This is a repost of a 1967 article from the Socialist Standard
These days as a result
of the financial crisis many are returning to similar “solutions” as Social
Credit have been offering since the Great Depression of the 1930s. The ideas of
Major Douglas proved particular popular in Canada and New Zealand, perhaps for
the reason these countries were alike in possessing a great number of small
farmers in debt to the Big Banks.
Are They The Only
Cranks?
So the Social Credit party has won a seat in the New Zealand
parliament. These currency cranks have fielded a full complement of candidates
at every election since they set up their Social Credit Political League in
1953. Their theories are based on the mistaken ideas of Major Douglas that at
present there is a chronic shortage of purchasing power. Odd, you might think,
that people can think that in a period of inflation there is a shortage of
purchasing power. In any event, when the New Zealand government set up a Royal
Commission on Monetary, Banking and Credit Systems, the Social Creditors
decided to have a try at proving this. The Appendix to the Commission's Report
which appeared in 1956, and which deals with the Social Credit witnesses, makes
interesting and amusing reading. Giving "evidence" for Social Credit
were Mr. Jordan of the Social Credit Association and Miss King and Mr. Young of
the Social Credit Political League.
Social Creditors claim that the present monetary system is
inherently defective as there is a chronic gap between the amount of purchasing
power and the prices of goods and services. The chief cause of this gap is the
banking system which has, they say, a monopoly of the destruction and creation
of money. In place of the present system they propose that the power to issue
credit should be vested in the "community." Hence the name: Social
Credit. They propose to cover the gap by the issue of "debt-free
money" which will allow taxes to be cut, prices to be reduced and social
security benefits to be increased (Good vote-catchers these!). Further
non-commercial public works could be financed in the same way – without any
increase in the public debt. The ultimate aim of Social Credit is a system
where all income takes the form of a national dividend, financed by debt-free
money.
Douglas encouraged the myth of a chronic shortage of
purchasing power with his spurious A+B Theorem. He merely took over the myth
that banks create wealth from the Mystical School of Banking Theorists, as
explained in last month's SOCIALIST STANDARD.
The Social Credit witnesses put up a sorry show. They
refused to defend the A + B theorem; they could not even precisely define
"purchasing power"; they had no idea of how banks operate; they
implied that money doesn't circulate; and their statistics were exposed as
frauds.
Basically, Social Credit is a conservative movement wanting
to preserve private enterprise capitalism while trying to remove some of its
defects by tinkering with the money system. The Commission had little
difficulty in showing where such tinkering would lead:
“If made in the present circumstances, the large issue of
debt-free money contemplated by the Association and recommended by other Social
Credit witnesses would produce most serious and chronic inflation and gravely
disrupt New Zealand's economy.”
The Commission gleefully pointed out that the Social Credit
schemes for abolishing interest would in the end be incompatible with the
continuance of private enterprise capitalism. This was enough to temper the
witnesses’ opposition to interest.
The Commission did manage to extract some revealing
confessions. Poor Mr. Jordan seems to have been convinced that there was too
much purchasing power! Says the Report:
“The Association's original submissions were clearly based
on the assumption that the supply of purchasing power in New Zealand has been
and remains inadequate. But we can only conclude from Mr. Jordan's final
address that the Association had by then come to the conclusion that New
Zealand was suffering in present circumstances from excess spending and an
excess supply of money. Indeed, Mr. Jordan appealed to the Commission for a
recommendation 'that the war against inflation be carried on'.”
Enough said. Social Creditors are of course easy meat. But
they are not alone in promising to cut taxes and prices and to increase state
hand-outs. There are others who claim to be able to solve the housing problem,
abolish destitution and stop war to boot. If Social Credit are cranks, what are
these others?
No comments:
Post a Comment