Thirteen Years of Progress
A Review of the Official Labour Party
Publication,
"Socialism and Social Credit," 1935
By A. HAMILTON McINTYRE, C.A.
AUTHOR'S NOTE
In writing this review of "Socialism and
Social
Credit"--a Report issued by the Labour
Party last year
and priced at twopence--I have had, first
of all, to
consider whether the subject should be
dealt with at
length or whether it should be disposed of
in as short
a manner as possible. Was it worth while to
deal with
the pamphlet, as it were, page by page, or
should the
method to be adopted be one of putting down
the
fundamental ideas of the authors of the
pamphlet with
regard to the matters under consideration,
and then,
shortly, contrasting these ideas with the
fundamental
ideas of the Social Credit movement?
My decision was taken in favour of dealing
with the
matter at some length, following fairly
strictly the
order of the Report. Whether or not the
adoption of
such a method makes the review more
interesting I
leave to the reader. The method obviously
has
disadvantages, but these are possibly
outweighed by
the ease with which the reader may deal
with the
Report and this review concurrently.
INTRODUCTORY
It is stated that the Report was prepared
by a
subcommittee at the request of the National
Executive
Committee. Nothing is said about its
submission to the
Labour Party Conference at Brighton early
in October,
1935, but it is understood that it was
submitted to
that conference and was adopted. The
following extract
is taken from the introductory note to the
Report:-
"The Report deals fully with Major
Douglas's 'Social
Credit' proposals and the National
Executive Committee
associates itself with the Subcommittee's
conclusions
on this subject." (Page 3, line 4.)
The subcommittee consisted of three
members- E. F. M.
Durbin, Hugh Gaitskell, and W. R. Hiskett -
each of
whom had, previous to their appointment,
repeatedly
expressed their antagonism to the Social
Credit
proposals. I think it is true to say,
however, that no
one of them, in criticising Serial Credit,
has ever
given much indication of having really
studied the
main principles involved. Their criticisms
have been
directed largely against what is known as
the A + B
Theorem.
Mr. Hiskett, from one point of view, might
be called
the most logical critic of the Social
Credit
contentions regarding the gap between
purchasing power
and prices. He, at any rate, realises that
if he is
not going to accept the A + B Theorem he is
logically
compelled to postulate a condition of
affairs where:-
"The total volume of money is sufficient to
purchase
at one time all final products awaiting
sale or in
process of manufacture, all raw materials
and
semi-manufactures and all the machinery for
future
production at its present value after
allowing for
depreciation." ("Social Credits or
Socialism."-Gollancz, 1935.)
The committee state their purpose in the
following
terms:-
"What is the Douglas Scheme? How does it
compare with
Labour's policy? Are there any points of
agreement
between them? What are the points of
disagreement, and
why?" (Page 6, line 4.)
As to how far the committee have
endeavoured to carry
out their avowed purpose I will leave the
reader of
the Report to judge. It is probably agreed
that they
have searched for all points of agreement;
but have
they made any effort to find out and
disclose in the
Report what the vital points of
disagreement are, and
why? In view of the composition of the
committee, one
naturally expects the Report to be an
attack on Social
Credit, and so it is rather amusing to find
that the
Report begins by setting forth the alleged
"Points of
Agreement."
FIRST POINT OF AGREEMENT?
The first matter about which there is said
to be some
agreement is connected with the deficiency
in
purchasing power. It seems to me the
committee suggest
that Douglas maintains that there is a
chronic
deficiency between total purchasing power
and RETAIL
PRICES, or prices of goods for immediate
consumption.
This is illustrated by a statement in the
Report that
in boom periods there is a surplus of
purchasing power
over prices. This, the committee seem to
think,
disposes of Douglas's case that the money
system is
never self-liquidating.
What the committee do not seem to grasp
or,
alternatively, are quite determined to
ignore, is that
the Social Credit case is that purchasing
power is
never equal to TOTAL PRICES when both are
regarded as
a flow.
If purchasing power was chronically unequal
to meet
the prices of consumable goods on the
market at the
time, the system obviously would not last
for very
long.
The true position may be put thus:-
(a) The rate of flow of purchasing power
will be,
almost certainly, less than the rate of
flow of prices
of CONSUMABLE GOODS when the rate of
production of
intermediate and capital goods is
slackened.
(b) The rate of flow of purchasing rower
will, almost
certainly, exceed the rate of flow of
prices 0F
CONSUMABLE GOODS when the rate of
production of
intermediate and capital goods is
accelerated.
(An inflationary rise of price and the
investment of
excess profits must be mentioned here--it
is embraced
in the A + B Theorem.)
(c) The rate of flow of purchasing power
will always
be less than the rate of flow of TOTAL
PRICES. One
might possibly add here a proviso to the
effect that
this may not be so during momentary periods
of
wholesale bankruptcies and losses. Even
then, however,
the deficiency will only be deferred.
Industry must recover its bad debts out of
future
prices, and losses must be restored by
future profits.
In other words, bankruptcies and losses are
themselves
a cost against the future.
That the committee hold, or pretend to
hold, the idea
that Douglas alleges a chronic deficiency
between
purchasing power and prices of goods for
consumption,
is further illustrated by the following
quotation:-
"During the boom, he (Douglas) admits the
gap is
temporarily filled, but only by the
creation of
additional debt to the Banks. This is. to
Major
Douglas, evidence of deficiency." (Page 9.
line 2.)
The above is rather an extraordinary
comment.
Commonsense would indicate that industry
does not get
into debt unless it is unable to pay its
costs from
its income, so that the fact of a creation
of an
additional debt to the banks should, in
all
commonsense, be evidence of deficiency. Yet
the
committee seem to think that this
particular statement
of theirs strikes a mortal blow at Social
Credit.
SECOND POINT OF AGREEMENT?
The second point of agreement is stated to
be the
common objection to destruction and
restriction
schemes as a cure for economic depression.
This is a
point of agreement, without doubt, but the
Report goes
on to say that "both Socialists and Social
Crediters
recognise the schemes for what they
are--monopolies
which aim at holding up prices and
squeezing the
utmost from the consumer." (Page 9, line
31.)
I should hesitate to say that this sentence
expresses
a point of agreement. There is just a
subtle
distinction which illustrates the
difference in
.outlook between a Socialist and a Social
Crediter.
The Socialist sees in the situation the
results of
greed, extortion, profit, and so on. The
Social
Crediter sees the results of faulty
arithmetic. The
Socialist sees an evil Capitalist extorting
money from
the worker. The Social Crediter sees a
harassed
business man trying his best to square his
accounts.
THIRD POINT OF AGREEMENT?
The third point of agreement is stated to
be a common
attitude to certain moral aspects of the
banking
system. Reference is made to bank credit
functioning
as money and the power of the banks to
create and
cancel money. The Report then goes on to
say:-
"These facts were not discovered by Major
Douglas.
They are to be found in all orthodox
writings on the
subject and are clearly stated in the pages
of the
Macmillan Report, but Major Douglas and
other monetary
reformers have certainly popularised them
better than
the Text Books and have also pointed to
certain
implications which tend to be slurred over
in more
orthodox accounts." (Page 10. line 9.)
I am sure this paragraph must have given
the committee
much thought in its composition. Major
Douglas, I am
certain, would make no claim to being the
first man to
have discovered the facts, but he is
entitled to claim
that he published the facts and drew
certain
conclusions from them in 1918. The facts
were
certainly contained in textbooks prior to
that
date--for example, H. D. McLeod's--but the
conclusions
from the facts had not, so far as I know,
been drawn
until Major Douglas's first publications.
To suggest
that the Macmillan Committee had any share
in
pioneering is merely laughable. The phrase
"certain
implications which tend to be slurred over"
is, I
think, worth a second thought. Apparently
the
committee have also "slurred over"
them.
THE NATIONALISATION COMPLEX
The Report proceeds, at some length, to
consider the
Socialist conclusions from these facts
regarding our
banking system, and it is obvious that the
committee's
whole outlook is coloured by the
nationalisation
complex. There is no suggestion made at all
that even
if the banks were nationalised the methods
used in
accounting the public moneys would be
changed. The
complaint, according to the Socialist
outlook, is
entirely that such powers are in the hands
of private
persons or institutions. That no change of
method is
contemplated is evident, I think, from the
following
extract:-
"That such great powers--of special
significance now
that the money system of this country is
not tied to
others through the Gold Standard--should be
exercised
by bodies which are legally beyond the
control of the
Government, is an anachronism as dangerous
as it is
absurd." (Page 10, line 32.)
I am not at all sure what interpretation is
intended
to be given to this sentence, but the only
conclusion
I can come to is that the committee would
not see so
much harm in the condition described if the
Gold
Standard was in operation. This shows quite
clearly, I
think, how much they have misunderstood the
true
position. That the committee are suffering
from the
complex I have suggested is further
confirmed by the
concern they show over the profits which
the Bank of
England makes. Pointing out that the
profits of the
Issue Department fall to the Treasury, they
seem to
think that so far as the Issue Department
is concerned
that problem is disposed of; but they also
point out
that since credit is not less money than
cash and bank
credit is quantitatively of much more
importance
"there is a strong moral case against the
exploitation
of credit creation for the purpose of
making private
profits." (Page II, line I.)
All the above shows clearly that the
committee have
not concerned themselves with the method of
issue and
cancellation of money, but rather with the
titular
right to create money and the profits
accruing from
such right. It is quite fair to suggest
that if the
committee had their way and the banks
were
nationalised, the same methods of issuing
and retiring
money would still be in operation and the
essential
problem, therefore, would be no nearer a
solution. An
admission is made in the Report that
expenditure on
public works can be carried out only by
incurring
further debt, thus burdening future
taxpayers with
interest and sinking fund payments. The
Report
states:-
"Simply because the right of creating new
money does
not belong to the State. the necessary
impetus to
recovery cannot be given." (Page II, line
26.)
One is left wondering how, if the right to
create new
money belonged to the Labour Party, they
would account
it. There is nothing in the Report, so far
as I am
aware, to show that they would account it
as anything
else but debt, nor that they would not
insist on its
recovery via taxation. It is true that this
point is
dealt with to a certain extent on page 32
of the
Report, but it is stated that where debt is
not repaid
out of taxation it is only a temporary
expedient and
the quantitative issues of such credit will
not be
large.
Before coming to their criticism of the
Social Credit
analysis the committee make the following
statement:-
"It is most unlikely that the full Social
Credit
proposals could be applied without either
producing
inflation or making it impossible for the
Banks to
exist in their present form." (Page II,
line 34.)
This statement is used as an argument
for
nationalisation. It is quite carefully
worded. If we
amend the terms of it a little, I think
most Social
Crediters would agree with it as
follows:-
Social Credit proposals cannot be applied
within the
present money system. They can be applied
only in a
changed money system and such change
involves a change
in the policy of the banks and the
Treasury.
It is merely childish at this time of day
to say the
Social Credit methods would cause
inflation. Social
Credit could not be applied within any
system which
permits of inflation.
The committee of the Labour Party is simply
up to the
old game of criticising Social Credit in
terms of
orthodox finance.
THE A + B THEOREM
The second division of the Report is stated
to be a
criticism of the Social Credit analysis,
and early in
this section the A + B Theorem is quoted.
This
theorem, it is said, is the central
argument on which
Major Douglas bases his conclusion. I would
suggest
that this is entirely wrong, and that the A
+ B
Theorem is the method by which Major
Douglas
illustrates his conclusion.
According to the committee of the Labour
Party, the
suggestion seems to be that one day Major
Douglas
discovered the A + B Theorem and the rest
of the
analysis followed. However pretty the
mental picture
conjured up by such a suggestion, I am
afraid that
idea must be discarded.
The A + B Theorem is merely a condensed
method of
stating facts which were discovered by
independent
means.
In Major Douglas's first published book,
"Economic
Democracy ," the A + B Theorem does not
appear.
The committee having decided to deal with
the A + B
Theorem, it is a pity, to my mind, that
they could not
quote it correctly in their Report. They
state:-
"A factory, or other productive
organisation, has,
besides its economic function as a producer
of goods,
a financial object." (Page 12,line 34-my
italics.)
While it is true that productive
organisations have a
financial object under the present system,
that is
precisely what the Social Crediter says is
wrong. The
correct statement of the A + B Theorem
begins by
saying:-
A factory, or other productive
organisation, has,
besides its economic function as a producer
of goods,
a financial aspect, which is an entirely
different
matter.
The Report proceeds to examine the A + B
Theorem in
its different interpretations. I do not
intend to deal
with these at length, as they have already,
to my
mind, been ably dealt with by Mr. A. W.
Joseph in a
pamphlet called "The A + B Theorem."
Broadly speaking, the Report ignores the
facts of
accumulation of financial capital and
involuntary
investment and, therefore, its arguments
against the
theorem are weak. I will, however, deal
with a few of
the higher lights in this section of the
Report.
Under the division headed "Repayment of
Bank Loans"
the Report says:-
"Now it is certainly true that if on
balance
throughout the whole of industry loans are
repaid to
the Banks, a deficiency of purchasing power
is bound
to arise...The question here is simply one
of fact. Is
there a tendency for the total of Bank
loans to
diminish? The answer is, that at certain
times--during
depressions--this is the case, but at other
times the
total of loans definitely expands." (Page
16, line 5.)
Further on in the Report it is
stated:-
"Equally, if a firm is voluntarily repaying
a loan out
of profits, and the Banks do not
immediately create
another loan to another producer, then
again
deficiency is bound to arise, but as we
have already
said, the question here is really one of
fact and the
facts show no general and chronic tendency
for the
total of Bank loans to diminish." (page 17,
line 9.)
The argument here is not very clearly
stated, but I
think it is fair to assume that the
committee admit
that repayment of bank loans charged into
prices and
appearing, therefore, as profit, do create
a
deficiency of purchasing power, but that
such
deficiency is corrected by the banks
issuing further
loans to other producers, and, therefore,
so long as
total bank loans do not show any sign of
diminishing,
there is no deficiency.
In my opinion, this illustrates the
fundamental
difference between the views of the
committee and the
views of the Social Crediter. Social
Crediters
realise, as the committee apparently does
not, that
these further bank loans to other producers
have got
to be repaid, and, therefore, do not
correct the
admitted deficiency--they merely postpone
it.
The committee evidently do not see that
bank loans
repaid may undergo a metamorphosis and
become
securities or reserves which still remain a
charge
against the ultimate consumer.
It is surely obvious that industrial debt
and national
debt, requiring ultimately to be met and
forming a
charge against the consumers (admittedly
unpayable
under the present system), are not to be
measured by
the increase in bank loans. While bank
loans have on
balance probably diminished since 1920,
Government,
municipal, and industrial debt has
increased in
fantastic proportions. The committee's
failure to see
this arises from the fact that they
ignore
accumulations of financial capital in
considering the
A+B Theorem.
A little later in the Report it is
stated:-
"It is, in fact, the policy of the Labour
Party to
stabilise prices; and prices can only be
stabilised,
when production is increasing, if there is
an adequate
increase in the quantity of money." (Page
17, line
3B.)
It seems to be clear from this statement
that the
committee look on stabilisation as having
some
miraculous quality, and it is also clear
that they
regard the volume of money as being
something which
should control prices which again goes to
show that
they have not understood the principal
Social Credit
contention, which is that the money system
must no
longer be used to control prices through
the so-called
law of supply and demand. Prices should be
controlled
by the real cost of production.
THE ILLUSIVE INVESTMENT
In three paragraphs under the sub-heading
of
"Investment," the committee go on to record
their
criticism of an aspect of the deficiency.
They record
the views of the Social Crediter in the
following
terms:-
"The act of saving withdraws money from the
market for
finished commodities and makes it
impossible to sell a
part of the product. The money which is
saved is
invested and paid out eventually in wages,
and so
passes into consumers' income; but in the
meanwhile,
it is argued, the process of investment has
led to the
production of new capital goods and there
is no
purchasing power available to purchase
these." (Page
IB, line 15.)
The above statement of the Social Credit
case is a
reasonably fair one, but it does emphasise
the problem
as if it was entirely one of individual
consumers or
workers saving actual cash from their
incomes and
buying new investments. It ignores, or at
any rate
does not make it clear, that the processes
of saving
and investing are going on all through the
industrial
system and are being carried on by
producers of all
kinds in the form of reserves and
undistributed
profits.
The Report goes on to say that the above
stated
argument is quite unsound, for the reason
that if
investment takes place concurrently with
saving the
deficiency caused by the saving is balanced
by the
money spent on the investment.
"It is true that if saving increases, some
finished
commodities cannot be sold at their old
prices, but at
the same time some investment goods,
machinery,
buildings, raw materials, etc., will be
sold at more
than cost prices. There will be depression
in certain
industries and boom in others; less money
will be
distributed in some, and more in others.
Consumers'
income as a whole will be unchanged." (Page
18, line
36.)
One is left wondering what on earth the
committee
meant when they wrote this. Investment
goods,
machinery, buildings, raw materials, etc.,
are not
sold in the sense that their costs are
defrayed. They
are merely transferred from one ownership
to another,
the financial costs attaching to thein
still remaining
to be defrayed by the only person who can
defray
costs, namely, the consumer.
The following quotation, I think, shows
clearly the
wrong ideas on which the committee are
working. It
occurs shortly after the previously quoted
extract:-
"As the new capital goods are produced,
they will
continue to be bought by the savings of
consumers.
They will then be used in production. This
will lead
to an increase in the output of industry.
If there is
to be no fall in prices, it is necessary
that the
quantity of purchasing power and the
incomes of
consumers should now be increased. This is,
of course,
implicit in the Labour Party policy of
stabilising
prices. A failure to increase purchasing
power at this
point might be said to constitute a
deficiency; but it
is certain that this is not the main
deficiency to
which Major Douglas refers." (Page 19, line
12.)
This extract is, I think, worth a little
careful
study. Take the first sentence. The
suggestion that
new capital goods are bought by the savings
of
consumers is nonsense if it is intended to
suggest, as
I think it quite clearly is, that the costs
incurred
in making these new capital goods are
thereby wiped
out. If new capital goods are paid for by
the savings
of consumers, the consumers who did pay for
them are
now investors holding shares, mortgages,
or
debentures, in the form of scrip. They look
to this
scrip to bring them a return in the way of
income and
ulrimately to repay to them the money
originally paid
for the scrip. If consumers, as a whole,
have invested
in capital goods, then they can only look
to
themselves as the source out of which their
dividends
are to come and out of which their capital
is to be
repaid to them.
Consider the sentence above, beginning "If
there is to
be no fall in prices." This again shows
quite clearly
that the committee of the Labour Party
think that the
volume of money should control price. One
can only
assume from the next sentence that the
official Labour
Party policy of stabilisation recognises
that in these
circumstances there would be a deficiency
of
purchasing power and that they have a
remedy for such
deficiency. This remedy can take only one
of two
forms. It can take the form of encouraging
still
further increased production of capital
goods, or it
can take the form of distributing free
credit either
to the consumer or to the producer for
reduction of
prices.
There seems to be no doubt whatever which
of the above
two forms would be adopted by the Labour
Party. It
must be the former, through which schemes
of public
works or the encouragement of production of
still
further capital goods would provide an
agency by means
of which an increased total volume of wages
would
serve the purpose of preventing too severe
a fall in
the prices of finished goods.
STATIONARY EQUILIBRIUM?
The committee's arguments under the heading
of
"Depreciation" are a re-hash of the old
argument that
while depreciation is being charged on one
factory,
there would, or should, be another factory
in the
process of erection, the wages paid on
the
construction of which would meet the
depreciation
charged on the first factory.
It is merely another aspect of the argument
about
industry being in a state described by
Professor
Robbins as "Stationary Equilibrium," or, if
one
prefers it, "A steady state of
self-repeating
movement."
The argument takes no account whatever of
the fact
that although a factory may take only one
year to
build, it may take fifty years to wear out,
and seeing
such an argument in print, or listening to
it in
conversation, has always conjured up a
vision before
my eyes in which the erection of the second
factory is
carefully scheduled to take fifty years to
build, in
order that the money distributed in course
of its
erection will correspond to the
depreciation charged
on factory number one.
SUBTLETY
The opponents of Social Credit have often
said, as
indeed the Labour Party's Report suggests,
that Major
Douglas in his writings is very obscure.
What, then,
are we to make of the clarity of the
following extract
from the Report?--
"A more subtle form of this argument
maintains that
the actual change-over from labour to
machines causes
a diminution of the actual monetary
circulation. Since
cost reduction, it is maintained, is the
stimulus to
replace labour with machines, the new costs
will be
less than the old, and hence the amount of
money used
by industry will be less. There are
doubtless
occasions when this will be so, but it
seems equally
probable that since the reduction of costs
offers the
prospect of higher profits, more, rather
than less,
will be borrowed by industry. Because a
firm reduces
its unit costs, it does not necessarliy
reduce the
total amount which it spends, i.e., its
aggregate
costs." (Page 20, line 25.)
The last sentence in the above extract is,
of course,
a clear statement of fact, but what the
meaning, or
intention, of the paragraph as a whole is,
I must
confess I do not know. Presumably this
"subtle form of
the argument" is being fathered on to the
Social
Credit movement, but Social Crediters will
have no
hesitation in disowning it.
LABOUR SAVING
This particular section of the Report
finishes up by
saying that "the real objection to the
replacement of
labour by machinery" is that it "generally
throws
certain workers out of employment," and
that:-
"in any case it continually tends to reduce
the
relative share of labour in the product and
increase
the share of capital." (Page 20, line
40.)
The Social Credit proposal, as we all know,
is to give
every citizen of the country a share in the
capital of
the country in the form of a National
Dividend, or, if
you like to look on it in that way, to make
everybody
a capitalist.
But the Labour Party committee say:-
"The method of dealing with this evil is
not monetary
policy, but Socialism. The community must,
itself, own
the machines." (Page 20, line 41.)
It is evident, therefore, that the
committee are still
unable to distinguish between titular
ownership and
administration.
Incidentally, no Social Crediter has any
objection,
real or fancied, to the displacement of
labour by
machinery, but, on the contrary, welcomes
it.
WHEN DOCTORS DIFFER
The third section of the Report is devoted
to a
consideration of the Social Credit cure,
and the
Report admits that this cure follows, for
the most
part, quite logically from the analysis. It
is
therefore rather extraordinary that, having
to their
mind completely disposed of the analysis,
they should
be at any trouble at all to deal with the
cure.
However, actually almost seven pages of the
Report
concern themselves with exposing the
"fallacies" of
the cure.
This particular aspect of the matter is
dealt with by
the committee in the following terms:-
"Before proceeding to consider this scheme,
we must
emphasise that disagreement with Major
Douglas's
analysis is not in itself an adequate
reason for
rejecting his proposals entirely. It has
already been
pointed out that at a time when resources
are not
fully employed an increase in the quantity
of money is
required. Major Douglas does, in fact,
suggest one way
by which this might be provided. It remains
to be seen
how far this is the best way, and also how
far the
Social Credit proposals can secure not only
the
achievement but also the maintenance of a
high level
of production." (Page 22, line 1.)
The above paragraph confirms my previous
contention
that the committee had, at the back of
their mind,
some faint hope or fear--whichever way you
like to put
it--that the Social Credit proposals might
possibly be
operated within the present system. Having
failed
altogether to consider in any adequate way
the basis
on which the Social Credit proposals are
founded, the
committee naturally adopt the above
outlook. If the
committee had really examined the basic
ideas which
are fundamental to the Social Credit
proposals, and
rejected them, then there would have been
no necessity
whatever for them to deal with the remedial
proposals
at all.
The Social Credit proposals fall under
three heads:-
(I) The setting up of a National Credit
Account: This
proposal is based on a conception of Real
Credit.
(2) The compensated price, sometimes
referred to as
the just price, or the national discount:
This is
based on the axiom that the real cost of
production is
consumption, together with a realisation of
the uses
to which financial credit can be put.
(3) The issue of a National Dividend: This
is based on
the previous conceptions together with a
realisation
of the part played in production by what is
called
"The Cultural Inheritance."
The astonishing thing about the whole
Report is that
nowhere in it is there any sign that the
committee
have considered either:-
(a) The distinction between Real Credit and
Financial
Credit.
(b) The axiom that the real cost of
production is
consumption, or
(c) The idea of The Cultural
Inheritance.
Nowhere in the Report are any of these
three things
mentioned, and yet, as I have said, these
three things
are the fundamentals of Social Credit.
With regard to (b), namely, the axiom that
the real
cost of production is consumption, it is
not
surprising that the Labour Party committee
do not deal
with this, because, so far as I know, no
critic of
Social Credit has ever dealt with this.
They have all
considered it much wiser to ignore it.
STRANGE SILENCE
Assuming, for the moment, that the present
mqney
system works as the committee seem to think
it does:-
In any one year let us suppose that the
financial
figures attaching themselves to the total
production
of the country are as follow:-
Consumable goods
£3,000 million
Capital goods and development £1,000 Total
production
£4,000
million
Then, presumably, the committee's
conception of what
happens is that people as a whole get
£4,000 millions,
out of which they spend £3,000 and invest
£1,000. The
question is, have the community been fairly
charged?
If it is true that the real cost of
production is
consumption, then. the real cost of this
year's
production is only £3,000 million, not
£4,000 million,
and the correct price at which the £3,000
million of
consumable goods should have been charged
was-£3,ooo x
- 3,000/4,000 or £2,250 million; so that on
a question
which suggests that the community as a
whole are
possibly being overcharged £750 million per
annum, the
Report is curiously silent.
THE DIVIDEND
The section of the Report which deals with
the
National Dividend is very small. Its value
as
effective criticism is even smaller.
Reference in it
is made to the Draft Scheme for Scotland
which should,
at any rate, suggest that the committee
have studied
that scheme. On the other hand, the
paragraph goes on
to suggest that it is proposed to
distribute
purchasing power equal to the total capital
value of
all assets.
There is, of course, no such proposal in
the Draft
Scheme for Scotland. The initial National
Dividend in
the scheme is suggested at one per cent. of
such
capitalised value, so that to the mind of
the
committee one per cent. must be equal to
the total.
This short paragraph on the National
Dividend
illustrates also the previous contention
that the
committee have made no study whatever of
the question
of Real Credit and Financial Credit. The
following
extract will make this clear:-
"An obvious fallacy here lies in the fact
that Major
Douglas appears always to include the
capitalised
value of all assets in his estimate of
production. and
even goes the length of capitalising the
productive
capacity of individuals." (Page 27, line
38.) .
What the significance of the words
"estimate of
production" is, in the above sentence, is
one which I
am not quite able to solve. If it is an
estimate of
real resources up to date, then that is one
matter; if
the committee are suggesting that it is an
estimate of
increase annually, then, of course, that is
another
matter altogether. To illustrate the real
worth of the
committee's statement, I would refer the
reader to the
Scheme for Scotland: "From the Grand Total
thus
obtained" (valuation in money of physical
assets plus
population) "a figure representing the
price value of
the Scottish Capital Account could be
obtained."
By some peculiar means the committee
translate "the
price value of the Scottish Capital Account
into
"estimate of production."
THE ONLY WAY
The last section of the Report deals with
what it
calls "The Real Solution." It is quite
clear that to
the mind of the committee no change in the
financial
system is required, so that from one point
of view
further comment on this section should be
unnecessary.
There are, however, some high lights which
might be
dealt with:-
Extract (1)- "By varying the lending
policies of the
Banks and thus the volume of money, it
should be
possible to increase very considerably the
volume of
output." (Page 28, line 24.)
Again is illustrated the conception that
money and the
volume of money is to control
production.
Extract (2)- immediately following Extract
(1)- "The
standard of living could be made to rise
slowly but
steadily as the real productive power of
society grew
larger." (page 28, line 26.)
Earlier in the Report the proportion of
unemployed
resources is stated at 30 per cent., so
that it seems
rather extraordinary to suggest that the
standard of
living requires only to rise slowly but
steadily. One
would think that a 30 per cent. increase at
least
would be due immediately.
Extract (3)- "In the View of the Labour
Party, the
course of capitalist depression is
characterised by a
deficiency of purchasing power at certain
times, and
an excess of purchasing power at others."
(Page 28,
line 30.)
Here, presumably, the committee are
referring to
purchasing power as against consumable
goods.
Extract (4)- "Only money in active
circulation
provides a market for 'production and
increases
employment. One method, and again a
perfectly orthodox
one, of intensifying the activity of
monetary
circulation is for the Government to spend
more money
on capital account." (Page 30, line
33.)
The above illustrates the committee's
belief in the
velocity of circulation theory which, of
course, is
involved in their acceptance of control of
price by
the volume of money. The extract also
illustrates what
I have suggested earlier as the method the
committee
advocate of making good the deficiency
which they see
as between money and prices. The method, of
course, is
merely to "borrow yourself out of debt."
The extract
also shows that the committee think the
objective of
industry is to provide employment.
Extract (5)- "No doubt there is room for
further
capital expenditure on housing, but it
should always
be accompanied by the kind of investment in
productive
industry which will provide continuous
employment at
higher real wages. The real social income
must be
increased...It is not possible to persuade
industry to
borrow more when it is in the throes of
acute
depression." (Page 31, line 15.)
This extract again illustrates the previous
statement
that the committee think that the objective
of the
industrial system is employment. What real
wages are,
and what the real social income is, is
perhaps a
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