| Subject: | [socialcredit] The Delusion of Super-Production | | Date: | Friday, September 22, 2006 06:47:15 (-0700) | | From: | MODERATOR <socredus @.....com>
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The following is the text of one of Douglas's earliest
essays, once again courtesy of Wally Klinck.
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The Delusion of Super-Production
C. H. Douglas
*English Review*
December, 1918
It is hardly necessary to draw attention to the
insistence with which we are told that in order to pay
for the war we must produce more manufactured goods
than ever before--a powerful section of the Press
would have the whole military, political, social and
industrial policy of the Allied Governments directed
to the purpose, that, when by a complete victory we
have acquired control of raw material and disposed of
our most dangerous competitor, we may adjust our
internal differences and settle down to an unfettered
era of commercial activity, from which all other
desirable things will, it is suggested, proceed
naturally.
There are an almost infinite number of aspects to this
proposition which is not dissimilar, so far as it
goes, from that with which Germany went to war: it is
possible to attack it from the point of view of the
historian, the psychologist, or even the physiologist.
It is even possible that certain quite indispensable
suffrages have still to be obtained for it. But it is
sufficiently interesting to take it as it stands on a
frankly material, "practical" basis, and see what are
its logical consequences.
A fair statement of the argument for unlimited and
intensified manufacturing subsequent to the war would
no doubt be something after this fashion:
(1) We must pay for the war.
(2) This means hight taxes.
(3) Taxes must come from earnings.
(4) High earnings and low labour costs can only be
continued if the output is increased.
Before dealing with these points let it be thoroughly
well understood that, as compared with the economic
power of absorption, the world was over-manufacturing
before the war in nearly every direction. If any
person capable of independent thought disagrees with
this statement, he will no doubt be able to explain
the immense development of advertising; why the cost
of selling a sewing machine, amongst many other
instances, was higher than the manufacturing cost; why
a new model, not novel in any real essential, appeared
from most of the motor-car works each year, thus
automatically depreciating the value of the previous
year's fashion, and why, in spite of all these and
countless more desperate efforts to stimulate
absorption at home, aided by the barter of trade gin
to our black brother abroad, the stress of competition
to sell was daily growing more insupportable, the main
pressure, of course, appearing in the guise of labour
troubles, unemployment, strikes for higher wages, etc,
but being defintely felt all over the social structure
and being focussed from a national point of view in
the struggle for markets; of which struggle war was
the inevitable and final outcome.
Bearing this selling pressure in mind, let us consider
what will be the post-war situation, assuming any
reasonably early termination of hostilities, and in
the absence of any radical modification in the
economic structure.
It is almost impossible to form any accurate estimate
of the extension of manufacturing plant which has
taken place in the British Empire since 1914, but on a
gold standard basis it is almost certainly to the
value of not less than £750,000,000, and may be much
more. To this has to be added the still more gigantic
expansion of industrial America, with Japan, France
and Italy by no means idle; and the fact that Germany
and Austria have clearly put forth a comparable
effort.
But, still more important, these extensions are
largely homogeneous instead of being accretions on
small jobbing plants. In spite of a number of
notorious instances of bad design, the main
object--repetition-production by modern methods--has
been achieved, and in consequence the output per
individual has gone up in most cases several hundreds
per cent. and in some cases thousands per cent. And
by the introduction of women into industry on a large
scale the available sources of labour supply have been
greatly increased.
On the whole, therefore, the plant and the
organisation for manufacturing have been expanded in
every great country to many times their pre-war
capacity; much of this extension is easily convertible
to peace-time uses; and while the raw material side of
the question is rather less easy to compute it is
possible that something to feed into the machines
might be available for a considerable period of
unlimited activity, although by no means indefinitely.
Therefore it may be accepted as obvious that the
factory system of the world is prepared, to a degree
transcending anything dreamt of in the past, to flood
the market with any article on which a profit in
manufacture can apparently be made.
But absorption is a very different matter, and, in
considering it, a clear idea of what is meant by the
power of absorption is necessary. It is quite
incontestable that the real power of absorption of the
world after the war will be considerable; the repair
of the devastated areas, housing schemes, power,
railway, shipping, aerial and other transport problems
will all require the effort and attention
civilisation, not to mention the demand for a higher
standard of life all round.
But the capitalist manufactuerer means by power of
absorption the total money or credit value available
as payment for his goods, and in the last resort this
is represented by the total sum of the spending powers
in cash or credit of the units of the population. The
contention of the existing capitalistic and financial
authorities, on whom of course the reponsibility for
the policy rests, is that super-production would mean
high wages and the high wages would mean high
absorption power, and so on. Let us see.
The factory cost--not the selling price--of any
article under our present industrial and financial
system is made up of three main divisions--direct
labor cost, material cost and overhead charges, the
ratio of which varies widely, with the "modernity" of
the method of production. For instance, a sculptor
producing a work of art with the aid of simple tools
and a block of marble has next to no overhead charges,
but a very low rate of production, while a modern
screw-making plant using automatic machines may have
very high overhead charges and very low direct labour
cost, or high rates of production.
Since increased industrial output per individual
depends mainly on tools and method, it may almost be
stated as a law that intensified production means a
progressively higher ratio of overhead charges to
direct labour cost, and, apart from artificial
reasons, this is simply an indication of the extent to
which machinery replaces manual labour, as it should.
Now, for reasons which it is hoped will be clear from
what follows, the factory cost, including management
and indirect labour, *of the total factory output of
any article is always more than the total sum paid in
wages, salaries, and for raw material,* in respect of
it. Consequently, the total output of the world's
factory system is inevitably costed at a figure
greatly in excess of the salaries and wages which go
to the production of it. Selling charges and profit
merely increase the price and decrease the purchasing
power of money, as, of course, *caeteris paribus* do
general rises in wages.
In order to realise clearly this most important
relation between factory cost, and money released, it
must be borne in mind that manufacturing, or, what is
commonly called production, is conversion, and just as
the conversion of mechanical energy into electricity
or heat into mechanical energy involves a dispersion,
which for practical purposes is a loss, so the
conversion of manufactured articles can never take
place without a similar economic dispersion.
Obviously the balance, which is represented by this
economic dispersion must go somewhere. A little
reflection will make it clear that it represents
depreciation, obsolescence, scrapped material, etc.,
all of which are charged to the consumer *instead of
being a charge against the value of the product.*
In consequence of this the book value of the world's
production is continuously growing more and more in
excess of the capacity to absorb or liquidate it, and
every transaction between buyer and seller increases
this discrepancy so long as the exchange takes place
at a figure in excess of the total wages, etc., which
go to the various conversions of the product; with the
result that a continuous rise in the cost of living
absolutely *must* take place, apart and above that
represented by currency inflation; palliated by
intrinsically more efficient productive methods, but
leading along a path of cumulative fierce competition
and harder toil to an absolutely inevitable breakdown.
The money required for public works can only be
provided by loans or taxation, a decreasing amount of
which is returned in wages and salaries; an increasing
amount going to swell the mortgage held by the banker
and the manufacturer on the effective effort of the
world's population.
The complete fallacy of the super-production argument
as it stands is apparent; it must be clear, if the
statements just made are admitted, that neither
apparently high wages nor even apparently cheap items
amongst the articles produced can evolve a social
system having in it any elements of stability
whatever.
There is no more dangerous delusion abroud in the
world at this time than that production *per se* is
wealth--it is about as sensible as a statement that
because food is necessary to man he should eat
continually and eat everything. Production is
necessary and desirable just so long as the actual
thing produced is a means to something else which is
necessary to humanity, and like everything else the
thing produced has to be paid for by effort on the
part of someone. So far from the necessity of this
country and the world, being an orgy of unlimited
production, the first need is for a revisioin of
material necessity, combined with sound scientific
efforts, to produce to a programme framed to meet the
ascertained demands; not artificially stimulated, but
individualistic in orgin whenever possible.
Such a programme might be allotted in sections amongst
the available producing centres at block prices, and
such producing centres might again contract with the
whole "effort" (i.e., staff and labour) involved, at a
price to cover the whole output; such price to include
upkeep of plant, stocks, etc. Efficiency in operation
would then result in shorter hours, and would itself
be cumulative.
If such a policy can be combined with a large
decentralisation of initiative, high *rates* of
production would follow natuarally, and the
individual, for the first time, would begin to reap
the solid benefits of the use of mechanism. On this
basis it would be possible to attack the second urgent
necessity, the reduction of money in any form whatever
to the status of an absolute medium of exchange.
These are not light tasks, but the alternative to
their assumption is a weary pilgrimage which may have
some very lurid passages. And in the end it may be
found that the chief crime of the capitalist was that
he was such a very bad capitalist; in that he neither
recognised his assets, nor met his liabilities.
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