberta Social Credit Party gradually departed from its origins and became popularly identified as a right wing populist movement. In the Secretariat’s journal, "An Act for the Better Management of the Credit of Alberta", [Citation |last=Douglas |first=C.H. |publication-date=February 8, 1947 |publication-place=Liverpool |date=1947 |volume=17 |issue=23 |title=An Act for the Better Management of the Credit of Alberta |periodical=The Social Crediter |publisher=K.R.P. Publications Ltd. |accessdate=2008-02-27 ] Douglas published a critical analysis of the Social Credit movement in Alberta, [Citation |last=Douglas |first=C.H. |publication-date=August 28, 1947 |publisher=K.R.P. Publications Ltd. |publication-place=Liverpool |volume=20 |issue=26 |date=1947 |title=Social Credit in Alberta |periodical=The Social Crediter |accessdate=2008-02-27 ] [Citation |last=Douglas |first=C.H. |publication-date=September 4-11, 1947 |date=1947 |publisher=K.R.P. Publications Ltd. |publication-place=Liverpool |volume=21 |issue=1,2 |title=Social Credit in Alberta |periodical=The Social Crediter |accessdate=2008-02-27 ] in which he said, "The Manning administration is no more a Social Credit administration than the British government is Labor". Manning accused Douglas and his followers of anti-Semitism, and went about purging all of the so called "Douglasites" from the Party. While Social Credit governments formed in British Columbia, Canada, they had little in common with Douglas or his theories. Social Credit Parties also enjoyed some national electoral success in Canada and in New Zealand, with support from Western Canada and more notably from Quebec.

ocial Credit philosophy

Douglas described Social Credit as "a policy of a philosophy", and warned against viewing it solely as a scheme for monetary reform. [cite web |url=http://www.alor.org/Library/Policyofaphilosophy.htm#1a |title=The Policy of a Philosophy |accessdate=2008-03-01 |author=C.H. Douglas |publisher=Australian League of Rights] He coined this philosophy "practical Christianity" – the central issue of which is the Incarnation. Douglas believed there was a Canon which ran through the universe, and Jesus Christ was the Incarnation of this Canon. However, he also believed Christianity remained ineffective so long as it remained transcendental. Religion, which derives from the Latin word "relegare" (to “bind back”), was intended to be a binding back to reality. [cite web |url=http://www.alor.org/Library/BrieffortheProsecution.htm#1a |title=Brief for the Prosecution |author=C.H. Douglas |publisher=Veritas Publishing Co. Pty, Ltd|isbn=0949667803] Social Credit is concerned with the incarnation of Christian principles in our organic affairs. Specifically, it is concerned with the principles of association and how to maximize the increments of association which redound to satisfaction of the individual in society – while minimizing any decrements of association. [>cite book |title=The ABC of Social Credit |author=E. S. Holter|publisher=Vancouver: Institute of Economic Democracy, Sixth Printing, Dec.1978 | isbn=0920392245] Social Credit elevates the importance of the individual and holds that all institutions exist to serve the individual – that the State exists to serve its citizens, not that individuals exist to serve the State. [cite book |title=Economic Democracy |last=Douglas |first=C.H. |year=1920 |pages=33 |isbn=0904656004]

The goal of Social Credit is to maximize immanent sovereignty. Social Credit is consonant with the Christian doctrine of Salvation through unearned Grace, and is therefore incompatible with any variant of the doctrine of salvation through works. Works need not be of Purity in intent or of desirable consequence and in themselves alone are as "filthy rags." For instance, the present system makes destructive, obscenely wasteful wars a virtual certainty—which provides lots of "work" for everyone. Social Credit has been called the Third Alternative to the futile Left-Right Duality. [cite book |title=Aladdin's Lamp: The Wealth of the American People |last=Munson |first=Gorham |year=1945 |publisher=Creative Age Press |location=New York ] Although Douglas defined Social Credit as a philosophy with Christian roots, he did not envision a Christian theocracy. Practical Christian society is Trinitarian in structure,based upon a constitution where the constitution is an organism changing in relation to our knowledge of the nature of the universe.cite web |url=http://www.alor.org/Library/RealisticConstitutionalism.htm#1a |title=Realistic Constitutionalism |accessdate=2008-02-28 |author=C.H. Douglas |publisher=Australian League of Rights] Social Credit society recognizes the fact that the relationship between man and God is unique. [cite book|title= Why I am a Social Crediter| last=Monahan| first=Bryan | pages= 3 |purblisher=Tidal Publichations |isbn=0858550016] In this view, it is essential to allow man the greatest possible freedom in order to pursue this relationship. If people are given the economic security and leisure achievable in the context of a Social Credit dispensation, most would end their service to mammon and use their free time pursuing spiritual, intellectual, or cultural goals leading to self-development. [cite web |url=http://www.alor.org/Library/UseofSocialCredit.htm#1a |title=The Use of Social Credit] Douglas did not believe that religion should be thrust upon anyone through force of law or external compulsion. He emphasized that all policy derives from its respective philosophy and that “... Society is primarily metaphysical, and must have regard to the organic relationships of its prototype.” [C.H. Douglas letter to L.D. Byrne, March 28, 1940]

Douglas said that Social Crediters want to build a new civilization based upon absolute economic security for the individual—where “...they shall sit every man [individual] under his [her] vine and under his [her] fig tree; and none shall make them afraid.” [Citation |last=Douglas |first=C.H. |publication-date=1954-55 |year=1954 |title=Cover |periodical=the Douglas Quarterly Review |series=The Fig Tree, New Series |publication-place=Belfast, Ireland |publisher=K.R.P. Publications |volume=1 |issue=June |pages=Cover |accessdate=3/1/2008 ] [sourcetext|source=Bible|version=King James|book=Micah|chapter=4|verse=4] In keeping with this goal, Douglas was opposed to all forms of taxation on real property. This set Social Credit at variance from the land-taxing recommendations of Henry George. [cite web |url=http://www.yamaguchy.netfirms.com/7897401/douglas/land2.html|title=The “Land for the (Chosen) People” Racket |accessdate=2008-05-25 |author=C.H. Douglas]

Douglas opposed what he termed "the pyramid of power". Totalitarianism reflects this pyramid and is the antithesis of Social Credit. It turns the government into an end instead of a means, and the individual into a means instead of an end—Demon est deus inversus—“the devil is God upside down.” Social Credit is designed to give the individual the maximum freedom allowable given the need for association in economic, political and social matters. [cite book|title= Why I am a Social Crediter| last=Monahan| first=Bryan | pages=7 |publisher=Tidal Publications |isbn=0858550016] "The progress of human society is best measured by the extent of its creative ability. Imbued with a number of natural gifts, notably reason, memory, understanding and free will, man has learned gradually to master the secrets of nature, and to build for himself a world wherein lie the potentialities of peace, security, liberty and abundance." [cite book | title= Alberta Post-War Reconstruction Committee Report of the Subcommittee on Finance | year = 1945] Social Credit rejects dialectical materialistic philosophy. [C.H. Douglas letter to L.D. Byrne, March 28, 1940] Douglas divided philosophy into two schools of thought that he labeled the "classical school" and the "modern school", which are broadly represented by philosophies of Aristotle and Francis Bacon respectively. Douglas was critical of both schools of thought, but believed that "the truth lies in appreciation of the fact that neither conception is useful without the other". [cite web |url=http://www.mondopolitico.com/library/socialcredit/p1c1.htm |title=Static and Dynamic Sociology |accessdate=2008-03-01 |author=C.H. Douglas |work=Social Credit |publisher=Mondo Politico]

ocial Credit and anti-Semitism

Social Crediters, and Douglas himself, have been criticized for spreading anti-semitism. While it is true that Douglas was critical of international Jewry, especially in his later writings, these criticisms were based upon Jewish philosophy, not Jews as a race. His criticisms were founded upon philosophical differences between the Christian doctrine of Incarnation and salvation through grace, and the Judeo doctrines of legalism and salvation through works: “It is not too much to say that one of the root ideas through which Christianity comes into conflict with the conceptions of the Old Testament and the ideals of the pre-Christians era, is in respect of this dethronement of abstractionism.”cite book |title=Social Credit |last=Douglas |first=C.H. |year=1973 publisher=Gordon Press |location=New York |pages=22 |url=http://www.mondopolitico.com/library/socialcredit/p1c2.htm ]

Social Credit is opposed to abstractionist philosophies, as Douglas believed these philosophies inevitably led to the elevation of abstractions, such as state, over individuals. He also believed that Jewish abstractionist thought tended to lead them to communist ideals and the emphasis of the group over the individual. “Anti-Semitism of the Douglas kind, if it can be called anti-Semitism at all, may be fantastic, may be dangerous even, in that it may be twisted into a dreadful form, but it is not itself vicious nor evil.”cite book |title=Social Credit: The English Origins |last=Finlay |first=John L |year=1972 publisher=McGill-Queen's Univ. Press |location=Montreal| pages=105 |isbn=9780773501119 |url=http://www.geocities.com/socredus/compendium/finlay-1972.txt ]

In her book, "Social Discredit: Anti-Semitism, Social Credit and the Jewish Response", Janine Stingel claims, “Douglas's economic and political doctrines were wholly dependent on an anti-Semitic conspiracy theory". [cite book| title=Social Discredit: Anti-Semitism, Social Credit and the Jewish Response |last=Stingel |first=Janine |page=13 |publisher=McGill-Queen's University Press |location=Montreal | year=2000] Douglas's A+B theorem is based upon an analysis of prices and incomes and their relation to cost accounting, not an "anti-semitic conspiracy theory". While some of Douglas’s statements about Jews, especially in relation to the alleged forgery known as "The Protocols of the Learned Elders of Zion", have caused numerous attacks on the entire movement, claims that his works wholly based upon anti-semitic conspiracy theory is grossly exaggerated at best. "It must also be noted that while Douglas was critical of some aspects of Jewish thought, Douglas did not seek to discriminate against Jews as people. It was never suggested that the National Dividend be withheld from them.cite book |title=Social Credit: The English Origins |last=Finlay |first=John L |year=1972 publisher=McGill-Queen's Univ. Press |location=Montreal| pages=105 |isbn=9780773501119 |url=http://www.geocities.com/socredus/compendium/finlay-1972.txt]

Groups influenced by Social Credit

Australia

*Australian League of Rights
*Douglas Credit Party

Canada

Federal political parties:
*Social Credit Party of Canada/Canadian social credit movement
*"Ralliement créditiste"
*Abolitionist Party of Canada/Christian Credit Party
*Canadian Action Party (active)
*Global Party of Canada

Provincial political parties:
*Alberta Social Credit Party (active)
*British Columbia Social Credit Party (active)
*Manitoba Social Credit Party
*Social Credit Party of Ontario
*Ralliement créditiste du Québec
*Social Credit Party of Saskatchewan

Organizations:
*Pilgrims of Saint Michael
*Committee on Monetary and Economic Reform

*"See also:" Prosperity Certificate

New Zealand

*Country Party
*Democratic Labour Party
*New Zealand Democratic Party
*New Democratic Party (New Zealand)
*Real Democracy Movement
*Social Credit Party (New Zealand)
* [http://www.nzsocialcredit.blogspot.com New Zealand Social Credit Association (Inc)]

olomon Islands

*Solomon Islands Social Credit Party (active)

United Kingdom

*Douglas Social Credit Secretariat
*Social Credit Party of Great Britain and Northern Ireland

Literary figures in Social Credit

As lack of finance has been a constant impediment to the development of the arts and literature, the concept of economic democracy through Social Credit had immediate appeal in literary circles. Names associated with Social Credit include Charlie Chaplin, William Carlos Williams, Ezra Pound, T. S. Eliot, Herbert Read, Aldous Huxley, Storm Jameson, Eimar O’Duffy, Sybil Thorndyke, Bonamy Dobrée and the American publisher James Laughlin. In 1933 [http://www.fantasticfiction.co.uk/o/eimar-oduffy/ Eimar O’Duffy] published "Asses in Clover", a science fiction fantasy exploration of Social Credit themes. His Social Credit economics book "Life and Money: Being a Critical Examination of the Principles and Practice of Orthodox Economics with A Practical Scheme to End the Muddle it has made of our Civilisation", was endorsed by Douglas.

Robert A. Heinlein described a Social Credit economy in his first novel, "For Us, the Living", and his "Beyond This Horizon" describes a similar system in less detail. In Heinlein's future society, government is not funded by taxation. Instead, government controls the currency and prevents inflation by providing a price rebate to participating business and a guaranteed income to every citizen.

More recently, [http://www.richardccook.com/ Richard C. Cook] , an analyst for the U.S. Civil Service Commission, Food and Drug Administration, NASA, the U.S. Treasury Department, and author of the books "Challenger Revealed" and "We Hold These Truths", has written several articles relating to Social Credit and monetary reform at [http://www.globalresearch.ca/ Global Research] , an independent research and media group of writers, scholars, journalists and activists.

Frances Hutchinson, PhD and Chairperson of the [http://douglassocialcredit.com/ Social Credit Secretariat] , has co-authored, with Brian Burkitt, a thoroughly researched and peer reviewed book entitled "The Political Economy of Social Credit and Guild Socialism". [cite book| title=Political Economy of Social Credit and Guild Socialism |last=Hutchinson |first=Frances |publisher=Routledge |location=UK |year=1997 |isbn=9780415147095] .

ocial Credit in fiction and poetry

* Robert A. Heinlein, ""
* Ezra Pound, "The Cantos".

External links

* [http://www.mondopolitico.com/library/socialcredit/socialcredit.htm Social Credit] , Mondo Politico Library's presentation of Clifford Hugh Douglas' book, "Social Credit" (full text)
* [http://www.social-credit.com Social-Credit.com]
* [http://www.douglassocialcredit.com DouglasSocialCredit.com] - Social Credit Secretariat
* [http://www.alor.org/Library1.htm Australian League of Rights] - online library
* [http://www.kibbokift.org/ The Green Shirt Movement for Social Credit]
* [http://www.ecn.net.au/~socred/ Social Credit School of Studies]
* [http://www.elistas.com/list/socialcredit/archive/index/261/ Social Credit Email group]
* [http://social-credit.blogspot.com/ Social Credit Blog]
* [http://socialcredit.blogspot.com/ Social Credit New Zealand School of Studies]
* [http://www.plainsfm.org.nz/feeds/podcasts/programme/economic-democracy/ Economic Democracy Podcasts]

Further reading

* "Economic Democracy", by C. H. Douglas (1920) "new edition": December 1974; Bloomfield Books; ISBN 0904656063
* [http://www.social-credit.com/ "Major Douglas: The Policy of Philosophy"] , by John W. Hughes, Edmonton, Brightest Pebble Publishing Company, 2004; first published in Great Britain by Wedderspoon Associates, 2002
* "Major Douglas and Alberta Social Credit", by Bob Hesketh, ISBN 0-8020-4148-5

Fiction and poetry

* "", by Robert A. Heinlein
* "The Cantos", by Ezra Pound

Notes