| Subject: | [socialcredit] Control of Policy | | Date: | Thursday, June 1, 2006 07:52:33 (-0700) | | From: | MODERATOR <socredus @.....com>
|
The Control of Policy in Industry
C. H. Douglas
Chapter II, The Control and Distribution of
Production, 1922.
This address was given to the Students at Ruskin
College, Oxford, who at the time were chiefly Marxist
in outlook.
Excerpt:
...There exists in civilized society in all countries
to-day an institution whose business is to issue
money. This institution is called a bank. The
banking business is in many respects the exact
opposite of the Social Reform business--it is
immensely powerful, talks very little, acts quickly,
knows what it wants, chooses its employees wisely in
its own interests.
When a bank allows a manufacturer an overdraft for the
purpose of carrying out a contract or a production
programme, it performs an absolutely vital function,
without which production would stop. If you doubt
this, consider for a moment the result of a rise in
the bank rate of interest on loans and you see that
the power to choke off producers by taxing them at
will is essentially similar to that exercised by
governments on consumers by orthodox taxation, with
the vital difference that in the first case a purely
sectional interest is operating uncontrolled by
society, whereas in the second case the power
undoubtedly exists, though ineffective because
misunderstood, to control it in the general interest.
Now the vital thing done by a bank in its financing
aspect is to mobilize effective demand.
*The effective demand is that of the public, based on
the money of the public, and the willingness of
producers to respond to economic orders; but the
paramount policy which directs the mobilization is
anti-public, because it aims at depriving, with the
greatest possible rapidity, the public of the means to
make its demands effective, through the agency of
prices.*
In order, then, to acquire public control of economic
policy, we have to control the whole mechanism of
effective demand--the rate at which its vehicle,
financial credit, is issued, the conditions on which
it is issued, and take such measures as will ensure
that the public, from whom it arises, are penalized by
withdrawal of the vehicle to the minimum possible
extent. It must be obvious that the real imit of the
rate at which something representing purchasing-power
could be issued to the *public* is equal to the
maximum rate at which goods can be produced, whereas
the 'taking back' through prices of this
purchasing-power should be the equivalent of the
fraction of the potential production which is
consumed.
Let us imagine that wages, salaries and dividends,
added together, were issued via the productive
industries at a *rate* representing the maximum
possible production of ultimate products, and actual
consumption was only one quarter of potential
production. Then, clearly, the community would only
have exercised one quarter of its potential demand.
But the whole of the *costs* of production--the issues
of purchasing-power through the agencies of wages,
salaries and dividends--would have to be allocated to
the *actual* production as at present, and if we
charge the public with the whole cost of production
their total effective demand is taken from them. But
if we apply to the ascertained cost of production a
fractional multiplier equal to the ratio of actual
consumption to potential production, then we take back
in prices that portion of the total purchasing-power
which represents the actual energy draft on the
productive resources of the community and the price to
the actual consumer would be, in the case above
mentioned, 75 per cent less than commercial costs.
If I have made myself clear you will see that
credit-issue and price-making are the positive and
negative aspects of the same thing, and we can only
control the economic situation by controlling both of
them--not one at a time, but both together, and in
order to do this it is necessary to transfer the basis
of the credit-system entirely away from *currency* on
which it now rests, to *useful productive capacity.*
The issue of credit instruments will not result in an
expansion of money for the same or a diminished amount
of goods, which is inflation, but an expansion of
goods for the same or a diminishing amount of money,
which is deflation.
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Control of Policy
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