It is possible that Social Crediters come across as a one track record. The track is called ‘the gap’. I suspect that word is something like a trigger that launches the social crediter into as good an explanation as he is capable of the fault with the financial system; a trigger to which I am not immune. Excuse me.
It’s really pretty simple. The consumer gets money from wages salaries and dividends through employment in industry. The assumption of the modern economy is that these incomes are sufficient to meet the prices on products coming out of industry. They are not. This is because the modern industrial system that makes the products does so over lengthening periods of time and increasingly by use of expensive machinery. Also, machinery is developed with the express purpose of displacing human labour and to intentionally reduce the quantity of money made available to labour. So costs accumulate at a greater rate in the production system than incomes are released to workers to meet those costs, displayed on price tags, in the consumer system. Hence we say there is a gap between prices of products for sale and the money in consumers’ pockets to pay those prices.
The palliatives are two; loan and export credit.
Increasing loan credit spikes money in cycle and brings some temporary relief. Governments, business and private people all perform this role and the character of government can often be defined by which group takes on the debt. The main problem with making money in this way is that money itself is a cost that must be recovered in prices. So, while increasing debt levels may keep the economy ticking over, it generates its own costs therefore can’t solve our gap problem. Douglas was pretty clear about the quality of credit that would fill the gap, ‘We must give the consumer purchasing power which does not appear in prices1’ – loan credit cannot perform this function.
The other soother is not much different. It involves getting money borrowed in other nations by selling things abroad. Export credit. The real difference with export credit is that it does not carry the costs of money borrowed domestically and it deals with the accumulating surplus product problem, made inevitable by the gap, by selling it offshore. This money is useful in keeping the material economy liquid but at some point it will disappear from the scene as debt repayment. This explains why a favourable balance of trade is always selling more than you’re buying, measured, of course, in money. The problem is that because all industrial nations suffer from the gap we get a fierce and destabilising scramble for export markets that invariably develops into hostile international relations and war. In terms of bridging the gap there is no methodological difference between achieving a favourable balance of trade and increasing loan credit domestically, only the scale is global.
A thorough analysis of the conventional methods of bridging the gap is beyond the scope of this essay but has been explained in Heydorn’s vital book Social Credit Economics on pages 235 -253. It is enough to say here that nothing that is being done or proposed in orthodox circles has any chance of solving our difficulties because,
The reliance on new debts to meet the existing gap actually translates into the establishment of a body of debt which, in the aggregate, is unrepayable and ever increasing. There is more money owed than every actually exists and the situation is continually deteriorating.2
The gap is a glitch; a maladjusted detail in the larger system, the chief obstacle to the fixing of which is acceptance of the diagnosis. It is essentially a fault in the book keeping side of the economy, that is, the financial side. The adjustment would come in the form of a distribution of credit (not debt) to people, of sufficient quantity to fill the gap.
The problem described does not have any other solution. Money is a necessary tool for economic management but it is completely unreasonable for it to be the government it has become and, if we continue to accept the situation where it is kept in continual short supply, it is unavoidable that it shall be a government. The economy requires recalibration as an organisation that provides wanted goods and services, and for this to happen the consumer must be properly empowered with sufficient credit. Either the power of industry, raised by centuries of applied science and technique, are made to work in the interest of the community who have control over it, or this power remains subject to the policy of private banks and the creation and collection of their debts.
The first objection is the technical one that inflation would ensue. This problem has been dealt with in the essay A Realistic Answer to Inflation.
The other objection has a moral flavour. I would encourage anyone who has jumped back from their computer to point and shout ‘he that does not work nor shall he eat!’ to reconsider that position calmly. What is being suggested here is a thorough distribution of what is being produced and the granting to consumers (which is all of us) of an effective power to decide what will continue to be produced. If you have moral ideas about work at any cost you are entitled to them but the reality is that it has not for a long time been necessary to employ the entire working age population for 38 hours a week to achieve a dignified material existence for everybody.
Consider this statistical sketch of the agricultural situation in Australia. In 2011 there were 157,000 farmers, that is 19,700 fewer than in 2006. In 2011 they comprised less than 2% of Australia’s total workforce. They provided the Australian population with 93% of its food while exporting 60% of its product overseas3. Add to this a rough estimate of food wasted. Foodwise estimates that between 20 to 40% of fruit and vegetables never make it to the shops for failing to meet cosmetic requirements and, of the food bought, up to 20% is thrown away4. This output was achieved by a farming community nearly a quarter of whom (23%) were over the age of 65 and at the end of a decade when 45,000,000 hectares of land went out of production5. It should be added that the thanks they receive for their vital service is the pressure of, on average, $476,000 of debt, which is the real dilemma facing our food producers.6
Reflection on these numbers would suggest the most urgent problem of food has been solved*, and not by the employment of people. If less than 2% of the working population are involved in providing us with food what are the rest up to? The fact is that the proportion of labour involved in necessary work is miniscule. The vast majority spend the most productive years of their lives coerced by debt and cost of living pressures into working pretend jobs that do nothing to contribute to improvement of our general situation. Neither should you be fooled that unemployment is only 6.2%. Keep in mind this figure is reached by counting ‘everyone who works for at least one hour or more [per week] for pay or profit.7’
The systemic shortage of credit throws up the illusion of scarcity. This misconception forms the basis of a moral attitude to work. If there wasn’t enough food to feed everybody it would be wrong to take it from those who had grown their own to give to those who hadn’t bothered to do the work. But this is a long way from our situation. Contrary to the theories of salaried economists, production methods and labour shortages have little to do with our problem. The answer is more accessible. It lies in an allocation of purchasing power that conforms to the facts.
We are on the cusp of a new phase of the industrial revolution which threatens to worsen our general condition if we don’t enlighten ourselves with respect to the role of finance. A report by PriceWaterhouseCoopers claims that ‘44% (5.1 million) Australian jobs are at high risk of being affected by computerisation and technology over the next 20 years.8’In 2013 India experienced an increase of 23% in robot installations, while China, the world’s largest market, sold 56,000, robots in 2014. At a factory in China that makes components for mobile phones they have installed robots to reduce their labour force from 650 people to 60, while increasing their output from 8000 pieces to 21,000.9 This is a story that makes the assumptions of Hockey’s Intergenerational Report, that productive capacity is dependent on labour participation, nonsensical. But what does this mean? It does not mean less production. It does mean less income relative to prices. It does mean a broadening of the effects of the glitch.
The employment system is breaking down. Are we expected to continue to tolerate a situation where growing numbers of displaced workers live in material poverty and insecurity while the docks and factory sidings pile up with goods that can’t be bought? Will we continue to accept crippling taxation, a redistribution of insufficient money, as this economic dysfunction makes direr our social problems and, in deference to financial elites, not assign fault and cause where fault and cause lie?
Civilisation has been running itself to exhaustion on this spot for centuries and the introduction of advanced robotics and the use of algorithms capable of ‘intelligent’ analysis only promises to make our situation worse. In 1924 Douglas put the Social Credit position thus:
The other alternative, while recognising the necessity for discipline in the world, does not concern itself with that necessity in considering the modern productive process. It surveys the facts, finds an inherent incompatibility between the substitution of solar energy for human energy, on the one hand, and the retention of a financial and industrial system based on the assumption that work is the only claim to goods, on the other hand, and takes as its objective the delivery of goods making the objectives always subordinate to human individuality10.
This passage encapsulates more than is obvious at first reading. It points directly at the illogical course of replacing working people with machines and from then on ensuring they have less access to the growing stock of goods and services. But it also draws attention to the underlying philosophical disconnect between the production and distribution system. Producers take a scientific approach to limit financial costs (especially in relation to problematic humans) and increase output, and have been extraordinarily successful. Conversely, the distribution of this product is contingent upon a moral system imposed upon populations by means of the global monetary system. That production is more than sufficient for the needs of the world’s population is secondary to the imposition of moral lessons associated with work. This is quite clear when one sees that the discussion about the economy is not centred on the efficient manufacture and delivery of goods and services but the provision of employment to distribute incomes. Douglas endeavoured to make clear to us that there was no need to undertake a programme of production to secure a financial outcome or, in his words, ‘I do not regard it as being a sane system that before you can buy a cabbage it is absolutely necessary to make a machine gun.11’
The glitch is being exploited as a way of keeping those that control finance in a position to dispense rewards and punishments. Douglas is unequivocal about the purpose served by keeping us all at our grindstones, irrespective of material necessity:
Why then is there so great a misdirection of attention in a matter of such primary importance? There is, I think, only one general and comprehensive answer which can be given to this question; and that is, that whether consciously or not, there is a widespread feeling on the part of executives of all descriptions that the only method by which large masses of human beings can be kept in agreement with dogmatic moral and social ideals is by arranging that they shall be kept so hard at work that they have not the leisure or even the desire to think for themselves12.
Similar themes are found in Orwell’s fictional dystopia, Oceania.
From the moment when the machine first made its appearance it was clear to all thinking people that the need for human drudgery, and therefore to a great extent for human inequality, had disappeared.
For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realize that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance13.
The abundance generated by machinery and improved technique presents a threat to the established order and the problem becomes how not to distribute it. In war time the solution to this dilemma is pretty straight forward; you blow it up. But in peace time the way to keep people at work is to superimpose on our abundance a financial system that is incapable of representing wealth.
We all understand the motive of the mechanic that takes to long to find a problem with your car. They speak jargon at you hoping you don’t understand so that when the bill comes down you grit your teeth and pay up. This isn’t that far from the case. The glitch enables a small minority, in a position to fix the problem, a commanding advantage at the expense of their customers. We need to wake up and perceive the rip off. Heed the billions of the bankers and the debts of the people. Take stock of our real wealth position and the ‘we’re poor’ rhetoric of the politicians and salaried economists whose only solution is more work, tax and debt. It is the people that generate our standard of living; therefore it is the people that are the proper recipients of it. It is really too much being lectured by politicians and economists about sacrifice, economy and hard work. Social Credit provides a complete, intelligible alternative that would allow us to strike a realistic balance between work and leisure by dispossessing finance of the command over the money mechanism that dispenses our real wealth.
* That is not to say that the only thing worth considering in agriculture is the ratio, quantity to man hours.
Douglas, C.H. 1922. The Control and Distribution of Production, Heritage Books, South Australia.
Heydorn, O. 2014. Social Credit Economics. CreateSpace Independent Publishing Platform, Onatrio, Canada.
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PriceWaterhouseCoopers. 2015. A Smart Move. Available from: http://pwc.docalytics.com/v/a-smart-move-pwc-stem-report-april-2015[22/09/2015]
Australian Bureau of Statistics. 2012. Labour Force, Australia, Feb. 2012. Available from: http://www.abs.gov.au/ausstats/abs@.nsf/Previousproducts/6202.0Main%20Features999Feb%202012?opendocument [22/09/2015].
Douglas, C.H. 1933. Social Credit, Third Edition, Eyre and Spottiswoode, London.
C.H. Douglas and R.G. Hawtrey, “The Birmingham Debate,” The New Age LII, no. 23 (Thursday April 6th 1933):270
Douglas, C.H. 1933. Social Credit, Third Edition, Eyre and Spottiswoode, London.
Orwell, G. 1949. Nineteen Eighty Four. Secker & Warburg, London.