| Subject: | [socialcredit] These Present Discontents | | Date: | Saturday, September 16, 2006 13:06:13 (-0700) | | From: | MODERATOR <socredus @.....com>
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Serialized in *The New Age,* early 1920.
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These Present Discontents.
By Major C. H. Douglas.
[The present series of three articles is reprinted
from the “Nation” by the kind permission of the
Editor. The series “Credit-Power and Democracy,’’ will
be resumed in our issue of May 27.--ED. N.A.]
I.
Whether or not the Great War has released the immense
flood of criticism on every subject, which is the
feature of the moment, or whether, as is probable, a
position would in any case have been reached by this
time in which a large majority of the world’s
population must have become profoundly dissatisfied
with their lot, is no doubt arguable. But that such a
position has arrived surely no one would deny. Even
the hard-shelled Tory, if he be anything at all of a
realist, must admit that, reasonably or otherwise, his
opponents are making the working of that pre-war world
to which his eyes turn back with longing, and to the
restoration of which his energies are bent, an arduous
and uncomfortable undertaking; while the audacious
seekers after that New World so confidently promised
as the logical consequence of a victorious peace, seem
united on one subject only--the determination to make
the old one as uncomfortable as possible for
everybody.
Viewed dispassionately, therefore, it seems fair to
assume that we really are on the eve of great, even
fundamental, changes; that, while change must come, it
is childish to believe that any sort of change will
do; and, in consequence, to grant that it is of vital
importance to know what is amiss with civilisation, as
a preliminary to prescribing for the malady.
There are already a number of popular remedies on the
market--there is State Socialism, for instance. State
Socialism, however, is a little under a cloud--most
people are more anxious to learn how it can be
avoided, than conspicuously eloquent on its merits.
The orthodox, or rather, Majority, Guild Socialists,
for example, explain that the nationalisation which
the miners want is something quite different from that
which Mr. Sidney Webb and the Fabian Society want, and
are concerned very largely to assure their followers
that, under Guildism, there will be no bureaucracy,
or, at any rate, there will be quite a new kind of
bureaucrat, warranted free from any of the old world
characteristics on which many people hold strong
opinions. And there is Bolshevism, the Russian
“menace”--mysterious, misunderstood, maligned by one
side, and fanatically idealised by another.
But it is a curious fact that almost the only feature
that these prescriptions for the disease of the body
politic have in common is that they are all more or
less novel systems of adminstration, i.e., they assume
that a new mechanism is required. It is quite true
that they are uniformly introduced to our attention by
moral and metaphysical arguments of an exalted nature,
but the concrete embodiment of these sentiments seems
to suggest that the whole problem is to design a
social structure which will still more effectually
subordinate mankind to it, rather than that he might
be enabled progressively to conquer the machine which
now enslaves him.
Before breaking up the wonderful machine of
civilisation and industry as we know it, therefore, it
is well to remember that there is prima facie evidence
that, considered simply as a machine, it is deserving
of a high degree of respect. By its aid all the
wonderful achievements of the nineteenth and twentieth
centuries have materialised, nor can the misuse which
has been made of some of them be laid to its
discredit. An organisation which permits a coolie in
India to grow rice and jute in the certain knowledge
that cotton fabric from Manchester will accrue to him
as a result, is a good organisation per se, and there
is absolutely nothing in the published plans of any
Socialist body which offers the slightest prospect of
replacing effectively the arrangements which at
present enable such co-ordination of effort to
function. If, therefore, we are in possession of an
effective mechanism, built up by centuries of trial
and error, we want to he very sure that our
difficulties arise from the system as a whole before
becoming it revocably committed to its destruction.
There is another aspect of the question, however,
which has only an indirect connection with
adminstrative mechanism, and that is policy. Now, as
that sturdy patriot, Sir Marcus Samuel, observed the
other day, as he made the price of petrol four times
what it is in America, there is no use in mincing
matters. There are only two Great Policies in the
world to-day--Domination and Freedom. Any policy which
aims at the establishment of a complete sovereignty,
whether it be of a Kaiser, a League, a State, a Trust,
or a Trade Union, is a policy of Domination,
irrespective of the fine work with which it may be
accompanied; and any policy which makes it easier for
the individual to benefit by association, without
being constrained beyond the inherent necessities of
the function involved in the association, is a policy
of Freedom.
As between these two policies, there could be no
greater mistake made than to assume that all would-be
reformers are aiming at freedom, though many of them,
no doubt, honestly think that they are. The fanatical
Labour theorist, who would deny the right to live to
any person not engaged in orthodox toil, quite
irrespective of the facts of wealth production; the
Trust magnate who intrigues for Prohibition because it
reduces his premium for Workman’s Compensation
Insurance, or corners an essential article under the
pretext of efficient production, are, no less than the
mediaeval ecclesiastics who burned men’s bodies that
their souls might live, practical exponents of
salvation by complusion. It may be worth while,
therefore, to see whether the industrial and social
machine, as now operated, may not be equally the
instrument of either policy.
As to every-day, practical, individual freedom, it
will no doubt be granted that any man or woman who at
the present time is in possession of a stable income
of the “unearned” description, of, say, per annum, is
economically free, i.e., such a person is sure of a
reasonably high standard of life, even though his
opinions may be highly distasteful to a large number
of people.
This statement is only true, however, so long as the
general level of the prices of those articles which
are actually used to make the standard of living,
i.e., ultimate commodities, remains as at present. But
let us imagine that the control of all housing came
into the hands of one man, who bought each house at
ten times the present market cost, obtaining the (no
doubt fabulous) sum of money required by means of an
overdraft at the banks, based on his ability, under
the circumstances, to make the rents of houses ten
times what they are now, then this statement would no
longer be true. Our hypothetical freeman would once
again have become a slave because his necessities
would force him to obtain more “money” on any terms
imposed by those in control of it. The essential thing
which would have happened is that a Housing Trust
would have come into possession of the whole of the
credit-value attaching to the demand for houses, and
would have been able to make any price for a house, so
long as that price enabled the Trust to retain the
bank-credit with which the house was bought.
We may observe that in this simple example, we have a
complete instance of the embodiment of two
diametrically opposite policies, the machinery
permitting either of them, so far as we have so far
seen, to become effective. The only essential, to the
complete ascendancy of the hypothetical Trust (which
might, and probably would be not only economic, but
moral and intellectual) is that it should centralise
the credit, and retain the power of price-making. In
order to make the analysis of any value, however, we
have both to ascertain whether such a centralisation
of credit is probable, whether the function of
price-making is indissolubly attached to it, and
whether, in the first place, our economic freeman had
any “right” to be in possession of “unearned” income
(and so may be the prototype of the New Citizen), or
whether it was merely obtained at the expense of
someone else, as the orthodox Socialist would have us
believe.
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II.
In order to arrive at a sound conclusion in these
matters it is necessary to start where all things
start in Nature, and to decide what are the motives
which, actuate men in this connection with the
economic and industrial systems; and it is true, as
well as proverbial, that self-preservation is the
first law of Nature. Man does not live by bread alone,
but he does not live very long without a reasonable
amount of food, clothes, and shelter. Secondly, and
subsequently, he requires, and this increasingly, an
outlet for the creative spirit. It may be noted in
passing, that it is just at this point that the
“intellectual” is apt to fail in interpreting the
great mass of humanity engaged in a deadly grapple
with the weekly household bills, a battle which must
in most cases be won decisively before the surplus
energy becomes available for the satisfaction of the
need of self-expression.
It is in the nature of things that the provision of
food, clothes and shelter, involves a conversion of
energy, i.e., it means work, in the mechanical sense
of the word: and when man had no available store of
energy on which to draw other than that contained in
the food he ate and converted into muscular capacity
to do work, these things inevitably took up a good
deal of his day, although there is good evidence that,
by the fourteenth century, in England, a very
tolerable material standard of comfort was maintained
without excessive toil. At the present time, when
every man, woman, and child has on the average at
least ten times the mechanical energy of the strongest
man, at the door, if not at command, and the knowledge
available for its beneficial use is incomparably
greater, the struggle for existence is yet probably
more intense than ever it was, and large classes of
the working population live under conditions which are
frankly abominable.
There is no doubt whatever that this is an anomaly due
to misdirection of effort, and, bearing in mind the
primary motives which actuate men in the mass, it is
clearly vital to see if possible where this
misdirection occurs--why men, working hard for
comparatively long hours, with marvellous tools and
almost unlimited mechanical energy at disposal, seem
yet powerless to achieve even elementary economic
security.
We have agreed that the primary purpose for which men
work is food, clothes and shelter. The modern
industrial system does not allow of the direct
exchange of service for these things, but of necessity
introduces a common medium which we call “money,”
which is defined as “any medium which has reached such
a degree of acceptability that no matter what it is
made of, and no matter why people want it, no one will
refuse it in exchange for his product” (Professor
Walker). Consequently, in order to meet the primal
necessities, men work for money, having always at the
back of their mind that so much money represents so
much satisfaction of these primal needs. It should be
particularly observed that it is this faith, this
credit, which gives money its value, and it is
therefore true to say that all money is, or is
fundamentally dependent upon, credit.
But (although the fact does not appear to have
received any general recognition) there are two
conceptions of credit, one, that of the worker, and a
second, that of the financier and banker. The worker
for wages or other forms of pay, gives “credit” to the
idea that the more he produces the more satisfaction
of primal needs is thereby made possible, i.e., this
real credit is based on the rule of delivering the
required goods. The financier uses this belief as a
basis for financial credit, which is essentially a
measure of the rate of making money. The nexus between
these two “credits” is prices, and it is part of the
argument with which we are concerned to show that it
is in the lengthening of this nexus that misdirection
of effort must occur.
The modern industrial system has an outstanding
characteristic--it is the Machine Age; and men are
increasingly employed and paid for making machines
which themselves perhaps only perform one out of many
or the processes which go to the production of
something men really want in itself, an ultimate
product, and these same men, as individuals, do not
want these machines for the making of which they are
paid; they only want the ultimate product.
Consider what happens to the money aspect of these
ultimate commodities. Men must have them; and “it is
no use mincing matters, the price of an article is
what it will fetch.” The rules of the game allowing
it, retail prices will rise until the whole of the
money paid for the production, not only of these goods
but of the capital and export goods being produced at
the same time, has been absorbed, assuming only that
there is competition to buy and not to sell. This has
the effect that if the upper limit of price is fixed,
as at present, by “supply and demand," the price-maker
is enabled to make such prices for ultimate products
as will return to him the purchasing power
distributed, not only in respect of these products,
but of the plant which produced them, leaving him in
control of all this plant, a situation which in turn
enables him to control both the quantity and variety
of its output, and so maintain his control over
prices.
We are now in a position to see that a centralisation
of financial credit is not only probable, but certain,
so long as certain premises go unchallenged. What is
the effect of this on real credit?
Now, if the purchasing-power distributed both in
respect of capital goods (machinery, factories, etc.),
and consumption (ultimate) commodities is always taken
back from the public in the price of ultimate
commodities only, two things will clearly happen.
Since the illusion of the constant necessity for
strenuous effort must be kept up, the price-makers
will want to make as many capital goods as possible,
and deliver as few ultimate products at home as will
avoid revolution; and the workers who compose the mass
of the public will progressively cease to believe in
the purchasing-power of work for money, and will
demand goods of the kind for which they have a use.
That is exactly what is happening at the present time.
In spite of the fact that, for instance, hundreds of
thousands of houses are needed urgently in Great
Britain alone (the position is almost as bad in
America) the building trades are busy to the limit of
their capacity in building or extending factories or
other capital properties; while Labour is more and
more determined to ignore scales of pay, and to insist
on adequate standards of life, and, at the same time,
and rightly, has completely lost patience with the
generalisation that increased production is the
solution of all our difficulties.
The end of all this is surely clear. In the moment
when the victory for financial centralisation is
complete, so also will the separation of real credit
from financial credit leave the “victors” with a mass
of monetary wealth which will not induce the baking of
a loaf of bread. We shall then have Bolshevism; not
the Bolshevism of the idealist, probably including in
that category M. Lenin, but the Bolshevism which the
policy of the destruction of the credit attaching to
money has forced on M. Lenin, which replaces
inducement by compulsion, the banknote by conscription
of Labour. Perhaps the realisation of this has
reconciled our masters to Bolshevism.
However that may be, to those who do not look forward
with undue enthusiasm to the apotheosis of the
machine-gun, the re-identification of real credit with
financial credit is the vital issue; and it is
proposed to show that this is dependent, in the first
place, on the removal of the price-fixing process from
the play of financial supply and demand, and the
reference of it to the ratio between the credit-value
of capital-production, and the diminution of that
credit-value by consumption.
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III.
It is to be hoped that the previous articles have made
it clear that the decay of real credit is inextricably
involved with a disbelief in the bona fides of those
in control of the policy of industry; a disbelief
which cannot fail to be intensified by the observation
of the luxury which this control enables its
possessors to enjoy. It is entirely beside the point
that, in one sense, the accusation of conscious
turpitude may be unjustified; that many so-called
Capitalists are men of the highest probity and
culture, and that most of them can no more help making
money than a cork can help floating--the embittered
toiler is apt to say, in effect, that, being in
control, they should deliver the goods, and that as
they do not deliver the goods, except to themselves,
they must be put out of control.
Eliminating rhetoric and personalities, he is right.
The practical object of the whole economic and
industrial system is to deliver, not “more,” but the
right quantity of the right goods to the whole of the
people, with the minimum of discomfort to all
concerned, the people themselves, i.e., individuals,
being the judge both as to quantity and rightness.
After that object has been attained, the productive
organisation may legitimately be an outlet for
creative activity. At no time is it a legitimate
object of the general productive process to “provide
employment” for the purpose of distributing wages--to
make things which the public do not need, and the
makers do not enjoy making, in order that some canon
of obsolete theological morality, or the premises of
an effete financial system, may thereby be satisfied.
Still less is it a legitimate tool of the
will-to-govern.
It will be seen, therefore, that the new motive in
industry which is required, is not something founded
on a half-understood altruism, but rather on a
well-founded assurance that if the best results are
not being attained, it is because they are practically
unattainable, not because some person or class is
obstructing their attainment. This amounts to a demand
for the control of the policy (not the processes) of
industry in the interest of the consumer, since his
demand is the source of all economic production, and
we may notice in passing that it is no doubt here, in
all probability, that the State Socialist error (for
it is an error) took its rise--in the idea that this
control of policy is resident in administration;
whereas it is resident in Finance, in Credit issue,
and price making. “Socialise” these, and there is no
need to, and you had far better not, nationalise
administration.
At this point it is necessary to make clear a
fundamental proposition. Men associate together in
industry because there is a true unearned increment in
association--a telephone system requires a population
to give it a value; ten men pulling on a rope can
accomplish that which ten separated men could never
achieve. With the growth of machine production and the
utilisation of non-human sources of energy, this
unearned increment is growing enormously more
important than the earned increment about which the
Syndicalist, in particular, is so concerned.
This unearned increment rests inalienably on a basis
of Capital, not of Labour; and if Capital derives
from, and should be vested in the community, as is,
broadly speaking, incontestable, then it is as members
of the community, tout court, unconditionally, that
individuals should benefit by this unearned increment.
The dividend is the vehicle for the distribution of
this unearned increment, and it is in the
universalisation of the dividend, and not in its
abolition, that we shall achieve freedom. Only when
this is realised will it be grasped that it is better
for everyone concerned, and especially for Labour,
that the routine operators of the plant of
civilisation should be selected solely for efficiency,
subject to the most drastic competition, and
progressively displaced by machinery.
Dividends on Capital, then, come from a true unearned
increment, and the recipient of dividends is only the
pioneer of the future Citizen. But a dividend, in the
ordinary sense of the word, is a payment of “money,”
of which we have already seen credit is the vital
component, and although credit derives from the
community, the organ of credit-issue, its mobiliser,
is the bank. The most important and fundamental
function of a bank should be to envisage the capacity
of the community it serves, taken in conjunction with
its plant and culture, to meet the demands made upon
it; and, under democratic control, to issue purchasing
power, on behalf of the community (the true State) up
to the limit of this capacity, so that as individuals
the units composing the community can set in motion
the machinery which will make such demands effective.
Let me repeat, there must be somewhere something which
stands as Trustee for the unearned increment of
association above referred to, the greater part of
which is inherited from a past generation. This
Trustee we may call the State, and his agents, the
banks. Then it must be clear that it is the business
of this Trustee to divide amongst the tenants-for-life
of the estate, its benefits, i.e., the State should
lend, and not borrow, purchasing power, and that for
the benefit of individuals, the consumers.
Currency being merely a sort of conveyor-belt for this
purchasing power, the form the currency may take does
not affect the question at issue. The strenuous
efforts being made at this time to re-establish gold
as the basis of currency are simply the outcome of the
desire to monopolise the conveyor-belt in the
interests of a comparatively small gang of persons who
own the gold.
If, therefore, we can make the bank the servant of the
consumer and not, as at present, the tool of the
financier and the price-maker, we can see that the
bank only “lends” to those enterprises which result in
ultimate goods and services needed by individuals for
personal use; in other words, we can democratise the
policy of production.
While the dividend is clearly indicated as the final
method of distributing the goods and services which
form the material basis of civilisation, it is not yet
universalised, and, while aiming at its rapid
extension, it is vital to the survival of real credit
that the unearned increment should at once be widely
distributed. If we reduce prices below cost, i.e.,
below the sum of the purchasing-power distributed
during the production of the goods for
consumption-use, and make an issue of financial credit
to the producer to enable him to carry on his business
on the orthodox principles, we have, in effect, given
a share of this unearned increment to every consumer,
and left him with an additional credit-power to form
the basis of his future dividends. The basis of this
financial credit issue has already been indicated; it
is dependent on the ratio between the credit value of
both capital production and ultimate production, and
total consumption.
It should be noticed that the control of credit issue
and the regulation of prices are interdependent--you
cannot tackle one of them alone. Such issues of credit
are constantly in progress at present, and simply put
up prices. Similarly, any attempt to fix prices
results in the stifling of all initiative and the
inevitable ascendancy of a bureaucracy. It is outside
the scope of these paragraphs to deal with the
mechanism necessary to put the principles herein
outlined into practical operation, but it may be said
that it is of the simplest description, and is
practically all of it in existence. The writer will be
happy to explain it to anyone who is sufficiently
interested to write to him on the matter. In
conclusion, it may not be out of place to glance
briefly at some of the results which might be expected
to accrue from the adoption of the policy indicated;
and this aspect of the question can hardly be better
put than in the words of Mr. A. R. Orage, quoted from
a pamphlet printed for private circulation :-
"...these results are brought about with the minimum
disturbance of existing social arrangements, yet with
immediate social relief. No attack is made upon
property as such, or upon the rights of property. No
confiscation is implied, nor any violent supercession
of existing industrial control. No sudden or difficult
transformation on the part of the State is
presupposed. Nor are men expected, as a condition of
the practicability of the scheme, to be better than
they are. The scheme, in short, presupposes only what
is.
“Nevertheless, from the moment that it is adopted,
considerable changes are effected, and fundamental
reconstruction is induced. Prices would fall to a
level unknown in this country for five hundred years,
and that without loss to the producer; and real wages
(in other words, the purchasing power of wages) would
correspondingly rise. Production would be enormously
stimulated by the diffusion of spending power; yet, at
the same time, extravagant consumption would be
checked by the operation of the ratio of Price and
Cost. Invention would obviously be encouraged by a
common and palpable interest in labour-saving: and in
general the whole of Industry would at once begin to
respond to the spirit of a real co-operative
Commonwealth.
“What democracy has effected in politics, that and
much more would be effected by democracy in
economics...It is certain...that its adoption would so
profoundly modify the commercial relations of all
nations as to remove the principal cause of war
between them.”
(THE END.)
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