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Message 5377
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| Subject: | [socialcredit] FIRST INTERIM REPORT | | Date: | Thursday, May 8, 2008 08:56:04 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
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The text below is from a PDF document downloaded from
the Secretariat's website,
http://douglassocialcredit.com/
At the Secretariat's site now available for download
are the early Douglas essays, "The Delusion of
Super-Production", "The Pyramid of Power", "What is
Capitalism?", and "Exchange and Exports". Also the
books *Credit Power and Democracy* and *Social
Credit*.
-------------------------------------------------
FIRST INTERIM REPORT ON THE POSSIBILITIES OF THE
APPLICATION OF SOCIAL CREDIT PRINCIPLES TO THE
PROVINCE OF ALBERTA
Submitted to His Majesty's Premier and Legislative
Council of Alberta, at Edmonton, Alberta May
23rd, 1935
By MAJOR C. H. DOUGLAS
Together with Correspondence which followed the
Report, between Premier R. G. Reid and Major Douglas,
and between Hon. J. F. Lymburn, Attorney-General, and
Major Douglas
EDMONTON: W. D. McLean, King's Printer 1935
PREAMBLE In order to provide an understandable
background for this Report, it seems necessary to
recall certain general considerations.
Stripped of unnecessary complications, a community
such as the Province of Alberta, with a governing body
entrusted with certain powers, may be considered as an
association of individuals to obtain conditions of
life, both social and economic, which could not be
obtained without organization. It is not only an
association for the purpose of working effectively,
but also an association to enable the eventual
objective of the work to be realized in enjoyment.
The essential wealth of such a community, looked at
from its productive side, consists in its physical
assets, either in the state in which they are found in
nature, or as improved by the application of labour,
and in particular, modern industrial methods; and even
more importantly in its vital assets, represented by
its population and their state of education,
intelligence, morals, health and social well being.
That is to say “wealth” is not “money.”
It is a matter of universal experience, however, that
none of these forms of real wealth, enumerated above,
can come into the possession and control of the
individual without the use of this device, commonly
called money, but which is more comprehensively
defined, and in fact more easily understood, by its
technical term "effective demand."
Effective demand originated in the barter system, that
is to say individuals parted with a surplus of real
wealth in their possession to obtain in exchange real
wealth of a different variety for which they had a
need. The barter system became modified when the idea
of a third factor, erroneously considered as the
embodiment of wealth, for instance gold and silver,
came into use as the common method of exchanging real
or useful wealth. The fact that gold and silver are
themselves commodities, having certain uses, for
ornament or otherwise, no doubt served to intensify
this idea. The great increase of wealth of a genuinely
useful kind, as compared with the symbols of wealth
supplied by the precious metals, forced the
introduction of other forms of symbolic wealth, still
carrying with them the barter conception, but being in
fact merely claims on wealth of the same nature that a
railway ticket is a claim upon transportation, while
having no value in itself, a condition of affairs
which exists at the present time in relation to the
specific form of ticket that we term a dollar bill.
In the modem world, however, the preponderating
feature in effective demand which is universally
employed to carry on the world's business is what is
technically called a "credit instrument," of which
there are several forms. For the purposes of this
preamble it is only necessary to consider the cheque.
The cheque is essentially a draft upon an allotment of
the public credit, by which is meant the well founded
belief that certain quantities of real wealth, having
price figures attached to them, corresponding to the
amount of the cheque, and produced by unspecified
members of the public, will be delivered in return for
the cheque, and a cheque is therefore, so far as it is
accepted as money, a form, and the most common form,
of effective demand.
While it is clear that under a barter system there is
always sufficient effective demand although it may be
inequitably distributed, under a money or cheque
system both inequitable and ineffective demand are
certain unless production and demand are consciously
and systematically related.
Cheques are drawn upon deposits, and it is admitted by
all responsible authorities that deposits are created,
to a major extent, by purely book-keeping transactions
on the part of banking institutions. It is therefore
correct to say that banking institutions are in a
position to create, claim as their property, and to
lend upon their own terms, effective demand which is
the only method by which real wealth produced by the
general public can be transferred from the producer of
it to the user. The question as to the legal right of
banking institutions to claim effective demand of
public property, thus created, as their own exclusive
property, and to lay down the terms upon which it
shall be issued and the conditions under which it must
be repaid, together with the price which shall be paid
for the temporary use of it, will be examined in the
main body of this Interim Report. At the moment it is
sufficient to emphasize that the whole economic
structure, the security of the individual, his social
environment, his level of education, and to a large
extent the conditions of his physical, mental and
moral development, are controlled by the provision or
witholding of this effective demand which is in
essence merely a book-keeping process.
While it is probably true to say that, as at present
conducted, the art of banking consists essentially in
“fooling some of the people all of the time, and all
of the people some of the time,” it would be a mistake
to overlook the fact which must proceed from the
obvious importance of finance, that the conditions of
material progress and the possibilities of a
continuing and improving standard of living have been
and are being achieved within the framework of the
financial system. While it is generally agreed that
this is so, it is not widely understood that
modifications are essential to enable these processes
to be continued. Without going too far into this
aspect of the matter, it may be said that the
financial system in its orthodox form has worked
fairly successfully during an age of expansion in
which preponderatingly large quantities of capital
goods, not intended to be directly consumed by
individuals, have been produced, and the purchasing
power or effective demand which has been distributed
to individuals as an inducement to produce other
capital goods has been available to them as effective
demand for a sufficient quantity of consumable goods.
Since this process of expansion is beyond question
proceeding at a much slower rate, while the debts
which have been contracted in regard to previous
expansion are becoming increasingly onerous,
sufficient purchasing power for the use of the general
population does not become available through orthodox
methods, and if it did, by excessive concentration
upon capital production or Public Works, the breakdown
of the system owing to intolerable debt charges would
only be accentuated.
In regard to the Province of Alberta, therefore, it
appears to me to be evident that little which is
effective can be done to relieve the economic
difficulties which exist unless a departure is made
from methods which were moderately effective in the
past but are no longer suitable to conditions which
have changed fundamentally. Any attempt to deal with
the situation, which does not recognize its
fundamental cause, must discredit the Administration
and eventually result either in an abolition of
organized forms of government in favor of a pure
financial hegemony, or in a continuous disintegration
of social morale, possibly ending in something
approaching anarchy. Both Europe and America, under
the Bank of England and the Federal Reserve System
respectively, have been subjected to almost a complete
financial hegemony for the past fifteen years, with
results which are evident.
If this aspect of the matter were that alone requiring
consideration, it does not appear probable that any
government could hesitate in immediately instituting
modifications designed to rectify the situation.
Unfortunately, however, this monopoly of the creation
of effective demand, which has been allowed to pass
for the most part into the hands of the banking
system, from its very nature constitutes a formidable
power, having objectives of its own not those of the
general population, and it is thereby entirely proper
that the consequences of challenging its interests
should be examined.
THE NATURE OF THE PRELIMINARY INQUIRY
1. At the outset, it must again be emphasized that a
distinction should be drawn between any particular
plan for the utilization of the public credit, when
control of it has been acquired, and a strategy for
acquiring the power to deal with the public credit. If
this distinction be understood, it will be realized
that plans for dealing with the public credit are
wholly premature, while the power to deal with it has
not been attained. For this reason I propose to
confine myself, in this preliminary report to possible
methods and strategy in regard to the preliminary
objective, that of obtaining access to the public
credit.
2. It does not require much consideration to realize
that it is not very probable that an effective
strategy can be pursued to a successful conclusion
with the whole hearted co-operation of those operating
a financial system which already possesses the
monopoly of credit, with all the powers and privileges
which that situation implies. To put the matter
concretely, every step in this direction will be
opposed, and must inevitably be opposed by, e.g., the
Bank of Canada, acting for the International Bankers.
It is not so certain that, under the changed
conditions, the same remark applies wholly to the
Chartered Banks, as, for instance, in Great Britain, a
sharp cleavage is developing between the Joint Stock
Banks and the Bank of England. It is perhaps, however,
safer to assume that the banking system of Canada
would unite against any steps in this direction.
3. The first consideration which arises is as to the
legality of the claim of the banking system to public
credit, taking the law as it stands. It is obviously a
consideration secondary to this, to consider what
sanctions, due to the power of public resentment
against an usurped and anti-social claim, could be
raised, even though this claim had become legalized.
In regard to the first question, in the Province of
Alberta the matter is by no means clear. The power of
printing legal tender money, or that which passes as
money, undoubtedly belongs to the Dominion, and has
now been delegated to the Bank of Canada. But it
cannot be contended that this disposes of the
question, since, if it did, bands would be prohibited
from issuing cheques, which quite unquestionably pass
as money, and are not Dominion or Bank of Canada
documents.
Further than this, matters of property and Civil
Rights are the exclusive domain of the Provincial
Government, and it is difficult to contend that it is
not a Civil Right for an individual to write an order
upon himself calling for the delivery of a portion of
his property. Such an order is effective demand.
Further than this, the Provinces are specifically
granted the right to raise loans upon the sole credit
of the Province. Such loans are raised in money or
credit instruments, and have to be repaid in money or
credit instruments, and the interest upon them has to
be paid by credit instruments. Therefore, if it be
contended that the Provinces have no power to issue
credit instruments, the phrase "the sole credit of the
Province" has no financial meaning, although it may
have a realistic meaning.
In this connection, I should like to acknowledge the
valuable assistance of Mr. Gray of the Attorney
General's department, and the brief kindly submitted
to me by Mr. Herbert C. Boyd, M.A., LL.B., of
Edgerton, Alta., both of which informations so far as
they go, seem to confirm my own view of the position.
4. It would therefore seem that there is room for
considerable action on the part of the Province
without placing the Province in danger of the
invocation of legal sanctions against it, by the
banking system, acting on the premise that it has
sustained a tort. The second obvious sanction (and one
not contained in the legal system) to be considered is
the effect which might be produced by a refusal of
financial facilities from the existing financial
system, together with an attack of a psychological
nature upon the action of the Province.
5. It is clear, and all experience confirms this view,
that if credit instruments can be issued under the
sanction of the constituted legal authority (in this
case the Province), no difficulty arises in obtaining
their universal acceptance within the range of the
jurisdiction of the governing body. This has been
successfully demonstrated beyond question in many
instances and under the most unfavourable conditions,
during the past twenty years. In Great Britain in 1914
the whole population was accustomed to handling actual
gold coins, and, in fact, strongly disliked the only
existing paper money, the Bank of England note. Within
a week of the outbreak of war a complete change from
gold metallic currency to a paper currency was
instituted without visible shock, in spite of the well
known existence of enemy agents-provocateurs, using
all possible efforts to destroy confidence in the new
money. Under conditions which could never be
paralleled in this country, and after calculated
inflation never before known in history, one series of
paper Marks after another has been accepted and has
functioned in Germany with no tangible backing other
than the mere declaration that it was legal tender. No
difficulty might be expected, therefore, if certain
cheques were made legal tender.
6. A difficulty does arise, however, where a
considerable portion of the commodities required has
to be imported from outside the credit area over which
the Government has jurisdiction, and it is essential
for the practical solution of this that a considerable
amount of what may be considered as foreign currency
or credit should be accumulated. I have given
considerable attention to this aspect of the matter,
and I do not believe that it is insuperable in regard
to Alberta, more particularly since the fear of
repudiation has raised in the mind of the external
bond-holder a recognition that his debtor has claims
upon his consideration, particularly if no suggestion
of fundamental repudiation is contemplated.
7. The sanctions therefore that can be applied to
penalize action against the existing monopoly of
credit, so far as Alberta is concerned, do not appear
to be legal, and do not appear to extend so far as to
render an internal credit system unworkable. They
appear to be more formidable in connection with the
exchange problem which is raised as between Alberta
production and imports to be exchanged for the surplus
of it, but even so they are not novel, and methods for
dealing with them have been successfully applied both
in Russia and Germany.
8. On the other hand it is important to realize that
the sanctions are not wholly upon one side. To use the
vernacular, the whole world is becoming "money
conscious." While revolt against financial
mismanagement appears to be for the moment more vocal
in the Western Provinces of Canada, it is by no means
non-existent in the East. It has grown rapidly, and is
powerfully represented in the Senate and Congress of
the United States, and is becoming a popular movement
on the Pacific Coast. It is highly probable that the
next Government of New Zealand will be committed to
some form of Social Credit, and in the State
Governments of Australia, as distinguished from the
Federal Government, its power is growing so rapidly
that it is not easy to state the present position.
There is much discussion of the subject in South
Africa. In Great Britain the position is probably even
more important, though less apparent to casual
observation, in view of the closely-knit Press
organization and the monopoly of broadcasting, which
is intimately associated with the Bank of England.
9. The practical importance of this in regard to
Alberta is that vindictive action by the financial
authorities could be pilloried through the agency of
Press and broadcasting to an audience which is already
sufficiently instructed all over the world to grasp
the questions that are at stake, and has a pronounced
bias against the banking system as it exists at the
present time.
10. Further, sanctions, which do not contemplate
essential repudiation, exist in the external debt of
the Province, and in the circumstance that the
producing organizations external to Alberta are just
as anxious to receive orders upon any terms which will
enable them to meet, their financial commitments as
Alberta could be to receive their product.
11. It may not be out of place to comment at this
point upon the rise of the idea of secession. In this
connection it should be noticed that disintegrating
influences are evident, not merely all over the
British Empire, but in such countries as Spain,
Southern Germany, and the Western States of America.
In every case with which I am acquainted the
disintegrating influence is financial and so far from
a modified financial system tending towards a
secessionist policy, any informed examination of the
question seems to indicate that it is the existing
financial system which is the seed-bed of
disintegration, and that a modification of it, which,
if successful, could not fail to spread with immense
rapidity, would be the shortest method of disposing of
such disintegrating influences. That, in fact, it is
only insistence upon an effective financial system
which raises the question of secession into the sphere
of practical politics. The real secessionists,
therefore, are those who insist upon an orthodox
financial policy, regardless of its consequences to
the population affected.
12. To summarize the position, therefore, the
alternatives lie between a surrender to interests
whose legal position is doubtful, and whose power,
though admittedly great, is neither impregnable nor
free from serious attack in quarters outside Alberta,
on the one hand, and measures designed to free the
Province from external financial control. The result
of the former line of action can be judged from past
experience, and in my opinion must involve failure to
solve the so called unemployment problem, a stationary
or only very slowly increasing population in this
Province, inability to develop the resources of the
country, and political and social disintegration.
Orthodox financial assistance would, however, be
available, by the adoption of this policy, although
accompanied by a rise in the public debt, and a
continuous drain on individual financial resources
through rising taxation. If this policy is adopted all
experience tends to show that preparations for
severely repressive measures, through increased police
organization, are essential.
13. The consequences of the adoption of the second
policy, if properly conducted, might mean temporary
difficulties in regard to the import of articles not
produced in the Province, a certain amount of
political conflict with the Dominion Government, and a
good deal of misrepresentation as to the actions and
policies which accompanied this general attitude.
14. On the other hand, it would be possible, within a
very short period of time, to minimize the
unemployment problem in the Province, to increase the
general standard of living of the whole population
without decreasing that of any of its members, and to
embark upon a systematic development of the resources
of the Province on a scale otherwise unattainable.
15. In general, and without at the moment going into
too much detail, the preliminary steps to be taken in
this direction are, in my opinion:
(1) The systematic provision of a News circulation
system under the unchallengeable control of the
Province, particularly in regard to radio facilities
of sufficient power to cover a wide geographical area.
(2) The organization of some Credit Institution,
either under the Dominion Bank Act or otherwise, which
will give access to the creation of effective demand
through the credit system, on principles already well
recognized and established.
(3) Systematic organization directed to the
accumulation of what, for the purposes of this report,
may be termed "foreign exchange," i.e., effective
demand not subject to attack as being recognizable as
having been created within the Province.
(Signed) C. H. DOUGLAS,
Chief Reconstruction Adviser
to His Majesty's Government of Alberta.
Memorandum Re Legislative Powers of the Province
Submitted by W. S. Gray, Attorney General’s
Department, at Request of the Government for
the Guidance of Major Douglas in Making His Report
The following two questions have been submitted to me
for an opinion:
1. What meaning is to be given to the words in
Subsection 3 of Section 92 of the British North
America Act as follows:
“The borrowing of money on the sole credit of the
Province."
I am not able to ascribe any meaning to the word
"credit" in this subsection other than the ordinary,
everyday meaning found in Murray's New English
Dictionary of “trust or confidence in a person’s
ability and intention to pay at some future time.
2. Is there anything which justifies the separation
from the accepted meaning of property of the right to
issue effective demands upon that property?
Involved in this question is the meaning to be given
to the words "property and civil rights" contained in
Subsection 13 of Section 92 of the said Act. It is
quite difficult to give an opinion on the proper
interpretation of any Subsection of Section 91 or
Section 92 of the said Act without having something
concrete to work upon.
This was pointed out by Viscount Haldane, Lord
Chancellor, in John Deer Plow Co., Ltd., vs. Wharton,
reportcd in 1915, A.C. p. 330. The Lord Chancellor
said at p. 339:
“It must be borne in mind in construing the two
sections that matters which is a special aspect and
for a particular purpose may fall within one of them
may in a different aspect and for a different purpose
fall within the other. In such cases the nature and
scope of the legislative attempt of the Dominion or
the Province (as the case may be), have to be examined
with reference to the actual facts if it is to be
possible to determine under which set of powers it
falls in substance and in reality. This may not be
difficult to determine in actual and concrete cases.
But it may well be impossible to give abstract answers
to general questions as to the meaning of the words,
or to lay down any interpretation based on their
literal scope apart from their context.”
The words “property and civil rights” are very wide,
and standing alone would, I think, include not merely
property and civil rights as generally understood, but
also the right to issue efffective demands upon
property.
In Citizens Insurance Co. of Canada vs. Parsons, 7
A.C. 96, the question involved was the validity of
certain legislation passed by the Province of Quebec
and dealing with insurance contracts and certain
statutory conditions attached to such contracts. It
was contended in that case that the words "property
and civil rights" had a narrow meaning and that they
would not extend to include contracts between
individuals. This contention was not given effect to,
however, and Sir Montague Smith in giving opinion of
the Privy Council, said at p. 111: “In this statute
the words ‘property’ and ‘civil rights’ are plainly
used in their largest sense and there is no reason for
holding that in the Statute under discussion they are
used in a different and narrower one.”
There can be no doubt, therefore, that the words,
standing alone, would justify the answer--no--to
question No.2 above, and that the Province, prima
facie, would have the right to legislate in the manner
suggested by the question.
In the same case, however, Sir Montague Smith uses the
following language at p. 109:
“The first question to be decided is, whether the Act
impeached in the present appeals falls within any of
the classes of subjects enumerated in Section 92, and
assigned exclusively to the legislatures of the
provinces; for if it does not, it can be of no
validity, and no other question would then arise. It
is only when an Act of the provincial legislature
prima facie falls within one of these classes of
subjects that the further questions arise, viz.,
whether, notwithstanding this is so, the subject of
the Act does not also fall within one of the
enumerated classes of subjects in Section 91, and
whether the power of the provincial legislature is or
is not thereby overborne.”
Also, in the John Deere Plow case, Viscount Haldane
stated at p. 340:
“The expression ‘civil rights in the Province’ is a
very wide one, extending, if interpreted literally, to
much of the field of the other heads of Section 92 and
also to much of the field of Section 91. But the
expression cannot be so interpreted, and it must be
regarded as excluding cases expressly dealt with
elsewhere in the two sections, notwithstanding the
generality of the words.”
The power, therefore, of the Province to legislate may
be overridden by the power to the Dominion Parliament
in Section 91, such as:
14. Currency and coinage.
15. Banking, incorporation of banks and the issue of
paper money.
20. Legal tender.
A good example of this is found in the case of Tennant
vs. Union Bank of Canada, 1894, A.C. 31, in which it
was held that tho certain legislation contained in the
Bank Act was valid–notwithstanding that tho exercise
of the power interfered with property and civil rights
in the Province and conferred upon a bank privilege as
a lender which the Provincial law did not recognize.
I am not in a position to express any opinion as to
whether the powers given to the Dominion Parliament
under Section 91 would over ride the powers given to
the Province with respect to property and civil
rights, without having before me something concrete in
the way of a draft of proposed legislation.
Letter from Major Douglas to Premier Reid Conveying
the Interim Report
Macdonald Hotel,
Edmonton, Alta., Canada, 23rd May, 1935.
Dear Mr. Reid:
With this letter I am sending you the original and
duplicate of my First Interim Report to your
Government on the Possibilities of the application of
Social Credit Principles to the Province of Alberta.
You will notice that in this Report I have taken the
line that action initiating in Alberta, though quite
possibly not ultimately confined to Alberta, is both
possible and desirable, and that such action must have
as its first objective access to the financial credit
which is properly based upon the resources and the
people of Alberta itself.
To put this matter beyond possibility of
misapprehension, I might state that in my opinion no
mere redistribution of the purchasing power already
available in Alberta can be effective in attaining, at
any rate with sufficient rapidity, the results
demanded both by the general situation and by public
opinion, and that there is no likelihood of credit
being obtained from ordinary sources upon such terms
as would be suitable, to the extent which is required.
I feel sure that you will agree that before I can
proceed very much further I much have some decision as
to the general policy which is to be pursued, and I am
aware myself that you will require a Mandate for such
a decision.
In regard to this latter, and assuming according with
the general underlying policy, I should suggest that a
Mandate be asked, as far as possible, for objectives
rather than for mechanisms. These objectives in my
opinion should be firstly those contained in the last
section of my First Interim Report, and should be
supplemented by a statement of ultimate objectives of
which the following are fundamental:
1. A drastic reduction of taxation, particularly upon
real property.
2. A maintenance dividend as of right, possibly small
at first, and graded so as to be at a maximum after
middle age.
3. Measures designed to produce a low price level
within the Province, with adequate remuneration to the
producer and trader.
4. Development of internal resources based rather upon
physical capacity than upon financial considerations.
All of these objectives can be attained, and can only
be attained by access to control of the local credit.
The problem is at least as much a political as a
technical problem, and if I might venture to make two
tentative suggestions in regard to the former aspect
of it, they would be (1) that, if not at present, at
some suitable time, as early as possible, a coalition
government should be formed, and (2) that a Department
of Public Relations should be organized specifically
to deal with the criticism from the public both with a
view to keeping the general public informed and also
for the purpose of discouraging by suitable methods
loose accusations of defective administration.
It does not appear that I can do very much more in
Alberta which will be immediately efffective until the
general situation is cleared upon the lines I have
just indicated, and I am therefore devoting my
attention to collecting information which will enable
me to proceed in accordance with the instructions of
the Government when they can be given.
If this would meet your views, I propose to leave
Alberta about the 31st instant, with sufficient
information in my possession to enable several months’
work to be carried on in England.
Yours very truly
(Signed) C. H. Douglas
The Hon. R. G. Reid,
Premier of Alberta,
Legislative Assembly,
EDMONTON, Alta.
Letter from Premier Reid to Major Douglas Following
Receipt of Interim Report
Edmonton, Alberta, June 1, 1935.
Dear Major Douglas:
Discussions we have had both preceding and subsequent
to the receipt of your interim report have had the
effect of clarifying many of the issues confronting
us.
My purpose in writing at this time is to fix certain
ideas that developed during these discussions, which
otherwise might remain rather vague.
You take the view that the field of issuance and
control of credit instruments is not fully allotted to
Dominion jurisdiction, but that a portion of it
remains with the Province.
Having reached this conclusion you make three
recommendations which are not ultimate objectives but
merely preliminary steps in the direction of reform.
If nothing further could be done these measures would
be of little avail.
You stated that the ends to be achieved through social
credit, namely, the distribution of a maintenance
dividend and the securing of a low price level within
the Province, with adequate remuneration to the
producer and the trader, can only be attained by
securing access to control of the local credit, and
that the distribution of dividends from a fund to be
raised by a levy on production or by sales tax would
be merely a redistribution of the purchasing power
already available in Alberta, ineffective in attaining
the results sought, and would not be social credit as
expounded by you.
To my suggestion that the people of the Province are
expecting that your report to the Government will
outline a social credit plan applicable to Alberta you
replied that without much further study of statistical
data with respect to production, imports and other
economic factors, it is impossible to state at what
time or in what amount maintenance dividends could be
paid, and further that until the power to deal with
the public credit has been secured plans for dealing
with it are wholly premature.
I would like to express my appreciation of the
readiness with which you placed yourself at our
disposal at all times and your unfailing courtesy
throughout all our lengthy discussions.
Undoubtedly questions will raise themselves in our
minds as a result of our continued consideration of
these matters, and I will be writing you from time to
time as there is occasion to do so.
Yours faithfully,
(Signed) R. G. Reid
Major C. H. Douglas,
Macdonald Hotel, EDMONTON, Alberta.
Letter from Major Douglas to Premier Reid
Macdonald Hotel, Edmonton, Alta., Canada, 2nd June,
1935.
Dear Mr. Reid:
Thank you for your letter of June 1st.
In regard to the latter three of the five paragraphs
of the first page of your letter, I would suggest that
these appear to be a paraphrase of the subject matter
of my report perhaps rather than a precis of our
discussions. Since the report itself is highly
condensed and the matters to which you refer cannot, I
think, be with propriety detached from the subject
matter which is included, I think it would be
preferable to regard the report itself as covering
them with the greatest possible brevity.
In regard to the first paragraph upon page two, much
the same remarks apply in reference to my letter to
you of the 23rd ultimo. While it is quite correct to
say that the power to deal with the public credit in
some form is a pre-requisite of any Social Credit
plan, I am precluded from putting before you plans for
the use of such credit when attained until I have a
decision from your Government as to the general policy
which is to be pursued.
I assume of course in this connection that no
paraphrase of any statement made by me will be made
public from official sources, and that should you deem
it desirable to publish any documents over my
signature, the whole document will be published. It is
probably superfluous to add that comment on such
documents when published in full is wholly legitimate.
In conclusion I should like to thank you for your very
kind remarks in the two concluding paragraphs of your
letter, and to assure you that I have found my
conferences with your cabinet both pleasant and
interesting and that I hold myself entirely at your
disposal for any assistance that it is in my power to
give, either in regard to this matter or any other
matters which would be a convenience to you, owing to
my presence in London.
Yours very truly,
(Signed) C. H. DOUGLAS.
The Hon. R. G. Reid,
His Majesty's Premier of Alberta,
The Legislative Assembly,
EDMONTON, Alberta.
Excerpts from Broadcast of William Aberhart May 28th,
1935
Submitted by Hon. J. F. Lymburn, Attorney General, to
Major Douglas with Requests for Comments in His
Position as Economic Advisor to the Government
MANNING: Mr. Aberhart, I think you should say a little
about the just price. This is really the finest
feature for the merchants and business men of our
Province. The problem that the business men are up
against because of cut throat prices and this mad rush
after business through manipulation of prices is
driving our business men in this Province to the wall.
I am sure that if the business men of this Province
could get to understand the workings of the just price
there will not be any business men in the whole
Province that will not support the principles of
social credit.
ABERHART: Yes, Manning, I think you are right. I am
satisfied that the businessmen can very readily see
that if sufficient basic monthly dividends were issued
to provide the bare necessities of food, clothing and
shelter to the people that there will be at once a
very large increase in the purchasing power of our
people. This of course will reflect itself at once in
the very great increase in the turnover of the
merchant's stock. Every business man knows that his
profit really rests with the amount of his turnover
rather than on the immediate profit on any goods that
he carries. Great departmental stores have proven that
a large turnover at a low profit is far better than a
small turnover at a large profit.
Some men try to tell us that as soon as we increase
the purchasing power of the people by the issuance of
basic dividends there will be a tendency towards the
vagaries of inflation; that the price level will rise
to consume the increased purchasing power, and no
great benefit will be accomplished. It is at this
point that we will tell or introduce the just price.
This is where the just price comes in. It is the
purpose of the government to form a commission of
experts...in various fields of professions or trades,
whose duty it will be to discuss and carefully settle
what a fair price would be for each article that is
offered for sale within the bounds of this Province.
They would take into account the cost of the raw
materials, the cost of the labour, the cost of the
machinery, the overhead charges for insurance, and so
forth. They would add to this the commission on
turnover and also the unearned increment. That is and
should be the property of the state.
MANNING: At present this increment is being exploited
by the manipulators of credit.
ABERHART: Yes. There is a point that many people miss.
Now this just price would be the same wherever you
bought the goods. It would be just to the producer,
just to the distributors and just to the consumer. No
producer would be required to sell the goods below the
cost of production, no distributor would be required
to sell the goods below the cost of securing them,
whether he imported the goods or whether he gets them
from our own producers. In addition to this, the just
price would be just to the consumer. He would not be
exploited of his purchasing power by very high prices.
This would give the small merchant a chance on a par
with the larger ones. The competition would not be in
price, but in service--in the delicacy with which he
exposes goods to the public gaze, for the neatness and
cleanness and sanitation of his store, and so forth.
No merchant would find after paying $3.21 a case for
any article that another store was selling it on a
leader counter at $2.80 a case.
Guarantee on account of the consumer--a guarantee of
the account of the consumer would protect the retailer
from the losses that he so often has under the present
system. The increased turnover of his goods would
again prevent him from loss from the goods drying out,
decaying or becoming shop-worn.
The increased turnover would at once make a greater
demand for clerks in the store, shippers in the
wholesale houses and railway clerks on the trains and
busses, and also clerks in the producing houses.
Unemployment therefore would immediately be decreased
to a greater extent.
It is true that the spread in prices would be less,
but if the increase in turnover was twice or three
times what it formerly was, then the merchant would be
able to secure greater returns through a greater
turnover, even if his profit spread was less.
MANNING: You would think that any man who understood
that just price arrangement if he is in business would
not hesitate one moment to back up the whole system of
social credit.
Major Douglas' Reply to Hon. Mr. Lymburn
Macdonald Hotel,
Edmonton, Alta., Canada, 1st June, 1935.
Dear Mr. Lymburn:
In connection with your request to criticise the
attached report of a broadcast by Mr. Aberhart, I
think it is only fair to make a little introductory
comment.
If Mr. Aberhart's objectives were only attainable by
the methods which he has outlined in his broadcasts,
to the limited extent that I am familiar with them,
the details that he has given would certainly be of
primary importance.
This is certainly not the case, and should Mr.
Aberhart be placed in a position of responsibility in
regard to the attainment of these objectives, it is
most improbable that he would either have the time or
the inclination to deal with the purely technical
aspects of the matter. While my contact with Mr.
Aberhart has been of the slightest, and is in fact
confined to two short interviews in which only the
most general aspects of the matter were discussed, I
am informed that he also takes up this position.
In addition to this, it has to be recognized that the
correct methods of dealing with the technical problems
involved in the attainment of the objectives put
forward by Mr. Aberhart are difficult to bring to the
comprehension of even a small number of highly
educated men, chiefly because they involve conceptions
with which only a small number of experts are
intimately familiar, and because they traverse the
common and erroneous conceptions held in regard to
matters of finance.
It appears to me to be quite reasonable to assume that
a popular leader, as distinct from a scientific
expositant, is chiefly concerned with presenting an
understandable picture rather than with great accuracy
in detail.
As a matter of opinion, I think Mr. Aberhart has made
the common tactical mistake of elaborating his detail
to a general audience to too great an extent, but if
this detail is to be taken seriously I think that Mr.
Aberhart should as a matter of courtesy be asked
whether such details are, or are not, a matter of
principle with him.
With these preliminary remarks, which I should like to
be regarded as an integral part of my criticism of the
attached paper, I may say that the explanation of the
Just Price is not that which can be applied to the
same phrase as used in the responsible literature of
Social Credit, and that the explanation given can best
be described as a proposal for regulating Price
Spreads together with a Processing Tax.
The proposal appears to contemplate a fixed price
regardless of costs, which seem to be assumed as
constant, and this price includes something labelled
“the unearned increment” which has, however, no
relation to that phrase as used in the Social Credit
literature. So far from such a proposal increasing
purchasing power it is a form of taxation which in all
probability decreases purchasing power by raising
prices. It involves a confusion between price values
and the purchasing power to liquidate them. There is
also a suggestion of a common form of the Velocity of
Circulation theory to the effect that purchasing power
is increased by rate of turnover. Both under the form
in which it seems to be expressed here and not less in
the form in which it is quite frequently quoted by
orthodox bankers, it is demonstrably incorrect. For an
examination of it I might refer you to my small
booklet "The New and the Old Economics" of which no
doubt a copy will be locally available. I am sorry I
have not a copy with me.
Generally speaking it would appear upon the face of it
that Mr. Aberhart has not grasped that Social Credit
involves the creation of additional purchasing power,
either by the reduction of prices below cost, for the
purpose of enabling the consumer to obtain more goods
for a given amount of money in his possession while
the financial deficit thus caused is made up to the
producer in fresh credit, or by issuing additional
sufficient purchasing power which is not passed
through the costing system and therefore docs not
increase prices, in the form of a National Dividend,
or more probably by both of these methods together.
But as I have previously said, these ideas are not
easy to put over to large masses of people, and unless
Mr. Aberhart were to persist in actually attempting to
attain an increase of purchasing power by the
processes he discusses I should not myself be inclined
to take a political speech containing them with too
much seriousness.
Yours sincerely,
(Signed) C. H. DOUGLAS.
The Hon. J. F. Lymburn,
Attorney General,
Legislative Buildings,
EDMONTON, Alta.
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