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Here is an article by C. H. Douglas which is
provided as a contribution to the current List discussion:
THE FIG TREE, Quarterly, Editor: C. H. Douglas ,
Associate Editor : Miles Hyatt
No. 10, SEPTEMBER, 1938
CONTENTS
The Psychological Causes of War--The Editor
Bankers are Responsible--Miles Hyatt
Murmurings in Myopia--V. J. Cobbetson
The Will to Power--J. Scott Kyle
Means and Ends--Tudor Jones
Political Strategy--H.
E.
Production and Distribution--C. H.
Douglas
The New Civilisation--Charles Jones
The Perfect Crime--G. R. Robertson
A Message Mutilated--W.
Lebel
Bombshell or Bagatelle?--Dr. Frotti
A Study of Money--John V. Reid
The Guernsey Market House Scheme--D. M. Sherwood
Verses--Geoffrey Dobbs, B. W. Kitching, Herbert
Bluen
Reviews
Although Major Douglas, as Editor, controls policy,
the selection of articles for THE FIG TREE is made by the Associate Editor.
Published by the Social Credit Secretariat Limited
163A, Strand, London, W.C.2. (DISCONTINUED)
By Annual Subscription 10S. 6d. or 35. 6d. a
quarter Post free everywhere. (DISCONTINUED)
Production and
Distribution, page 153
By C. H. DOUGLAS
MUCH confusion has been introduced into the
analysis of the industrial and economic system by the use of the word
"production." Consideration of the elementary principles of the conservation of
energy and matter is sufficient to indicate that there is no process involved
which can justifiably be called production, but that we have to deal with a
metabolic system which involves taking matter and energy in the forms in which
they are provided to us by nature, and transforming them into other forms in
which they are more useful to the special purposes and aims of man; a statement
of the case which does not differ very materially from the definition of
engineering contained in the Charter of the Institution of Civil Engineers. Left
to themselves these "products" resort to formless states approximating to the
"raw materials" out of which they are fashioned.
All changes of form are energy processes, and from
this fact it is clear that any fundamental change in the energy content of the
economic process may be expected to exert a profoundly modifying influence upon
the relation of the system to other human interests. It is probable that it is
the change in the energy content of our modern economic system which at bottom
is responsible, more than anything else, for the readjustments with which we are
faced in the world today. This is not, of course, to suggest that the increased
energy content of the economic system is in itself a disadvantage. On the
contrary, it is the direct, and probably the only method by which the
limitations imposed upon mankind by nature, as apart from those imposed upon him
by local restrictions, can be removed.
Man is primarily a heat engine, requiring per day
in the case of the adult about 4,000 calories contained in complex fuel. Simply
regarded as a prime mover, he is probably capable of exerting about 1/12th to
1/15th of one horsepower for the equivalent of about six hours out of the
twenty-four. On the rough estimate of 150 million horse-power available in Great Britain, the modern production
system, so far as energy content is concerned, has a potential output (on the
basis of a forty million population, of whom, say, fifteen millions are
employable) of at least four hundred times that of the population unaided by
mechanical power.
It is significant that the mere requirements of
food, warmth, and shelter were met in the Middle Ages with a short working day,
at a standard which, on the average, compares surprisingly well with that of
modern times, if all the factors be taken into account. Some of the achievements
of the Middle Ages, more particularly the architectural, are still unsurpassed,
and were accomplished by small populations continually harassed by local and
national wars and strife. The progress of the industrial arts, our knowledge of
materials and processes, and our experience of organisation, together with
freedom from physical interference in times of peace, would suggest that we
should have reached a standard of economic security combined with an increase of
leisure much greater than is, in fact, the case. Our failure to do so can,
probably, be traced in two complementary directions: first a high percentage of
waste, and, secondly, a failure in economic distribution.
WASTE
Much has been heard in the past few years of the
destruction, as surplus, of wealth actually created. This "surplus" wealth
ranges over a wide number of products. Merely as instances among many, in the
three years from June, 1931, to June, 1934, 29 million bags of coffee of 132
lbs. each were destroyed in Brazil alone. In 1926 there was a world wheat
surplus of 279 million bushels. In 1931 there was a surplus of 646 million
bushels, which in 1932 had become 669 million bushels. This was all material
which could have been absorbed if the white population of the world had obtained
as much wheat and coffee as it desired, or even needed.
It is probable, however, that by far the most
important factor in waste is misdirected human effort, resulting in a great
excess of capital production accompanied by a constant sabotage of plant still
capable of continued usefulness. A comprehensive analysis of sabotage, the
technical term applied to organised waste,
is contained in the works of Professor Thorstein Veblen; and it is beyond
question that the fundamental incentive is the desire to "make work," with the
object of "getting on the pay roll." This sabotage is effected in many ways.
Among the less obvious are bankruptcies and financial reorganisation. It is
estimated that out of every hundred retail shopkeepers ninety fail in business.
The number of bankruptcies per annum in Great Britain rose from about 900
in 1920 to nearly 7,000 in 1930, and probably the break-up or "sabotage" of
industrial plant was involved in most of these cases.
In this connection it should be pointed out that no
physical meaning can be attached to the phrase "producing at a loss." For
instance, a steamship is a potential means of transport, and is a physical
asset, whether it is run at a financial loss or no. The question as to whether
it is run at a financial loss or profit depends far more on the amount of
purchasing power available in the hands of the general public than it does upon
the peculiarities of the steamship, or the essential need for the services which
it can perform.
FAILURE IN ECONOMIC DISTRIBUTION
Two main factors are responsible for the observed
failure to distribute goods and services which the modern production system can
supply. The first of these is the disparity between total prices of goods for
sale and total purchasing power. This disparity, which is now not seriously
contested, may be traced to at least five causes, if the problem be examined
analytically:
(1) The allocation to selling prices of costs
which were not distributed at the time when the specific article was produced,
e.g., debt charges. The world debt increased 47 per cent. during the 17th
century, 466 per cent. during the 18th century and 12,000 per cent. during
the 19th century. Taking 100 years as the unit and A.D. 1800 as the origin,
world debt is increasing as the fourth power of time.
(2) Savings, i.e., abstention from buying.
(3) Investment of savings. The effect of this may
be merely the repayment of a bank loan, which destroys
both the loan and the money with which it is
repaid; or it may be to create a new cost without distributing new purchasing
power.
(4) Difference of circuit velocity between cost
liquidation and price-creation, which results in charges being carried over into
prices from a previous cost accountancy cycle. Practically all plant charges are
of this nature, and similarly all payments for material brought in from a
previous wage cycle. The effect of this is similar to that of increasing the
price of an article by the allocation of a profit.
(5) Deflation, i.e., sale of securities by banks
and recall of loans.
There are other factors, but they are of less
importance at the moment.
The second, and increasingly important, cause of
the failure in distribution results from the interlocking of the distribution of
purchasing power, or money, with the employment system, and as this is also the
primary incentive to sabotage, it is probably the factor requiring the most
urgent attention. It is obvious that a machine which produces as much as a
hundred men ought to distribute purchasing power to the hundred men displaced,
if the goods produced by it are to be sold. This would be the case if either (a)
the goods were given away, which would mean the abolition of the system, or (b)
if new purchasing power equivalent to the goods produced were distributed free,
which would be the ultimate extension of the dividend system. It will be seen
that the agitation for the abolition of dividends, of which much has been heard
in the past fifty years, is in direct opposition to the trend of engineering
development applied to production.
It is impossible to consider the conjoined problems
of production and distribution without some consideration of objectives. It is
not in accordance with the engineering method to discriminate between the moral
values of social forces. It is quite in that tradition to observe these forces,
their effects, and how they may be combined to attain a specific objective. It
is unfortunate that social objectives do not receive systematic examination, and
the executive officials of the industrial, economic and
distributive systems are therefore not
presented with clearly phrased instructions as to what is required of them.
There is evidence of the existence of at least
three objectives in the contemporary economic system. To some extent these are
contradictory, and even mutually exclusive. The first is that of the works'
manager who endeavours to produce a given article with a minimum of human
labour. His explanation of this objective is that he is endeavouring to reduce
costs, but for practical purposes the two statements are synonymous. The
successful endeavour to fulfil his function as works' manager produces a result
which may be expressed by two other parallel statements, equally synonymous from
a physical point of view, but having widely different practical effects. The
production of a given number of units with the employment of less human labour
produces either leisure or unemployment, the difference being that the term
leisure is commonly applied to a condition which is not accompanied by lack of
money, whereas that of unemployment implies this lack.
The second objective is commonly termed a political
objective. The success of the works' manager in achieving leisure is converted
into a political problem by rephrasing it as unemployment, and exhibiting it as
a national, or even a world-wide, disaster. In this case the presumed objective
of the economic system is to provide work, and only incidentally to provide
goods as well.
The third objective makes the contemporary economic
system an end in itself. The result of the efforts made to realise this
objective can be seen in the subordination of all other interests to the
maintenance of the system in its recognised form. Well-known examples of what
results from the pursuit of this objective are the paradox of poverty amidst
plenty, the application of the phrase "a favourable balance of trade" to a state
of affairs in which a country gives away more in exports than it receives in
imports, and the consequent urge to war.
PLANNING
There would appear to be considerable confusion in
relation to the legitimate application of the word "planning" to a general
economic activity. The planning conception as applied to output seems urgent
and
essential. As applied to methods it is probably out
of place, in a centralised form. The basic assumptions underlying it in the
latter application, which are that all the best methods of achieving any given
objective are already known and are uniform irrespective of local conditions,
seem to be without any sound justification. No modern planned town has so far
excelled the achievements of the Middle Ages, if the advantages placed at the
disposal of civilisation by the progress of the industrial arts be taken into
consideration, and some radical invention could conceivably make any large-scale
industry obsolete. Bureaux of standards for specific materials are obviously
desirable, but it is probable that greater freedom from financial restrictions
would direct all intelligent incentive to the use of only the best available
material.
Rectification of the present unsatisfactory state
of affairs does not present any serious technical difficulties, although,
because of the immense power of the banking system, it does present political
difficulty. It involves the institution of a monetary accounting system which
will reflect accurately the contemporary relation between the appreciation and
the depreciation of the assets to which it relates. Implicit in this is a
definition of objectives. Subsequent to this, it requires some formulation of
policy based on a correct presentation of the facts. The realisation of this
policy once laid down probably involves nothing further than a distribution of
financial purchasing power.
Assuming that the primary objective of the economic
system is economic comfort and security, this distribution of purchasing power
would be likely to follow three main channels:
(1) The abolition of taxation (by the financing of
Government services out of the National Credit).
(2) The distribution of a National Dividend, both
directly and by a system of compensated prices.
(3) The allocation of regulated credits for
production.
END
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"Production and Di
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