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The 
 Community's . Credit 
 
 A CONSIDERATION 
 OF THE PRINCIPLES 
 AND PROPOSALS OF 
 THE SOCIAL CREDIT 
 MOVEMENT 
 
 By 
 C. MARSHALL HATTERSLEY, M.A., LL.B. 
 
 1922 
 
 PUBLISHED BY "CREDIT POWER" PRESS, 
 70 High Holborn, London, W.C. I. 
 

 PKINTED BY ED. J. BURROW & Co.. Ltd. 
 London and Cheltenham. 
 
^c^ 
 
 Introductory. 
 
 Events to-day are moving far faster than 
 ideas, and while governments and their expert 
 advisers are seeking a cure for the economic 
 malady along old, discredited lines, the governed 
 are finding scant comfort in the out-worn for- 
 mulae of past decades and the platitudes of 
 present-day politicians. And in the meantime 
 the condition of modern industrial civilisation 
 grows daily more serious. The present situation 
 needs fresh analysis, and for its betterment, a 
 new remedy. 
 
 In the spring of the year 1920 there appeared 
 the former of two remarkable books by Major 
 C. H. Douglas. In ^' Economic Democracy," 
 and later (assisted by Mr. A. R. Orage, late 
 editor of "The New Age"), in " Credit-Power 
 and Democracy " also. Major Douglas has 
 undertaken a new and fundamental analysis 
 of the industrial situation, and has pointed 
 out the principles upon which any permanent 
 solution of the present economic difficulties 
 must be sought. The Social Credit Movement 
 has arisen as a direct result of these two 
 books, in order to study and develop the 
 principles formulated therein, and to discover 
 ways and means of carrying them into 
 effect. But the movement offers something 
 
 586208 
 
INTRODCTORY 
 
 more than a bare economic framework. It 
 holds out an ideal, and it shews how that 
 ideal can be attained. Therefore the social 
 creditor feels he has something to work for — 
 something well worth working for. He has 
 gained a new outlook on life, an outlook full of 
 hope. He knows that he is in possession of a 
 very great truth, and that it is " up to him " 
 to pass it on. 
 
 The following pages contain the gist of a 
 series of papers delivered to the Swinton (Yorks) 
 Group of the Social Credit Movement during 
 the latter part of 1921 and the Spring of 1922. 
 They were first written in an endeavour to 
 " bottom " some of Major Douglas's rather 
 startling and certainly unorthodox contentions, 
 and to become satisfied as to the accuracy or 
 otherwise of his conclusions. They are here 
 submitted with a deep consciousness of their 
 many limitations, but also in the hope that 
 they may be found of some assistance towards 
 the better understanding of a vital subject. 
 
 C. M. H, 
 
 Swinton, Rotherham. 
 December, 1922. 
 
Contents, 
 
 PAGB 
 
 Introductory . . . . . . . . . . i 
 
 PART 1. 
 
 An Analysis of the Present 
 Industrial and Economic Situation. 
 
 CHAPTER ONE 
 
 Some Preliminary Assumptions . . . . i 
 
 The Present Economic Impasse — Orthodox Advice 
 — The Struggle for Foreign Markets — Present 
 Conditions accelerated by War — Owen, Marx, 
 Douglas — Assumptions of the Orthodox Economist 
 — The Same Considered — Science and the Present 
 System — Conflicting Principles — The True Purpose 
 of Industry — Amended Assumptions. 
 
 CHAPTER TWO. 
 Credit and Credit-Power . . . . . . 16 
 
 The Conception of Credit — Credit, Real and 
 Financial — Basis of Financial Credit — Loan 
 Capital — Bankers' Credit and Prices — Loans 
 and Deposits — A few figures — Government 
 Borrowing — Trade and Government Loans — 
 Basis of Credit Power — Financial Pohcy and 
 Industrial Prosperity — Democracy ? — Consumer 
 Control of Credit. 
 
 CHAPTER THREE. 
 Industrial Stagnation . . . . . . 33 
 
 The " Flow Theory " — Argument — Illustration — 
 Conclusion — Criticism — Ultimate and Intermediate 
 Production — "Market - Topheaviness " — New 
 Capital Issues — Capitalisation of Profits — Accumu- 
 lation of Stocks — Effects of Topheaviness — Bank 
 Credit Issues — Enforced Export, and the Struggle 
 for Markets — The Danger Ahead. 
 
CONTENTS 
 
 CHAPTER FOUR. page 
 
 Prices and Price-Regulation . . • • 54 
 
 The " Law of Supply and Demand " — The Dual 
 Law of Prices — An Era of Combines — Control of 
 Industrial Policy — Passing of the Gold Standard 
 — Danger of a Return to a Gold Basis — The Real 
 Credit Basis — Distribution of Purchasing-Power 
 to Consumers — What is the Just Price ? — Summary 
 of the preceding Analysis. 
 
 PART IL 
 
 A Brief Survey of 
 
 Various Suggested Remedies. 
 
 CHAPTER FIVE. 
 Economic Panaceas . . . . . . . . 69 
 
 Proposed Economic Remedies — A Dual Solution 
 — Increased Production — Lower Wages — Higher 
 Wages — The Gold Standard — Abolition of Money 
 — Administrative Control by Workers — Profit- 
 Sharing — Nationalisation — The Capital Levy — A 
 State Bank — Export-Credits — The Marxian 
 School — A Change of Heart, 
 
 PART IIL 
 Some Constructive Principles & Proposals 
 
 CHAPTER SIX. 
 
 The Social Credit Principles. (i) The 
 
 Just Price 89 
 
 The Just Price — The Price-Factor — An illustra- 
 tion — Inflation — Impossible under these Proposals 
 — Legal Tender and Bank-Credit-Issues — The 
 Psychological Effect — Unemployment — Inherent 
 Feature of Present System — Revitalising In- 
 dustry — By the Just Price. 
 
CONTENTS 
 
 CHAPTER SEVEN. page 
 
 The Social Credit Principles. (2) National 
 
 Dividends . . . . . . . . 102 
 
 Inadequacy of the Wage System — The Dividend 
 System — The Three Factors in Industry — The 
 Common Cultural Inheritance — Morality of 
 National Dividends — Necessity — Anticipated 
 Benefits — Financing National Dividends — A new 
 Incentive to Industry — Economic Development 
 — A Step Forward. 
 
 CHAPTER EIGHT. 
 
 The Practical Application . . ..US 
 
 Producers' or Industrial Banks — National and 
 Industrial Dividends — No Expropriation — Con- 
 sumer Control of Credit — Application to Mining 
 Industry — Clearing House System — Illustration : 
 Manufacturers — Retailers — Simplicity of Suggested 
 Machinery — A Gradual Supersession of Present 
 System — Results Anticipated. 
 
 CHAPTER NINE. 
 The International Aspect .. .. ..131 
 
 Overseas Trade — Imports, Exports and the Price- 
 Factor — Price of Imports to Consumer — Price of 
 Exports to Foreign Purchaser — International. 
 Credit — Foreign Exchanges — Barter — Shipping 
 — Envoi. 
 
 APPENDICES. 
 
 Appendix " A." The First Price-Factor 147 
 Appendix " B." The Draft Scheme for the 
 
 Mining Industry . . . . • • ^53 
 
 Appendix " C." Bibliography . . . . 156 
 
Part I. 
 
 An Analysis of The Present 
 Industrial and Economic Situation. 
 
 CHAPTER ONE, 
 SOME PRELIMINARY ASSUMPTIONS. 
 
 CHAPTER TWO. 
 CREDIT AND CREDIT-POWER. 
 
 CHAPTER THREE. 
 INDUSTRIAL STAGNATION. 
 
 CHAPTER FOUR. 
 PRICES AND PRICE-REGULATION. 
 
... ,., THE community's CREDIT. 
 
 that 'which rhehaceS the peace and prosperity, 
 if'no'^' the very existence, of his own country. 
 Gigantic contradictions such as these seem to 
 point to something more than a temporary 
 hitch in the working of the world's economic 
 machinery. 
 
 Orthodox Were it not so tragic, it would be 
 Advice almost ludicrous to see the appalling 
 
 helplessness of our recognised leaders 
 of Commerce, of Labour, and of Finance, in 
 the face of the breakdown of the wonderful 
 economic machine that has developed almost 
 beyond recognition during the past century of 
 industry. Of such orthodox economists, the 
 majority stand aghast, and would seem to await 
 a miracle. Others appear to find consolation 
 in the thought that wars have often, if not 
 always, been followed by periods of acute trade 
 depression and economic distress, and profess to 
 look upon present conditions as merely a 
 severe manifestation of a more or less necessary 
 evil, — like, for instance, measles. Strange to 
 say, they find this a good and sufficient reason 
 for patient endurance, rather than active search 
 for a remedy, forgetting that even measles 
 occasionally proves fatal. The only advice they 
 have to offer (when docked of its surplusage) 
 seems to reduce to this : " Produce more ; 
 Consume less ; Export the surplus." Produce 
 more — and add to the already enormous accu- 
 
SOME PRELIMINARY ASSUMPTIONS. 
 
 mulation of unsaleable stocks. Consume less — 
 a difficult doctrine to preach to those already 
 unable to afford the bare necessities of life. 
 Export the surplus — ^where ? 
 
 The Struggle " With the present condition of 
 for Foreign restricted and reduced markets, 
 Markets. and the re-entry of Germany and 
 
 other countries into the field of 
 production, we have to face a great and increas- 
 ing competition. Indeed, this is already begin- 
 ning to make itself felt " (b). Japan, and per- 
 haps more particularly the U.S.A., under the 
 stress of economic conditions similar to our own, 
 are even now trying, not only to prevent Great 
 Britain from acquiring fresh markets, but, 
 further, to oust her from the markets she already 
 holds. Here is a condition of affairs pregnant 
 with international friction, and, disguise it as 
 we may, there exists at the present time a some- 
 what strained relationship between our American 
 cousins and ourselves that no amount of verbal 
 camouflage will be able to hide indefinitely, nor 
 wilful blindness disregard, — and which may, as 
 the economic struggle for the world's markets 
 grows increasingly acute, develop into something 
 more than cousinly bickering, (c). 
 
 (b) Mr. F, C. Goodeuough, Chairman of Barclay's Bank, speaking on January 
 26th, 1921. 
 
 (c) It is not disputed that the recent Conference at Washington achieved a 
 political triumph, and that it has perhaps done something to remove the likelihood 
 of another Great War in the immediate future. But armament agreements, however 
 beneficial they may appear, and however genuine may be the desire to avert war, 
 leave untouched the prime economic cause thereof. As to which see Chapter III* 
 infra, at page 52. 
 
Present The history of the past century 
 
 Conditions records frequent hitches in the 
 accelerated smooth working of the world's eco- 
 by the War. nomic machinery ; and as industry 
 gradually approached to its 
 present state of development, these hitches 
 became more frequent, and increasingly serious. 
 It is sometimes forgotten by those who blame 
 the European War of 1914-1918 (at present 
 popularly known as " The Great War ") for the 
 prevailing economic conditions, that before and 
 up to the outbreak of that war there was, and 
 had been for the past twenty years at least, a 
 constant rise in the general level of prices ; that 
 there was at the same time a steady increase in 
 the number of unemployed ; and that there was 
 an ever-increasing state of friction in foreign 
 markets, of which the logical culmination was the 
 War itself. Indeed, it would appear no exag- 
 geration to say that the War has merely accelera- 
 ted the process, and that economically we have 
 reached a state of affairs to-day that, had it been 
 possible to avert the war, we should probably 
 have attained some twenty or thirty years hence. 
 
 Owen, Inherent defects in the modern eco- 
 Marx, nomic system have been proclaimed 
 
 Douglas, from time to time by thinking men. 
 Unhappily these have not always 
 been correct in their diagnosis of the evil. 
 Robert Owen and the co-operators concluded 
 
 \ 
 
SOME PRELIMINARY ASSUMPTIONS. 
 
 that the middleman was responsible, and estab- 
 lished co-opertive factories and stores with the 
 set purpose of excluding the middleman and 
 his profit. Karl Marx, whose influence on 
 Labour thought to-day it would be hard to 
 exaggerate, taught, in effect, that the Capitalist 
 was and is the hereditary enemy of the Worker ; 
 he laid his stress on the appropriation of profits 
 by the employer. Major Douglas (d) carries the 
 analysis deeper, and, behind both the Middleman 
 and the Employer, he perceives in the Financier 
 and his system the basic cause of the economic 
 difficulties of our modern industrial civilisation. 
 
 Assumptions The orthodox economist, wherever 
 of the his private sympathies may lie, 
 
 Orthodox or even if he approaches the sub- 
 
 Economist, j ^ct with an unbiassed mind, tacitly 
 accepts, wholly or in part, the 
 following premises from which to draw his con- 
 clusions (e) : — 
 
 (i) That the only source of a community's 
 wealth is its output. 
 
 (2) That it is only possible to make the 
 poor richer by making the rich poorer. 
 
 (3) That Great Britain is now a poor 
 country, whose one need is economy. 
 
 (4) That external trade is indispensable to 
 the proper distribution of goods at home. 
 
 (5) That the price of goods to the consumer 
 
 (d) In his books " Economic Democracy " and "Credit-Power and Democracy." 
 
 (e) See " Notes of the Week " in " The New Age " for 3rd February, 1921. 
 
THE community's CREDIT. 
 
 can never be less than the financial cost of 
 production. 
 
 (6) That work is the only title to a share 
 in the goods and services of the community. 
 
 (7) That industry exists, not solely for the 
 production and distribution of goods, but also 
 to provide employment. 
 
 Let us, however, take the above assumptions 
 for detailed consideration. 
 
 That the (i) That the only source of a com- 
 
 only Source munity^s wealth is its output. This 
 of Wealth assumption entirely loses sight of 
 
 is Output. another great source of communal 
 real wealth, namely, capacity to 
 produce. Two men, we will suppose, are at work 
 in a coal-mine. A. is hewing coal ; B. is opening 
 a gallery to the coal-face. A. is thus increasing 
 the output of the mine ; B. is increasing, not 
 the actual output, but the capacity of the mine 
 to produce. The real wealth of the community 
 is enhanced not only by A.'s work, but also by 
 B.'s. So that, just as financial wealth is of 
 two kinds, currency and credit, the real wealth 
 of a community is also of two kinds, products, 
 and the capacity to produce. 
 
 That the (2) That it is only possible to make 
 
 Wealth of a the poor richer by making the rich 
 Community is poorer. This proposition implies 
 Limited. that the wealth of a community 
 
 is limited, and follows naturally 
 
SOME PRELIMINARY ASSUMPTIONS. 
 
 from a failure to realise that the real wealth 
 of a community does not consist of money — 
 money is only a machinery for the distribution 
 of real wealth — but consists of goods, and the 
 capacity to provide goods. When it is realised 
 how every new factory erected, every new inven- 
 tion made, every fresh scientific discovery 
 achieved, and every ton of coal raised increase 
 this capacity, one is bound to conclude that the 
 real wealth of a community is practically limit- 
 less. That being so, a proper utilisation of our 
 resources would result in the standard of living 
 of the poorer classes being infinitely bettered, 
 without the abstraction of one jot or one tittle 
 from the possessions of the rich. 
 
 That Great Britain (3) 7 hat Great Britain is 
 is now a poor now a poor country whose 
 
 Country. one need is Economy, The 
 
 truth of the matter is 
 that, measured by goods in stock plus capacity 
 to produce more goods when, where, and as 
 required, England's real wealth is greater than 
 ever before. During the War her industrial 
 machine was keyed up to concert pitch, and her 
 capacity to supply the needs of mankind is now 
 far in excess of what it was in pre-war days. 
 " The first thing to remember is that the old 
 " explanation of our poverty and commercial 
 " impotence will not stand investigation. Accord- 
 " ing to this view, we are poor and economically 
 
THE community's CREDIT. 
 
 * unhappy because we spent so much in the 
 ' war, i.e., destroyed so much property of all 
 ' kinds, and dissipated so much Capital. The 
 ' analogy of the private individual is used to 
 ' shew that we must expect to be poor. . . . 
 
 ' That analogy sounds well enough, but in fact 
 ' it is almost wholly fallacious. This country, 
 ' and indeed the world in general, has not been 
 ' impoverished by the War at all in the way 
 ' the ordinary man is impoverished. We, and 
 ' most of the other countries of the world, are 
 
 * in essentials as rich as we were before 1914. 
 
 * It is true that by loans and taxation we have 
 ' altered the distribution of property in a manner 
 ' which if it had been done in a different way 
 
 * would have been called revolutionary, but 
 ' that does not mean a diminution of total 
 ' wealth. . . . There are no great industries 
 ' that have been destroyed by the War, — our 
 ' coal-pits, our cotton-trade, our ship-building 
 ' yards, and all our industries, from iron furnaces 
 ' to woollen mills, are there ready to be worked. 
 ' . . . We have not even got a demoralised 
 ' population. Take it altogether, the War was 
 ' a stimulus, and there are more people at this 
 ' moment ready and eager, if they can see how, 
 ' to make a profit and increase the wealth of the 
 
 * world than there were ever before "(f)- Are 
 these the characteristics of a poor country ? 
 
 (f) The Spectator, October 15th, 1921, 
 
 8 
 
SOME PRELIMINARY ASSUMPTIONS. 
 
 That (4) That export trade is essential for 
 
 Export is the proper distribution of goods at 
 Essential home. By this time we are so accus- 
 tomed to the cry, " We must export 
 more," that we scarcely pause to ask ourselves 
 the reason why. It is, of course, obvious, that 
 if Great Britain is to import (e.g.) wheat from 
 abroad, she must sooner or later export an 
 equivalent value of home-products in exchange. 
 But what each and every industrial country is 
 striving after to-day is to obtain a so-called 
 " favourable balance of trade," that is, not so 
 much to exchange superfluous for needed com- 
 modities, as to acquire, by exporting greater 
 value than it imports, an income from outside 
 sources. Douglas shews how this is a necessary 
 result of the prevailing economic system. We 
 shall examine his arguments a little later (g), 
 but for the present will only remark that this 
 necessity is accepted as a fact on all sides, and 
 that the condition of world affairs to-day does 
 indeed afford weighty circumstantial corrobora- 
 tion. But (and here lies the danger), if it is an 
 economic necessity for Great Britain to export 
 goods and services to a greater value than she 
 imports, it is also an economic necessity for 
 America, for Japan, for Italy, and for Germany. 
 International friction is, humanly speaking, 
 unavoidable. A very disquieting doctrine this, 
 and one which, if true, points to some radical 
 defect in the world's economic system. 
 
 (g) Chapter III, infra. 
 
 9 
 
THE community's CREDIT. • 
 
 That Goods (5) ^hat the price of goods to the 
 cannot be sold consumer can never be less than 
 "under cost." ihe financial cost of production. 
 In other words, that if a manu- 
 facturer pays out j^ijOOO for raw materials and 
 ^1,000 in wages, salaries and overhead charges, 
 the price of the finished product to the public 
 can never, economically, be less than ^2,000 
 and may very well be considerably more. Under 
 the present financial and economic system this 
 is certainly the case. The selling-off by a manu- 
 facturer of his accumulated stocks at less than 
 production-cost is, of course, no more than a 
 temporary expedient, the loss incurred on which 
 will be recovered in enhanced prices at the 
 earliest opportunity. Indeed, so accustomed are 
 we to regard this assumption as axiomatic that 
 it sounds strange at first to suggest that it is 
 not necessarily true under every possible eco- 
 nomic system. And yet it would not necessarily 
 be the case if, for instance, the financial system of 
 an industrial community were deliberately based 
 on the real credit of that community, and the 
 present so-called gold basis were for ever dis- 
 carded as obsolete. As an illustration of what 
 we mean by this, let us assume that in a given 
 unit of time the gross increase in the real credit 
 of a community (by which we mean not only 
 the output of finished products, but also develop- 
 ment in the capacity of the community to 
 produce) to be of the value of ^^ 1,000,000. If 
 
SOME PRELIMINARY ASSUMPTIONS. 
 
 the simultaneous gross decrease in the com- 
 munity's real credit (in which we include not 
 only consumption of goods but also deprecia- 
 tion and the scrapping of obsolete plant) be 
 of the value of ^^800,000, it is clear that within 
 that given unit of time there has been a nett 
 appreciation in the real credit of the community 
 of the value of ^200,000. This nett increase in 
 the community's real credit would, under such 
 a system, form an effective backing to a Treasury 
 Issue of new financial credit to an amount 
 not in excess of ^200,000. If, now, we suppose 
 that the price of goods within the community 
 were to be regulated at, say, ^ /^ of their produc- 
 tion-cost, then, when the goods that had cost 
 j^8oo,ooo to produce had been sold, the manu- 
 facturers would be out of pocket to the tune of 
 j^i 60,000, and this sum could be reimbursed to 
 them by means of the Treasury Issue of new finan- 
 cial credit just mentioned. This, however, is a 
 somewhat intricate matter, with which we shall 
 deal in detail later (h). For the present it is sufii- 
 cient to note that whereas under the present 
 system the price of goods to the consumer cannot 
 economically be less than the cost of production, 
 it is not theoretically impossible or absurd to con- 
 ceive a system wherein this does not hold true. 
 
 That " Work " is Our last two assumptions may 
 
 the only title very conveniently be consid- 
 
 to Goods and ered together. They are (6) 
 
 Services. T^hat " work " is the only title 
 
 (h) Infra, pages 60, 61 and 62, and Chapter VI. 
 
THE community's CREDIT. 
 
 That Industry to a share in the goods and 
 exists, not only services of the community, and 
 to Produce and (7) '^^^^ industry exists not 
 Distribute Goods, '""^y ^o produce and distribute 
 goods, but also to provide em- 
 but also to provide ^/^^^^^^^ Industry has two 
 Employment. aspects. Primarily, of course, 
 
 the purpose of industry is the 
 satisfaction of man's material 
 wants by the production of goods ; and, 
 under the present system, industry is also the 
 medium for distributing, in wages, salaries and 
 dividends, the money that entitles its possessor 
 to share in those goods. In the former capacity 
 industry functions admirably ; in the latter it 
 is a failure. Nor is the reason far to seek. 
 
 Science Scientists are ever busy designing 
 and the new machinery and discovering fresh 
 Present processes to replace manual labour 
 System. ^7 ^^^^ ^^ machines. Solar energy 
 is being harnessed for the service of 
 man, with the ultimate object of supplying his 
 temporal needs with the minimum expenditure 
 of human energy, or time-work units. In other 
 words, invention and science are daily striving 
 to remove the burden of production from off 
 the shoulders of man and to throw it on to 
 machinery, to the relief and release of mankind 
 for leisure, culture, and recreation. All of which 
 admirable object the present economic system is 
 
 12 
 
SOME PRELIMINARY ASSUMPTIONS. 
 
 as busily thwarting. At the present day the 
 great majority of our population depends for 
 its daily bread upon employment. Employ- 
 ment is limited by the public demand for goods 
 and services. Scientific progress and the erection 
 of great quantities of efficient producing machin- 
 ery has placed industry in a position to meet 
 any possible public demand without the employ- 
 ment of more than a fraction of the human- 
 labour-power available. There is no longer 
 room in industry for all who seek employment 
 there. Instead, however, of releasing men for 
 the pursuit of knowledge, discovery or leisure, 
 science is to-day, in effect, casting them out to 
 starvation or " doles." 
 
 Two Here we see two conflicting prin- 
 
 Conflicting ciples at work. The principle of 
 Principles, progress would harness machines 
 to the service of man. The prin- 
 ciple that " work " is the only title to a share 
 in the produce of industry harnesses men to 
 the service of machines. In long-ago days it 
 was laid down by St. Paul, writing to the 
 Thessalonians (i) " that if a man would not work, 
 neither should he eat." Admirable as this doc- 
 trine may have been before the industrial 
 revolution, nowadays, when abstracted from its 
 context and suitably interpreted, it has become 
 the unwitting cause of much unnecessary misery. 
 
 (i) 2. Thess. 3. 10. 
 
 13 
 
THE community's CREDIT. 
 
 If we lived under a sane economic system we 
 should rejoice that we could produce all we 
 required or desired without employing all the 
 man-power available. There would be no 
 " unemployment problem," and no hungry, 
 ragged army demanding " work " as a means 
 to existence, when there is clothing and food 
 enough for all, but not sufficient employment to 
 go round. Present-day conditions afford a direct 
 incentive to adopt a policy of ca' canny, while 
 " making work " has developed into one of the 
 fine arts. And yet there can be no intrinsic 
 good in taking ten hours to produce by hand 
 what can be turned out in ten minutes by a 
 machine. The fact that one man can now do 
 the work of sixty ought not to result in reducing 
 a considerable proportion of the world's popula- 
 tion to a condition of semi-starvation and ser- 
 vility. The saving effected by means of new 
 inventions and processes should enure to the 
 benefit of the whole community (j). We shall 
 never even begin to solve the great Industrial Proh- 
 lem until we have realised that the true fur-pose of 
 Industry^ firsts last, and all the time^ is the pro- 
 duction and distribution of goods and services, and 
 not the provision of employment. And, as a corol- 
 lary, we must cease to regard " work " as the only 
 title to a share in the goods and services of the 
 community. 
 
 (j) See also infra, Chapter VII. 
 
 14 
 
SOME PRELIMINARY ASSUMPTIONS. 
 
 To Let us sum up. The present-day eco- 
 Sum nomic system has palpably broken down. 
 Up, Orthodox economists are at a loss to find 
 any adequate solution for the besetting 
 problems of to-day, because they base their 
 arguments upon false premises. What we have 
 so far attempted to shew is this : — 
 
 Amended (i) 7 hat the wealth of a community 
 
 Assumptions, consists not only of its output, hut 
 also of its capacity to produce. 
 
 (2) l^hat it is not necessary to make the Rich 
 poorer in order to make the Poor richer. 
 
 (3) l^hat Great Britain is not a poor country. 
 
 (4) a. That a favourable balance of trade is 
 generally considered absolutely necessary for the 
 proper distribution of goods at home. 
 
 b. That this implies a struggle for foreign 
 markets, and a continuance of economic wars. 
 
 (5) a. That under the present system it is not 
 economically feasible for commodities to be sold 
 to the consumer at a price less than the financial 
 cost of production. 
 
 b. That it is not, however, inherently impossible 
 to devise some system under which this would not 
 he the case. 
 
 (6) That " zvork " is no longer the only title to 
 a share in the goods and services of the community. 
 
 (7) That the true purpose of industry is the 
 production and distribution of goods, and not 
 necessarily the provision of employment. 
 
 15 
 
CHAPTER 11. 
 Credit and Credit-Power. 
 
 Introductory. It will be utterly impossible even 
 to begin to understand the causes 
 of the present-day economic impasse unless 
 first of all we grasp the two salient facts about 
 our modern financial system, namely, the im- 
 mense power of the banks to issue credits — the 
 life-blood of an industrial community — and the 
 effect of such issues upon prices and policy. 
 
 The Conception If, to begin with, we consider 
 of Credit. what is meant by Credit, we 
 
 mark at the outset that credit 
 is, as indeed its name implies, something based 
 on belief : belief in the capacity of the person 
 credited to accomplish something. A Bank, for 
 instance, only allows a tradesman to overdraw, 
 or, in other words, gives him credit, if it believes 
 that in due course the tradesman will be in a 
 position to pay off the overdraft with interest. 
 Belief is of the very essence of credit. 
 
 Real and Credit, it will be seen upon reflec- 
 Financial tion, is of two kinds, called by 
 Credit. Major Douglas " Real Credit " and 
 " Financial Credit " respectively. 
 Adopting his terminology. Real Credit may be 
 defined as an estimate of the capacity of the 
 
 i6 
 
CREDIT AND CREDIT-POWER. 
 
 person credited to deliver goods or services where, 
 when and as required. The Real Credit of 
 a manufacturer is based upon the beHef of 
 others in his capacity to dehver goods, and 
 may be due to his possession of suitable 
 machinery or an accumulated stock of past 
 products. Financial credit, on the other hand, 
 is the monetary expression of the belief of the 
 bank or other creditor in the capacity of the person 
 credited to deliver money where, when and as 
 required, and is, in general, equivalent to an 
 estimate of his capacity to dispose of his goods 
 or services in return for money. By way 
 of illustration : if A., a manufacturer, applies 
 to his bank for an overdraft on security of his 
 factory, the bank will estimate the market 
 value of A.'s factory before allowing him to 
 overdraw up to a certain amount, which amount 
 will not be in excess of such value. In other 
 words, the lender considers the borrower's real 
 credit, his capacity to deliver his goods or ser- 
 vices, and if he comes to the conclusion that the 
 said borrower has insufficient Real credit, will 
 refuse to advance him financial credit. So far 
 so good, but the analysis is not yet complete. 
 A lender will not give credit to a would-be 
 borrower simply because the borrower can 
 deliver a large stock of boots upon demand. 
 He will only give financial credit if he believes 
 that the borrower can sell his goods, and out of 
 the prices obtained from the public repay the 
 
 17 
 
THE community's CREDIT. 
 
 amount advanced in money. Indeed, the lender 
 would be disagreeably surprised if the borrower 
 attempted to wipe out his indebtedness in kind, 
 by presenting equivalent value in footwear. 
 
 The Bases It would seem, then, that financial 
 of credit is in general based not only 
 
 Financial on the Real Credit of the borrower, 
 Credit. but also upon a belief in the capacity 
 
 of the community to absorb and 
 pay for his goods or services. A trader may 
 nave quantities of beautiful and rare stones, 
 but if he have no market for his wares he 
 cannot obtain financial credit in respect thereof. 
 This is abundantly illustrated in the circum- 
 stances of to-day. Most manufacturers are 
 carrying stocks in much greater volume than 
 ever before. This is partly due to lack of 
 purchasing power abroad, and in part to credits 
 and currency at home being insufficient to meet 
 demands (a). Put otherwise, although real 
 credit is good and commodities are super- 
 abundant, yet the producer of to-day is without 
 any extensive market for his goods. Conse- 
 quently the banks have felt obliged not only to 
 restrict the issue of further financial credits, 
 but also to withdraw some of the credits they 
 have so lavishly distributed during the past few 
 years. Unfortunately the effect of the with- 
 drawal of these credits is that manufacturers, 
 becoming short of money, cannot continue to 
 
 (a) See infra, page 48. 
 
 l8 
 
CREDIT AND CREDI'T-POWER. 
 
 pay wages until their stocks are cleared. As 
 the flow of purchasing power in the form of 
 wages, etc., diminishes, so does it become 
 increasingly difficult for the community to buy 
 up these accumulated stocks. It is once again 
 the old story of a very vicious circle. 
 
 Loan The following extract from the writings 
 
 Capital, of Walter Bagehot may perhaps help 
 towards a realisation of the extent to 
 which Industry to-day is dependent for its very 
 existence on Bank issues of credit. In 1873 he 
 wrote as follows : — 
 
 " English trade is carried on upon borrowed 
 " capital to an extent of which few foreigners 
 " have an idea and none of our ancestors could 
 " have conceived. ... If a merchant have 
 "^^50,000, all his own, to gain 10% on it he 
 " must make ^^5,000 a year, and must charge 
 " accordingly : but if another have only j^i 0,000 
 " and borrow ^40,000 by discounts ... he 
 " has the same capital of ^50,000 to use, and 
 " can sell much cheaper. If the rate at which 
 " he borrows be 5%, he will have to payj£2,ooo 
 " a year ; and if, Hke the old trader, he make 
 "j^5,ooo a year, he will still, after paying his 
 " interest, obtain ;^3,ooo a year, or 30% on his 
 " own j^i 0,000. As most merchants are content 
 " with much less than 30%, he will be able, it 
 " he wishes, to forego some of that profit, lower 
 
 19 
 
*' the price of the commodity, and drive the 
 " old-fashioned trader, — the man who trades on 
 " his own capital, — out of the market. In 
 " modern English business, owing to the cer- 
 " tainty of obtaining loans, on discount of bills 
 " or otherwise, at a moderate rate of interest, 
 " there is a steady bounty on trading with 
 " borrowed capital, and a constant discourage- 
 " ment to confine yourself solely or mainly to 
 ** your own capital." (b). If Bagehot could write 
 so emphatically in the year 1873, one is led to 
 wonder how he would have expressed himself 
 had he lived to view the economic developments 
 of the present day. 
 
 Bankers* Credit It is not difficult to realise how 
 and Prices. great and important a part is 
 
 played in modern industry and 
 commerce by Bankers' Credits. What is not 
 always realised is that these issues of financial 
 credit are virtually issues of new money. The 
 effect upon the level of prices, that is, upon the 
 purchasing-power of existing credit and currency 
 is the same. To all intents and purposes the Banks 
 have in course of time acquired a monopoly 
 of credit-issue and credit-restriction, and even 
 Governments do not hesitate to pledge the 
 National Credit for the inferior credit that the 
 Banks create. In support of these assertions it 
 is impossible to do better than cite the words 
 of an eminent Banker, the Rt. Hon. Reginald 
 
 (b) Lombard Street, pages 8 and 9. 
 
CREDIT AND CREDIT-POWER. 
 
 McKenna, Chairman of the London Joint City 
 and Midland Bank Limited. Speaking on Janu- 
 ary 29th, 1920, he said : " What, then, has 
 " caused high prices ? ... If we take the 
 " community as a whole we may be quite sure 
 " that as spending-power grows the demand for 
 " goods grows with it, and as demand grows, 
 " prices rise. Here, then, is the first step that 
 " we must take to solve our problem : we must 
 " find the cause of this increase of spending 
 " power. . . . The actual spending-power of 
 " the public is gauged by the total amount of 
 " currency in circulation added to the total 
 " amount of Bank deposits. In 1914 the public 
 " spending power was ^^i, 198,000,000 : to-day it 
 " is j^2, 69 3, 000, 000, an increase of ^^i, 495, 000,000, 
 *' or 125%. . . If we take 100 to represent 
 " the cost of living in 1914, the corresponding 
 ** figure to-day would be about 225, or an in- 
 " crease of 125%. . . . 
 
 Bank Loans " What is the cause of the increase 
 and Deposits. " in spending-power, or, in other 
 " words, of the increase in cur- 
 " rency and Bank Deposits ? . . Let me give 
 " a brief illustration of how Bank Deposits are 
 " increased by Bank Loans. When a Bank 
 " makes a loan to a customer, or allows him an 
 " overdraft, in the ordinary course the loan 
 " will be drawn upon, or the overdraft will be 
 " made by a cheque drawn by the customer 
 
THE community's CREDIT. 
 
 " Upon the Bank and paid into someone's credit 
 " at the same or another Bank. The drawer of 
 " the cheque will not have reduced any deposit 
 " already in existence, because we are supposing 
 " a case in which he has been given a loan or 
 " allowed an overdraft. The receiver of the 
 " cheque, however, when he pays it into his own 
 " account, will be credited with its value, and 
 " thereby a new deposit will be created. . . . 
 " In the same way, when a Bank buys or dis- 
 " counts a bill, the proceeds of the sale are 
 " paid into the credit of the seller's account, and 
 " increase the total of Bank Deposits : and in 
 " the same way also when a Bank buys War 
 " Loan, or makes any other investments, the 
 " purchase money goes to the credit of some- 
 " body's account in some Bank, and increases 
 " the total of deposits. 
 
 A few " Let us look now at the increase of 
 
 Figures. " Bank Deposits since 1914, and see 
 
 " to what extent this increase is due 
 
 * respectively to payments in of additional 
 
 * currency and to Bank Loans. In June, 1914, 
 
 * the Banks held ^75,000,000 of currency. Last 
 
 * month (December 1919) the figure stood at 
 '^191,000,000. The Banks therefore held more 
 'currency to the amount of j^ii 6,000,000, and 
 ' to this extent the increase in the aggregate of 
 ' Bank Deposits is accounted for by payment 
 
 * in of currency. But it is estimated that since 
 
CREDIT AND CREDIT-POWER. 
 
 June, 1 91 4, Bank Deposits have risen by 
 j^i, 230,000,000. If j^ II 6,000,000 of this amount 
 are accounted for by payments of currency 
 into the Banks, there remains ^1,114,000,000 
 which, if the previous analysis be accepted as 
 correct, we must attribute to Bank Loans." 
 
 Comments. Here for a while let us pause to 
 consider the meaning of the above 
 quotation from the speech of the Chairman of 
 our largest Bank. First we remark that the 
 effect upon prices of additional sp ending-power 
 is the same whether that sp ending-power take 
 the form of additional legal tender issued by the 
 Government^ or additional financial credit created 
 by the Banks. In the second place we see 
 that the Banks can issue this credit to their 
 customers without any detriment to themselves. 
 When A. lends B. ^^lo he becomes thereby so 
 much the poorer. But when a Bank allows a 
 customer an overdraft, the amount of this over- 
 draft appears as a new deposit there or else- 
 where, and the Banks' financial position is 
 practically the same as before, except that more 
 interest is charged on the overdraft than is 
 allowed on the deposit. The only limit to the 
 Banks' power to create new credit is their legal 
 liability to pay out legal tender on demand in 
 exchange for it. A 15% backing of legal tender is 
 considered more than ample security (c). Thirdly, 
 we have to remark the fact that only approximately 
 
 (c) See also infra, pages 60 and 94. 
 
 23 C 
 
THE community's CREDIT. 
 
 one-fourth of the increase in our spending power 
 during the War was due to the creation of additional 
 currency by the Government, and that three-fourths 
 was due to what was in fact the creation of new 
 money by the Banks. This is a fact that is fre- 
 quently overlooked by those who blame the 
 Government for issuing " paper-money." It is 
 true that from time to time certain of these loans 
 are paid off, and deposits correspondingly dimin- 
 ish ; but, as we saw a little while ago(d), the whole 
 trend of modern finance is to encourage trading 
 as far as possible on borrowed capital, and in 
 many cases one loan is only repaid by 
 the obtaining of a larger credit elsewhere. We 
 can realise, therefore, how, under the present 
 economic system, Bankers' credit has become a 
 necessity to modern Industry (e). 
 
 Bank Loans It is a fact often overlooked that 
 and Prices, the tendency of these issues of 
 credit by Bankers is to raise the 
 level of prices. In normal times, it is true, the 
 money created by the Banks and lent to manu- 
 facturers is used to further production. This 
 increase, it may speciously be contended 
 counteracts, by the law of Supply and Demand, 
 the tendency of the price-level to rise consequent 
 upon an augmentation of the spending-power in 
 the hands of the community. How is it, then, 
 that for some years prior to the Great War the 
 
 (d) Supra, page 20. 
 
 (e) See supra, page 16. 
 
 24 
 
CREDIT AND CREDIT-POWER. 
 
 level of prices had been gradually rising ? (f). 
 How is it that in November 1920, two years 
 from the signing of the Armistice, and after 
 two years of intensive production, prices were 
 considerably higher than they were in November, 
 191 8 ? (g). There are at least two reasons that 
 may be given to explain this tendency of Bank 
 Credit Issues to raise the level of prices, i. The 
 flow of new spending-power into the community 
 precedes the flow of new goods. The prices of 
 existing goods rise. The cost of living increases. 
 Wages may perhaps rise to meet this. Cost of 
 production rises with wages. By the time the 
 new goods are ready for the market, the general 
 level of prices has risen, perhaps imperceptibly 
 in individual cases, but none the less certainly 
 in the aggregate (h). 2. In the second place^ 
 whereas the " Law of Supply and Demand "1 
 regulates the maximum price of a commodity,^ 
 the minimum price is determined by quite 
 another consideration, namely, the cost of pro- 
 duction, below which, under the present system, 
 it is not economically feasible to sell (i). 
 
 Government Mr. McKenna continues : " We have 
 
 Borrowing. " seen that during the last six years 
 
 " Bank Loans have been respon- 
 
 ^' sible for j^i, 100,000,000 in Bank Deposits. . . 
 
 (f) Between the years 1910 and 1914, there was an increase of 20% in the total 
 of Bank Deposits, and of 7% in the cost of living. 
 
 (g) The Ministry of Labour index figures for the cost of living were (taking August 
 1914 as 100), November 1918, 222 ; November 1920, 276. 
 
 (h) See infra, pages 49 and 50. 
 ^i) See also infra, pages 54 and 55. 
 
 25 
 
THE community's CREDIT. 
 
 " To whom, then, have these Loans been made ? 
 " It is impossible to give precise figures, but the 
 " best estimate that I can form is that of the 
 *' total of eleven hundred million, eight hundred 
 *' million pounds, including Treasury Bills, have 
 " been lent to the State, and three hundred 
 " million pounds to Trade. The Government, 
 " under the overwhelming necessity of War 
 " Effort, has been the great borrower from the 
 " Banks. . . . When the Government bor- 
 '* rows directly from the Banks, or indirectly 
 '* from the Banks through members of the public, 
 " who obtain Bank Advances to enable them 
 '' to take up loans, the Banks subscribe by 
 " drawing on their balances with the Bank of 
 " England. The money received by the Govern- 
 " ment is paid out in due course to meet liabili- 
 " ties to contractors, by whom again it is paid 
 " to the credit of their accounts with the Banks. 
 *' The customers' deposits are thus increased, 
 '' and as the Banks in their turn pay the money 
 " into their accounts at the Bank of England, 
 " the previous withdrawals from that Bank are 
 " made good. Thus the nett effect of the 
 "whole proceeding is to increase the total 
 " amount of Bank Deposits by the exact amount 
 " which the Banks have lent to the Government 
 " directly or indirectly, and the whole weight 
 " of additional spending power is thrown upon 
 " prices." 
 
 26 
 
CREDIT AND CREDIT-POWER. 
 
 Trade Again, what exactly does this mean ? 
 
 and First, of course, that only about 
 
 Government 30% of the increase in prices was 
 Loans. due to loans for the purpose of 
 
 trade, and that approximately 70% 
 was the direct result of Government borrowing. 
 But the inference is strong that if the 
 Government had not been compelled to borrow 
 even one penny. Bank Loans to manufacturers 
 or traders would, by themselves, have caused a 
 considerable rise in prices during that period. 
 Secondly, it means that when the Community, 
 by its Government, borrows from the Banks, 
 the nett result is that the Community has the 
 doubtful pleasure of paying at least 2% more per 
 annum for the money it borrows through its 
 Government than, as the Public, it receives 
 when it pays the same money into the Banks. 
 Thirdly, and still more important, we see that 
 proportionately to the amount lent by the Banks 
 to the Government does the Community, both 
 as Government and Public, labour under the 
 burden of enhanced prices. And yet, so accus- 
 tomed are we to our present financial system, 
 we do not deem it intrinsically absurd to see 
 the Community, as represented by its Govern- 
 ment, pledging the Communal Real Credit to 
 secure an inferior credit from a small section of 
 itself — the Financiers and the Banks — whose 
 whole ability to create such Financial Credit is 
 the outcome of the economic stability of the 
 
 27 
 
THE COMMUNITY S CREDIT. 
 
 Community as a whole. A true Government 
 should lend, not borrow. 
 
 The Basis That the Financiers and the Banks do 
 of Credit indeed derive all their power to issue 
 Power. Credit, and even their ability to carry 
 on at all, from the stability of the 
 Community itself, may be made clear by a single 
 illustration. When, in August 1914, Great 
 Britain declared War on Germany, there was 
 an immediate rush on the part of the public 
 to withdraw their deposits, and particularly 
 their gold, from the Banks. Had the public 
 continued to demand payment in gold, the Banks 
 would have had to stop payment altogether : 
 their credit, that is, the belief of the public in 
 their stability, would have vanished, and with 
 it the possibility of their continued existence. 
 But so dependent has the Community grown 
 under the present system upon the stability of 
 the Banks, that the Government felt itself 
 obliged to interfere to prevent their failure. 
 Consequently, at the request of the financial 
 magnates, the Government declared a three-days 
 Bank Holiday, and when next the Banks 
 resumed payment, the demand of the depositors 
 for their money was met by a flood of Treasury 
 Notes, hastily printed in the meantime. It was 
 thus the Treasury, the purse of the Community, 
 that saved the Private Banks by utilising Public 
 Credit : and it is undoubtedly true that behind 
 
 28 
 
CREDIT AND CREDIT-POWER. 
 
 and supporting the Credit of the Banks there is 
 and has always been the Real Credit of the Com- 
 munity (j). 
 
 Policy The prosperity of an industrial com- 
 
 and munity is dependent upon a wise and 
 
 Prosperity, disinterested financial policy, A 
 short-sighted or self-seeking policy 
 on the part of those who exercise the power of 
 credit-issue and credit-restriction is disastrous to 
 the economic and industrial well-being of the 
 whole community. The Cunliffe Policy of grad- 
 ual monetary deflation may be instanced as a 
 case in point. To quote once again the words 
 of Mr. McKenna (k) : " A declared policy of 
 ' monetary deflation is a public warning to the 
 ' trader that he must be prepared to lose on 
 ' every contract for the future delivery of goods. 
 ^ Owing to the general fall in prices, the market 
 ' price of goods when he gets them will be lower 
 ' than at the time when his contract was made. 
 ' A policy of gradual monetary deflation, but 
 ' deflation so guarded as not to interfere with 
 ' production, is a policy impossible of execution. 
 ' Trade is never good when prices are declining, 
 ' but the consequence of a continuous fall in 
 ' prices entailed by dear money and restriction 
 ' of credit, and accentuated by heavy taxation, 
 ' must be complete stagnation of business." 
 Without prolonged insistence upon the truth, 
 
 (j) See also infra, page 58. 
 
 (k) In a speech to the shareholdtra of the L.J.C.& M. Bank, January 28th, 1921. 
 
 29 
 
THE COMMUNITY S CREDIT. 
 
 often overlooked but self-evident upon reflection, 
 that deflation of money means inflation of the 
 real burden of the National Debt and therefore 
 of direct or indirect taxation, enough perhaps, 
 has been said to shew how an injudicious financial 
 policy can work havoc with industry. And yet, 
 the general public has no voice in the matter. 
 " He who pays the piper calls the tune " is 
 only another way of saying that he who controls 
 credit controls policy. 
 
 Democracy? The recent Bank amalgamations 
 and consequent gathering up of this 
 power of credit-manipulation into the hands of 
 the Boards of the " Big Five " (namely, Barclays, 
 Lloyds, London County Westminster and Parrs, 
 London Joint City and Midland, and the National 
 Provincial and Union Bank of England), have 
 raised a new menace to modern democracy. 
 Almost without protest on the part of the 
 Community, this dominating power has been 
 concentrated in the hands of a few financial 
 magnates, giving to each of them a control of 
 National Policy far in excess of that of a Cabinet 
 Minister. A Cabinet Minister is responsible to 
 the country for his mistakes. A Financier is 
 responsible to no-one for the consequences of 
 his policy. This country prides itself on being 
 essentially democratic, because the policy of the 
 majority as expressed at the polls is said to 
 prevail. And so it does, in mere matters of 
 
 30 
 
CREDIT AND CREDIT-POWER. 
 
 administration. But when financial interests 
 and economic policy are concerned, then it is 
 Finance that rules, and Finance alone. And it 
 must be noted well that the policies of the 
 Financier and of the individual member of the 
 public are by no means necessarily coincident. 
 The individual member of the community looks 
 upon money, rightly, as a title to goods and 
 services ; but the Financier looks upon goods 
 and services as a means to money, and if it pays 
 him to keep commodities in short supply and 
 prices up, he has the wherewithal to effect this 
 object (1). So long as the control of the issue 
 and restriction of credits is left in the hands of 
 private individuals, so long will it be little better 
 than bitter mockery to speak of this, or any other 
 industrial community, as being " democratic." 
 
 Credit One is therefore led to conclude that 
 
 Power at the root of the economic evils of 
 
 and t^^ present day lies neither the 
 
 Democracy, greed of Capital nor the exorbitant 
 demands and extravagant policy of 
 Labour, but that behind these, and stronger and 
 deadlier than either, there is the present 
 financial system, to which both Capital and 
 Labour are slaves (m). Labour sees the Capital- 
 ist in his more comfortable circumstances, and, 
 failing to look behind the obvious, concludes 
 that this same Capitalist is the hereditary foe. 
 
 (1) See infra, page 57. 
 (m) See also supra, page 5. 
 
 31 
 
THE community's CREDIT. 
 
 In truth, the enemy is not the Capitalist, — not 
 even the Financier personally (for the Financier 
 is, after all, generally as humane and well- 
 meaning a man as his fellows) — but this present- 
 day financial system. Until Labour and Capital 
 realise that their interests are one in this matter 
 — until they unite to replace this present finan- 
 cial system by one more in tune with the ideals 
 and aspirations of the times — until then, it is 
 submitted, will our national and international 
 well-being remain in jeopardy. 
 
 Consumer In what direction, then, are we to 
 Control seek the solution of our problem ? 
 of Credit. Briefly, it lies here. Financier, Capital- 
 ist, Worker, all have at least one 
 attribute in common ; all to a greater or less 
 degree are consumers. It is from this point of 
 view alone that they see money in its natural 
 and true light, as a title to goods and services — 
 merely a convenient and conventional machin- 
 ery. Industry should be carried on for the 
 benefit of the Consumer, that is, for every mem- 
 ber of the Community, and not merely for the 
 enrichment of a small section thereof : but this "^ 
 ideal state of affairs will never be realised until 
 the ultimate control of the Community's credit 
 rests with the Consumer (n). • 
 
 n) See also infra, pages 57 and 119. 
 
 32 
 
CHAPTER III. 
 Industrial Stagnation. 
 
 Introductory. There can be little or no question 
 about the truth of the statement 
 that the immediate cause of the present indus- 
 trial stagnation is a lack of purchasing-power on 
 the part of the Consumer, whether at home or 
 abroad. However great and real may be the 
 need for goods, unless demand is backed by 
 purchasing-power it is not a commercial propo- 
 sition to cater for it. Industry cannot continue 
 to produce goods, unless there is an effective 
 demand for them. When we begin to ask our- 
 selves the reason for this present serious lack of 
 purchasing-power on the part of the Consumer, 
 we shall find more than one very plausible 
 explanation. In the course of this chapter we 
 shall put forward what we venture to suggest is 
 the fundamental reason. 
 
 The Perhaps the most elusive conception 
 
 Flow of the Douglas Analysis, and one 
 
 Theory, which confronts the enquirer at the 
 very outset of his investigations, is 
 that which we may, for shortness, term the 
 " Flow Theory." Briefly, it is this. " In any 
 given unit of titne^ the flow of purchasing-power 
 to the various individuals connected with Industry 
 
 33 
 
THE community's CREDIT. 
 
 is never sufficient to buy the total products of 
 Industry produced within that unit of time, at the 
 prices which Manufacturers are, by the present 
 system, compelled to charge.''^ It may be well to 
 quote Douglas' own words in support of this 
 proposition. His argument runs thus : — 
 
 Douglas' " A factory or other productive 
 Argument. " organisation has, besides its eco- 
 " nomic function as a producer of 
 ** goods, a purely financial aspect. It may be 
 " regarded on the one hand as a device for the 
 " distribution of purchasing-power to individuals 
 " through the media of wages, salaries and 
 " dividends, and on the other hand as a manu- 
 *' factory of prices — financial values. From this 
 " standpoint its payments may be divided into 
 *' two groups : — 
 
 " Group A. All payments made to individuals. 
 (Wages, Salaries and Dividends.) 
 
 " Group B. All payments made to other organi- 
 sations. 
 (Raw materials. Bank Charges, and 
 other External Costs.) 
 
 " Now the rate of flow of purchasing-power to 
 " individuals is represented by A., but since all 
 " payments go into prices, the rate of flow of 
 " prices cannot be less than A. plus B. The 
 ** product of any factory may be considered as 
 
 34 
 
INDUSTRIAL STAGNATION. 
 
 " something which the pubHc ought to be able 
 " to buy, although in many cases it is an inter- 
 " mediate product and of no use to individuals 
 " but only to a subsequent manufacturer : but 
 " since A. will not purchase A. plus B., a pro- 
 ** portion of the product at least equivalent to 
 " B. must be distributed by a form of purchasing- 
 '' power not comprised in the descriptions 
 " grouped under A." (a). 
 
 His The concrete example given by 
 
 lUustratioii. Douglas is as follows : — " A steel 
 
 " bolt and nut weighing ten pounds 
 
 * might require in the blank about eleven and 
 
 * a half pounds of material, representing, say, 
 ' 3/6. The nett selling price of the scrap 
 
 * recovered would probably be about one penny. 
 ' The wages value of the total man-hours expen- 
 
 * ded on the conversion from the blank to the 
 
 * finished nut and bolt might be 5/-, and the 
 ' average plant charge 150% on the direct time 
 ' charge, i.e., 7/6. The factory cost would 
 
 * therefore be 15/1 1, of which j/6, or just under 
 
 * one-half, vv^ould be plant charge. Of this plant 
 ' charge probably 75%, or about 5/7, is repre- 
 
 * sented by the sum of items which are either 
 ' afterwards wiped off for depreciation and 
 ' consequently not distributed at all at that 
 ' time, or are distributed in payments outside 
 ' the organisation, which payments must clearly 
 
 (a) " Credit Power and Democracy " (2nd Ed.), pages 21 and 22, 
 
 35 
 
CREDIT. 
 
 be subsequent to any valuation of the articles 
 for which they are paid, and do not affect the 
 argument. Without proceeding to add selling 
 charges and profit, it must be clear that a 
 charge of 15/11 on the world's purchasing- 
 power has been created, of which only 6/10 is 
 distributed in respect of the specific article 
 under consideration " (b). 
 
 His Now, if the products of any one 
 
 Conclusion, factory in any given unit of time 
 cannot be purchased by the wages, 
 etc., distributed to individuals by that factory 
 within the same unit of time, it follows that the 
 aggregate production of all factories in the com- 
 munity cannot be purchased by the currency 
 and credit distributed in the process of industry. 
 In other words, the total purchasing-power of 
 the individual members of the Community is 
 ever increasingly unable to buy the products of 
 the Community at the price the manufacturer 
 is, by his system, compelled to charge. Conse- 
 quently, large stocks of unsold commodities are 
 accumulated which, unless bought by means of 
 new Bank-credits or exported to foreign markets, 
 can only be purchased by money subsequently 
 earned. But this money, in its turn, is only 
 distributed to the Community as payment for 
 further production. Thus it is that we find the 
 whole industrial world, either glutted with 
 unsaleable accumulations of stock, or else plunged 
 
 (b) " Economic Democracy," pages 59, 60 and 61. 
 
 36 
 
INDUSTRIAL STAGNATION. 
 
 into a maelstrom of production, — a mad striving 
 of the various communities to earn, by producing 
 new goods, sufficient wages and dividends to 
 purchase the accumulated products of the past, 
 and being left ever farther behind in the race. 
 
 A Criticism. It is certain to be objected, however, 
 by those who take what may be 
 called a static view of Industry, that Douglas, 
 whilst taking into account the fact that prices 
 include all the moneys paid out by his factory in 
 the given unit of time, whether to individual 
 members of the Community (his Group A.), or 
 to other organisations (his Group B.), does not 
 seem to take into account the fact that not 
 only are individual members of the Community, 
 but also other producers, potential purchasers 
 of the products of this factory. An illustration 
 will, we hope, make their position quite clear. 
 Suppose within a given Community the average 
 ratio of the disbursements comprised under 
 Group A. to the total cost of production be taken 
 as li/- in the pound. This means that if, in a 
 given unit of time, the Community produces 
 new goods at a cost of ^^20,000, of this sum 
 j^ii,ooo has been paid out in wages, salaries and 
 dividends to individual members of the Com- 
 munity, whilst ^9,000 represents inter-factory 
 payments. What, then, do these inter-factory 
 payments represent ? They represent the value 
 of all existing goods consumed in the process of 
 
 37 
 
THE community's CREDIT. 
 
 the production of the ^20,000 worth of new 
 goods. And so, although the cost of all the 
 goods made during the period under considera- 
 tion aggregates ^^20,000, yet, during this same 
 period^ there have been consumed (and paid for in 
 the process) ^£9,000 worth of goods already in 
 existence, leaving only a nett increase of ^11,000 
 worth of goods to be bought by the individual 
 consumers. On the other hand, the wages, 
 salaries, etc., distributed to individuals during our 
 unit of time are also ex hypothesi, £11,000, a sum 
 exactly sufficient to purchase this nett increase. 
 Whilst not denying that, if Industry be regarded 
 as something static, this criticism may appear 
 well-founded, it is, nevertheless, essential to 
 remember that Industry is not really static at aU, 
 but is an ever-expanding organism. Viewed in 
 this light, the increasing inability of a progressive 
 industrial community to purchase and absorb the 
 whole of its own production becomes more easy 
 to understand. 
 
 It may, perhaps, be helpful to those whose 
 " dynamic perception " of Industry is not yet 
 sufficiently developed to follow Douglas in his 
 argument, if we attempt to present one aspect 
 of the case in a somewhat different form, and 
 from another point of view. Before we proceed 
 to do so, however, it may be well to emphasise 
 the fundamental distinction that exists between 
 " ultimate " and " intermediate " production. 
 
 38 
 
INDUSTRIAL STAGNATION. 
 
 Ultimate There are two broad classes of goods 
 and that Industry is capable of produc- 
 
 Intermed" ing. These are (i) Ultimate Com- 
 iate ^ modities — goods which are ultimately 
 Production, produced, and to provide which is 
 the only true purpose of Industry. 
 These are the goods which you and I, as individ- 
 uals and consumers, require. Then (2) there are 
 those goods from which, and by means of which, 
 ultimate commodities are developed. These we 
 will call Intermediate Products. The importance 
 of this class of production lies solely in its func- 
 tion and capacity to produce other goods, — 
 ultimate commodities which the Consumer de- 
 mands. Bread is an ultimate commodity — the 
 bakehouse oven is an intermediate product. 
 Some kinds of goods are either ultimate or inter- 
 mediate, according to the use to which they are 
 put. Coal, for instance, is either ultimate or 
 intermediate, according as it is used for heating 
 a private house or a blast furnace. The goods 
 that Industry exists to deliver are ultimate 
 commodities, and intermediate production has 
 no value to the Consumer unless it is producing 
 the commodities he desires. 
 
 Market Let us, then, imagine the existence 
 
 Topheaviness. of a self-contained industrial com- 
 munity, and assume the presence 
 therein of manufacturing companies owning 
 goods which it has cost, say, ^^i, 000,000 to 
 
 39 D 
 
>^ 
 
 produce. Some of these goods will be inter- 
 mediate products, such as plant and machinery ; 
 the remainder will be ultimate commodities. 
 Let us assume that the total purchasing power in 
 the hands of individual members of the com- 
 munity is, at the moment under consideration, 
 ^100,000. The j^ 1, 000,000 represents the aggre- 
 gate amount of all payments made (however long 
 ago) to individuals in the course of the production 
 of these goods, the greater part of which has 
 already been spent and is no longer available 
 as purchasing-power in the hands of consumers. 
 Now, every fenny distributed to individuals in 
 respect of both kinds of production has, sooner or 
 later, to be recovered in the prices charged to the 
 public for ultimate commodities only. The effec- 
 tive demand for ultimate commodities is limited 
 by the amoimt of available purchasing-power in 
 the hands of individuals, namely, ^100,000. If, 
 we suppose that during the ensuing unit of time, 
 all payments made to individuals during the 
 course of production (that is, all wages, salaries, 
 and dividends) are spent directly in the purchase 
 for consumption of ultimate commodities, the 
 average length of time that must necessarily elapse 
 before money so distributed can be recovered 
 in prices will tend to remain fairly constant. 
 But let us, instead, suppose that various members 
 of the community invest, say, j^io,oc5o in Indus- 
 try. This sum is duly paid out in the form of 
 wages, etc., in the course of production. The 
 
 ^^-^' > 40 
 
\ TKTJTTSTPTAT. RTAnNATl 
 
 INDUSTRIAL STAGNATION, 
 
 total available purchasing-power of the individual 
 members of the community, however, remains 
 unaltered at ^^ 100,000 (for the ^^ 10,000 paid into 
 certain pockets as wages, etc., has been taken out 
 of other pockets as investment), while there is now 
 an additional ^10,000 to be eventually recovered 
 in prices of ultimate commodities An increase in A 
 
 the monetary value of unrecovered payments without y 
 
 an increase in the amount of available purchasing- >* 
 
 power in the hands of would-be consumers naturally 
 lengthens the average time that must elapse before 
 a payment made in the course of manufacture can 
 be recovered in price. Hence manuf actur-ers find, ^,„^. , 
 themselves better equipped for production, with- j 
 out any greater effective demand for ther' goods f 
 they can produce. Stocks begin to accumulate, i 
 as at the present time, unsaleable because the Oi* 
 jcommunity has not sufficient available pur- 
 chasing-power to buy them. The wheels of 
 industry are slowed, and there is an immediate 
 drop in the rate of flow of money into 
 the pockets of the consumers as wages, etc., 
 and a corresponding diminution in the effective 
 demand for ultimate commodities. This auto- 
 matically increases the length of time that must 
 elapse before payments made in the course of 
 production can be recovered in prices. Acute 
 " Market-Topheaviness " of this description is 
 the prime cause of Industrial Stagnation. 
 
THE community's CREDIT. 
 
 New We have just seen how the investment 
 
 Capital of money in industry which would 
 Issues. otherwise be spent on the purchase of 
 existing commodities increases, how- 
 ever slightly, the tendency of the market towards 
 " topheaviness." This, in itself, is a sufficient 
 condemnation of the existing system, for the 
 investment in production of money which would 
 otherwise be used to consume wealth, ought in 
 all sanity to be a benefit to the community. 
 Be that as it may, of late years the clamour for 
 new capital has resulted in a marked increase 
 of topheaviness. The amount of new Capital 
 Issues in the U.K. alone during the year 1919 
 was ^237,541,363, and during 1920 it amounted 
 to ^^384,2x0,818, making a grand total for these 
 two years of over six hundred and twenty million 
 pounds. And these stupendous figures exclude 
 altogether all direct borrowings by the British 
 Government for national purposes, all shares 
 issued to vendors, all allotments arising from 
 the capitalisation of reserve funds, and (except 
 where such have been made public) all issues of 
 private companies (c). The result is seen in 
 the acute market-topheaviness of the present day. 
 
 Capitalization It must be borne in mind, how- 
 
 of Profits. ever, that it is not only by means 
 
 of new Capital Issues that " top- 
 
 (c) LJ.C.M. Bank, Monthly Review, April 1921. 
 
 42 
 
INDUSTRIAL STAGNATION. 
 
 heaviness " is increased. If a manufacturing 
 company, out of accumulated and undistributed 
 profits, makes an extension to its plant and 
 machinery, the effect is precisely the same. In 
 order that the total products of the past may be 
 purchased, it is clearly necessary that, among 
 other things, all profits should be distributed to 
 consumers directly, in order that they may be 
 expended. Wages and salaries alone cannot 
 buy the whole production if profit be included 
 in the price. But if some profits, instead of 
 being distributed directly, are diverted to finance 
 new production, and are only distributed as pay- 
 ment for further work done, then there is a corres- 
 ponding augmentation of market-topheaviness. 
 Now, it would seem that any increase in plant 
 or machinery must of necessity be paid for either 
 out of newly-raised capital or out of undis- 
 tributed profits. An increase in productive 
 capacity, therefore, unaccompanied hy a similar 
 expansion of purchasing-power, adds its quota 
 to the general topheaviness of the market. 
 Profiteering, so often blamed for the present 
 economic situation, is certainly a virulent aggra- 
 vation of the industrial malaise, but it is not a 
 primary cause thereof. That lies inherent in the 
 system itself. 
 
 43 
 
THE COMMUNITY S CREDIT. 
 
 MONEY DISTRIBUTED 
 S TO INDIVIDUALS 
 
 MOMtY TO BR 
 RECOVEiJHD PHOM 
 INDIVIDUALS 
 
 //,} 
 
 -^ 
 
 PRICES 
 
 CHflRG ES «C«|NSI 
 "puRCHflSINC : 
 
 
 MONEYPj RECOVEK.E9 
 
 PROM ^CONSUMERS 
 
 IN i^l PRICES 
 
 Diagrams of The above is an attempt to express 
 the Cause the foregoing proposition in dia-. 
 of Market grammatic form. Considering first the 
 Topheavi" diagram on the left-hand side, we 
 ness. see Industry represented as a 
 
 (l)PurchaS'' pump (A), from which there flows 
 mg Power. ^ stream of wages, salaries, dividends 
 etc., into a storage tank (B). This 
 tank (B) represents the Community regarded as 
 a potential consumer of ultimate commodities. 
 The contents thereof denote the as yet unex- 
 pended wages, etc., received by individual mem- 
 bers of the Community in the course of pro- 
 duction, i.e., the amount of money available, if 
 desired, for the purchase of ultimate commodi- 
 ties. At the bottom of the tank (B) there are 
 depicted two outlet pipes, (C) and (D), through 
 which money leaves the pockets of Consumers. 
 Through pipe (C) there flows that portion which 
 
 44 
 
INDUSTRIAL STAGNATION. 
 
 is spent in the consumption of ultimate com- 
 modities. Through pipe (D) there flows all 
 money withdrawn from the public for the expan- 
 sion of Industry, either directly by means of 
 new Capital Issues, or indirectly, by the utilisa- 
 tion for that purpose of undistributed profits. 
 Both these pipes eventually discharge their 
 contents into a sump (E), whence the same money 
 is in due course pumped again, in the form of 
 wages, salaries and dividends, into the storage 
 tank (B). Here, then, we have a rough illustra- 
 tion of the way in which money flows from 
 Industry to the consumer and back again. 
 
 (2) Charges Let us now turn our attention to 
 against the diagram on the right-hand side. 
 
 purchasing Every payment made to individuals 
 power. in the course of production has two 
 
 distinct aspects. Positively, it is 
 an addition to the Consumers' purchasing- 
 power. Negatively, seeing that every penny 
 must sooner or later be recovered in the prices 
 of ultimate commodities, it is a fresh charge 
 against such purchasing-power. So here we see 
 Industry, again depicted as a pump (A'), pouring 
 out a stream of charges against purchasing-power 
 into a storage tank (B'), exactly equal to the 
 flow of wages, etc., passing from (A) to (B). 
 The contents of tank (B') may be regarded as 
 the total amount of payments made to individuals 
 in the course of production which have not yet 
 
 45 
 
THE community's CREDIT. 
 
 been recovered by Industry in the prices of 
 ultimate commodities sold to the Consumer. 
 More shortly, it represents the total amount of 
 outstanding charges against purchasing power. 
 Materially, these charges are represented by 
 stocks of unsold goods (both intermediate and 
 ultimate) within the community. This tank 
 (B') has but a single outflow pipe (C). Money 
 spent on consumption reduces not only the 
 available purchasing-power of consumers, but 
 also the total value of payments still to be 
 recovered in prices. The outflow from tank 
 (B') along pipe (C) is therefore exactly equal 
 to the outflow from tank (B) along pipe (C). 
 
 Diagrams Taking the diagrams together : the 
 Compared, inflow into both tanks (B) and (B') 
 is the same ; the outflow from tank 
 (B) is greater than the outflow from tank (B') by 
 the amount flowing down the pipe marked (D). 
 Therefore the contents of tank (B') are ever 
 increasing in comparison with the contents of 
 tank (B). In other words, the total charges 
 against purchasing-power are ever expanding in 
 comparison with the amount of the available 
 purchasing-power itself, which means that the 
 average time which must elapse before a payment 
 made in the course of production can be recovered 
 in price from the Consumer is gradually lengthen- 
 ing. Unrecovered payments are represented by 
 accumulated stocks. Industry is gradually 
 
 46 
 
INDUSTRIAL STAGNATION. 
 
 becoming choked with its own production. 
 
 Comments on the The above diagrams, for the 
 Diagrams. sake of simpHcity, dehber- 
 
 ately omit any reference to 
 the part played by the Bankers in the financing 
 of Industry, and it may perhaps be contended 
 that this omission entirely vitiates the argument. 
 We do not think so, and for the following reasons. 
 First of all, while we have made no direct 
 reference to the Banks, the term purchasing- 
 power, or money, includes not only legal tender, 
 but also Bank Credits (d). An issue of new 
 Bank Credit to Industry would be diagrammati- 
 cally represented by the addition of a certain 
 volume to the contents of the sump (E) which 
 has to pass through the pump Industry before 
 helping to swell the purchasing-power of con- 
 sumers, consequently also swelling the total 
 charges against such purchasing-power. And 
 again, we know that, although the normal ten- 
 dency is for the amount of money in the posses- 
 sion of the community to increase steadily (unless 
 a deliberate policy of deflation is adopted), yet 
 this increase is by no means commensurate with 
 the simultaneous expansion of Real Credit. Any 
 Real Credit Increment not paid for by entirely 
 new money must be, directly or indirectly, 
 financed by money withdrawn from the pockets 
 of Consumers, — money which would otherwise 
 
 (d) Sec supra, page 21. 
 
 47 
 
THE community's CREDIT. 
 
 be spent on consumption. Hence there is a 
 steady flow of purchasing-power along pipe (D), 
 and in all essentials the foregoing analysis holds 
 good. 
 
 Accumulations We conclude^ then, that under the 
 of Stock. prevailing economic system, a mod- 
 
 ern industrial community is unable 
 to absorb all its own production. Anyone still 
 unconvinced will, on looking about him, see and 
 read for himself a daily confirmation of this 
 conclusion. Whatever difhculties may obscure 
 the line of thought leading to the final proposition, 
 the events of every day testify to the truth of 
 the proposition itself. It may not be unprofitable 
 to quote the words of the Chairman of Barclay's 
 Bank in his speech to the shareholders in January 
 of last year (e) : " Most manufacturers are 
 " carrying stocks of much greater volume than 
 " under normal conditions. At the present time 
 " it is computed that in the cotton industry alone 
 " there are stocks, either of raw cotton or of 
 " piece goods, to the value of ^50/60,000,000 in 
 " excess of the usual supplies, and Bradford and 
 " other great industrial centres are in the same 
 " position. This accumulation of stocks is 
 " largely due to the lack of purchasing-power 
 " abroad. In part, however, it has resulted 
 " from credit being insufficient to meet demands" 
 Since when a consistent policy of monetary 
 deflation has reduced still further the amount 
 
 (e) 1921. 
 
 48 
 
INDUSTRIAL STAGNATION. 
 
 of credit available (f). Mr. Goodenough, it will 
 be observed, tacitly assumes that it is impossible 
 for the people of Great Britain to purchase all 
 the goods they produce. It is not, Heaven 
 knows, that they have no need of these goods. 
 In Northampton and Leicester, the homes of the 
 boot trade, down-at-heel men are tramping the 
 streets, thrown out of employment because they 
 have helped to produce more than the manu- 
 facturers can sell. Which illustration is but one 
 of many. 
 
 Bank Credit And so, in years of industrial pros- 
 Issues, perity, this " topheaviness " in- 
 creases, until at last Industry can 
 struggle on no longer. Then its wheels are 
 slowed, and unemployment and wide-spread 
 poverty result, because, as a community, we 
 are " too rich." Relief of a temporary nature 
 can, it would seem, be found in two directions, 
 and in two directions only, (i) The BankersN 
 may issue fresh credits to producers, by means 
 of which Industry for a time manages to retain 
 a semblance of prosperity, until yet vaster stocks 
 are accumulated ; or (2), the surplus production 
 may be exported to foreign communities. If,^^ 
 however. Bank Credit Issues are in any way to 
 relieve the existing tension, they can only do 
 so when issued in respect of the production of 
 goods not immediately required by the individual 
 member of the community as such. In other 
 
 (f) See supra, page 29. 
 
 49 
 
THE community's CREDIT. 
 
 words, such issues must be, and in fact are, for 
 the most part, made in respect of Capital Pro- 
 duction, such as the building of factories, the 
 erection of new machinery, the development of 
 mines, etc. Such additional purchasing-power 
 does, for the moment, increase the effective 
 demand of the public for ultimate commodities, 
 and cause a temporary abatement in the " top- 
 heaviness " of the market. Yet, seeing that the 
 whole amount of these issues must sooner or 
 later be recovered from the public in prices, 
 such beneficial effect has but temporary dura- 
 tion. The immediate result is to reduce the 
 value of existing money all round. Only a 
 proportion of the " market-topheaviness " is 
 represented by ultimate commodities actually 
 awaiting sale, the remainder being represented 
 by intermediate products awaiting development 
 into ultimate commodities. When, therefore, 
 Bank Credit Issues are paid out to consumers 
 in the course of the production of more inter- 
 mediate products (so increasing the spending- 
 power of the consumers), there is no immediate 
 and corresponding increase in the quantity of 
 ultimate commodities upon the market, and 
 consequently prices tend to rise. It matters 
 not whether new money comes into circulation 
 as legal-tender or Bank Credit, the effect upon 
 the currency and credit already in circulation 
 is the same (g). We conclude, therefore, that an 
 
 (g) See supra, pages 21 23, and 24. 
 
 50 
 
INDUSTRIAL STAGNATION. 
 
 increase in productive capacity is, under the 
 present system, either an aggravation of existing 
 " topheaviness," if financed by the public, or, 
 if financed by an issue of new credits by the 
 Banks, the cause of a general rise in the level 
 o f price s. 
 
 Export, and There remains, however, to be con- 
 the Struggle sidered the relief afforded by expor- 
 for Foreign tation, the need for which is by the 
 Markets. Orthodox Economist tacitly (and, 
 under the present system, rightly) 
 assumed to be essential for the continued well- 
 being of an industrial community. Surplus 
 production beyond what the members of the 
 community can afford to purchase for home 
 consumption is, as far as possible, exported to 
 countries that are not, as yet, glutted by their 
 own produce. In this way a certain amount of 
 the accumulated stocks may be disposed of and 
 paid for without further depleting the already 
 ^overburdened purse of the community. But it 
 is not merely a question of exchanging surplus 
 stocks for the products of other communities. 
 If a community cannot afford to purchase at 
 home the goods it is therefore obliged to dispose 
 of abroad, neither can it afford to purchase 
 what it imports in exchange for those goods. 
 The whole struggle is therefore, to obtain a 
 surplus of exports over imports, and that is why 
 all the industrial nations of the world are busily 
 
 51 
 
competing for markets among their less " pro- 
 gressive " brethren, for spheres of influence, and 
 for monopoHes. Germany, the most intensively 
 industrialised community in the world, was 
 compelled to war by the economic necessity of 
 capturing fresh markets for her output. The 
 same artificial necessity that drove Germany 
 into her mad bid for world supremacy acts and 
 reacts on the United States, on Japan, and on 
 ourselves. Disarmament conferences, such as 
 that held recently at Washington, and similar 
 international agreements may, indeed, postpone 
 for a little while a catastrophe from the contem- 
 plation of which Civilisation shrinks in horror. 
 But mere political or diplomatic action, however 
 successful it may appear at the time, and how- 
 ever universal its appeal to all that is best in 
 man, cannot do more than delay. If the present 
 system be persisted in, stern economic necessity 
 will render the final cataclysm inevitable. Every 
 year the surplus for export increases. Every year 
 the available markets become fewer and fewer as 
 other nations tend to become industrialised. Every 
 day brings us almost perceptibly nearer to the next 
 Great War, 
 
 The Briefly to recapitulate. The present-day 
 Danger industrial community is unable to absorb 
 Ahead. ^ it produces. This is due to a blind 
 adherence to an obsolete financial and 
 economic system. This system is not replaced, 
 
 52 
 
INDUSTRIAL STAGNATION. 
 
 because, for one reason, its retention ensures 
 wealth and power to a small section of the 
 community, who naturally utilise this same 
 wealth and power in preserving the system. 
 Surplus production accumulates, until the hunger 
 and misery attendant upon involuntary unem- 
 ployment endanger the national well-being. 
 Bank Credit Issues are, under the present sys- 
 tem, a two-edged remedy, and tend in the long 
 run to aggravate rather than relieve the situa- 
 tion. Consequently the industrial nations of 
 to-day are driven to seek what relief they can 
 in export, and the necessity for the capture of 
 foreign markets, ever growing more acute, paves 
 the way for war. It would seem, then, that a 
 continuance of the present financial and eco- 
 nomic system is, in effect, but a lingering form 
 of world-suicide — and perhaps not so very 
 lingering, after all. 
 
 53 
 
CHAPTER IV. 
 Prices and Price-Regulation. 
 
 "The Law It can hardly be superfluous, at 
 
 of Supply the beginning of a chapter such 
 
 and Demand." ^s this, once again to emphasise 
 the fact that the doctrine com- 
 monly known as " The Law of Supply and 
 Demand " is only partial in its apphcation to 
 the regulation of Prices. It is commonly con- 
 tended, and with some plausibility, that Demand, 
 relative to Supply, regulates the price of any 
 marketed commodity, and that therefore great 
 accumulations of stock should (and do) ensure a 
 lowering of prices to such an extent that the 
 community as a whole could (and can) afford to 
 purchase such stocks for consumption. It would 
 seem to be overlooked that a fall in prices is only 
 the after-reflection of a far greater decrease in the 
 rate of flow of money into the community, and 
 that it can be achieved only through wage- 
 reduction, unemployment, industrial stagnation, 
 class-bitterness, hunger and misery (a). Although 
 prices are, on the whole, considerably lower than 
 they were two years ago, yet it can hardly be 
 disputed that the effective demand of the 
 Community has decreased to a far larger extent, 
 and that in spite of this fall in the cost of living, 
 the wage-earning majority of the public is to-day 
 
 (a) c.f. supra, page 29. 
 
 54 
 
PRICES AND PRICE-REGULATION. 
 
 being forced to accept a lower standard of 
 existence. Less than ever can men afford the 
 goods they need. Ultimately, it is true, this 
 so-called " Law " does tend to fix the maximum 
 price of a marketed commodity, but, as we have\ 
 already pointed out (b) the minimum price at ■ 
 which a commodity can economically be sold is at 
 present based on a very different consideration, 
 that of the cost of production. Under the present-^ 
 financial system no manufacturer or trader can 
 for long continue, however great his supply may 
 be in relation to demand, or however small may 
 be the effective demand in relation to his avail- 
 able supply, to dispose of his products at less 
 than cost-price. 
 
 An In the period that preceded this 
 
 era present era of trusts and combines, 
 
 of competition tended to counteract some- 
 
 combines, what the effect of the former part of 
 our dual postulate. It kept prices 
 down to a " reasonable " level, which, under the 
 existing financial system, is one only slightly in 
 excess of the cost of production ; and it was 
 generally considered good commercial policy to 
 increase profits by increasing the quantity pro- 
 duced and sold, rather than, by restriction of 
 supply, to endeavour to obtain the maximum 
 profit from the sale of each individual com- 
 modity. But this is the era of the large trade 
 
 (b) Supra, page 25. 
 
 55 » 
 
THE community's CREDIT. 
 
 combine, whether of employers or workpeople, 
 resulting to a large extent in the elimination of 
 competition. It follows that the necessities of life 
 are supplied, by those whose interest it is to 
 regulate supply and price, to the members of the 
 community at such prices as will absorb the 
 greatest possible percentage of available purchas- 
 ing-power ; as will, in other words, enable the 
 majority of the Community to maintain only a 
 somewhat precarious existence. It follows also 
 that whatever the level of wages in an industrial 
 community may be, the majority of wage earners 
 will never, under the present system, be able to 
 afford much more than the bare necessities of 
 life, and that anything in the nature of luxuries 
 will ever remain the privilege of the minority. 
 
 Control We have already seen (c) how the 
 of power behind Industry, the power to 
 
 Industrial control policy and direct initiative, 
 Policy. -^i^s with Finance. It is the power of 
 credit-issue and of credit-restriction 
 that dominates the whole existence of an indus- 
 trial community. When a Bank is approached 
 with a view to an issue of credit, it is only 
 natural that it should most readily grant such 
 an issue to the manufacturer or trader who is 
 able to satisfy the Bank that he can make the 
 maximum profit on the minimum outlay, and 
 whose increased activity will not tend to cause a 
 
 (c) Supra, pages 29, 30, and 31. 
 
 56 
 
PRICES AND PRICE-REGULATION. 
 
 P fall in prices to the detriment of the Bank^s other 
 
 I securities. We see, then, that under the present 
 
 \ financial system, so long as money remains the 
 
 sole inducement to production, " the control of 
 
 '' the policy of production rests, not with the 
 
 '' administration of productive enterprise, but, 
 
 as to its initiation, with the Banks and others 
 
 who finance production, and as to its con- 
 
 '^ tinuance, with the price-makers, whose motive 
 
 " is in the very nature of things anti-public, 
 
 ^* since it aims at depriving with maximum 
 
 rapidity the individuals who comprise the 
 
 '' public of the independence conferred on them 
 
 " by the possession of purchasing-power ^\d). 
 
 Consumer And thus we saw, at the conclusion 
 Control of of a previous chapter (e), that it is 
 Credit. upon the Control of Credit by the 
 
 Consumer, and upon that alone, that 
 the possibility of any prolonged continuance of 
 modern civilisation depends. Control of Credit by 
 the Consumer is, of course, impossible so long as 
 the whole of the Financial Credit distributed to 
 individual members of the Community as such 
 in the process of production is re-absorbed as 
 quickly as possible through the medium of 
 unregulated prices. Is there, then, no method 
 whereby this re-absorption can be prevented, or 
 at any rate greatly retarded ? 
 
 (d) Credit-Power and Democracy { 2nd Ed.), at page 90. 
 
 (e) Supra, Chapter II. 
 
 57 
 
THE community's CREDIT. 
 
 Passing There is, and it is the object of the 
 of the later chapters of this book to outline 
 Gold such a system as would effectually 
 
 Standard, place the control of credit, and there- 
 with of the policy of production, in the 
 hands of the Consumers as a whole (f). The 
 first step in this direction must be to discard 
 any notion of returning to our pre-war gold 
 standard for currency. It can hardly fail to be 
 realised by unprejudiced minds that a gold basis 
 for an internal monetary system is an anach- 
 ronism (g). It is, indeed one of the indirect 
 benefits of the late war that it has torn us 
 ruthlessly away from the gold basis, and although 
 the pretence is still officially maintained that 
 there is a gold backing (admittedly inadequate) 
 to every Treasury Note, no thinking person is 
 deceived thereby. I'he only genuine^ the only 
 logical backing to a T^reasury Issue of whatever 
 description is, of course, the Real Credit of the 
 Community (h). Apart from the folly of basing 
 our monetary system upon gold, which, after all, 
 forms but an infinitesimal portion of the Com- 
 munity's resources, some idea of the danger to 
 our national and international well-being inherent 
 in a persistent adherence to a gold basis may be 
 gathered from a perusal of Mr. Arthur Kitson's 
 interesting treatise entitled " A Fraudulent 
 
 (f) See especially infra Chapters VI., VII., and VIII. 
 
 (g) See infra, page 111. 
 
 (h) See also infra, page 114. 
 
 58 
 
PRICES AND PRICE-REGULATION. 
 
 Standard " (i), from which the following extract 
 is taken. 
 
 Danger of " The following illustration of the 
 a Gold " triangle shows that at present all 
 Basis. " our huge volumes of credit are piled 
 " upon an insignificant amount of 
 *' gold, so that every golden sovereign represents 
 " from twenty to one hundred sovereigns' worth 
 " of credit. 
 
 Commerce Destroyed 
 
 Credit Destroyed 
 Gold Exported 
 
 " If, therefore, a million pounds of bullion 
 are exported, the Banks are compelled to call 
 in all the credit resting on that sum, in order 
 to maintain their so-called margin of safety. 
 Hence the movement of a comparatively small 
 amount of gold or legal tender means the 
 addition to or cancellation of a large volume 
 of currency. Some years ago ^he Bankers^ 
 Magazine gave a most startling instance of the 
 effect of gold exports upon the prices of our 
 gilt-edged securities. During a period of ten 
 weeks a certain group of American financiers 
 drew from the Bank of England sums equal 
 
 (i) In this connection see especially the first eight, the tenth, and the eleventh 
 chapters. 
 
 59 
 
THE community's CREDIT. 
 
 in all to eleven million pounds in gold and 
 shipped it to New York. Prior to this opera- 
 tion these gamblers sold British Securities 
 heavily, and bought United States bonds and 
 shares. The transfer of the gold caused a 
 fall in the prices of 325 of our representative 
 securities, equivalent to j^i 15,500,000, whilst 
 the absorption of this gold caused a corres- 
 ponding rise in Americans. This illustration 
 explains why a relatively small addition of 
 legal tender can sometimes seriously affect the 
 price level. It is not due so much to the 
 increase in legal tender, but to the dispro- 
 portionate amount of Bank Credit based upon 
 it. This fact also explains the reason why the 
 values of commodities have become so easily 
 the sport of speculators. The sudden creation 
 or withdrawal of credit, the export of gold 
 from one country to another, is sufficient to 
 ensure certain profits to the cosmopolitan 
 gamblers in finance." (j) 
 
 The Real The alternative to a metallic basis for 
 Credit our monetary system is a Real Credit 
 Basis. basis. It will be remembered that in 
 our preliminary Chapter (k) we imag- 
 ined a Community in which the gross increase in 
 Real Credit within a given period of time was of 
 the value of ^1,000,000, and wherein the produc- 
 tion-cost of goods simultaneously consumed was 
 
 (j) " A Fraudulent Standard," pages 153-155. 
 (k) Supra, Chapter I., at pages 10 and 11. 
 
 6o 
 
PRICES AND PRICE-REGULATION. 
 
 £800,000, leaving a nett increase in Real Credit, 
 during that period, of the value of £200,000. 
 If it be objected that such an increase is not a 
 matter of real experience, the following considera- 
 tions may be found helpful. There can be no 
 question but that every year sees a substantial 
 increase in the productive capacity of any 
 industrial community, — new factories, new 
 machinery, development of mines, etc, — over 
 and above any simultaneous capital deprecia- 
 tion. Therefore, even if it were possible to con- 
 sume all ultimate commodities (1) as fast as 
 they were placed on the market, capital apprecia- 
 tion added to Tlltimate commodities produced 
 must, except under very abnormal circumstances, 
 exceed the simultaneous capital depreciation plus 
 ultimate commodities consumed. Even during 
 the late War, when our wastage almost exceeded 
 our comprehension, ultimate commodities were 
 replaced as speedily as they were destroyed, and 
 in many industries capital production was un- 
 precedented. [A general approximation to the 
 Real Credit Increment of any year is afforded by 
 the aggregate capital issues of the year following, 
 for credit-increment is, roughly, whatever can be 
 capitalised. Hence, by adding together the credit- 
 issues of a given period, we should expect to 
 obtain some guide to the nett increase in Real 
 Credit that had taken place (m).] But to return 
 to our illustration : Our community, we will 
 
 (1) See supra, page 39. 
 
 (m) See also supra, page 42. 
 
 6i 
 
suppose, has adopted a Real Credit basis for 
 its monetary system ; the ^200,000 value of the 
 nett appreciation of the real credit of our 
 hypothetical community (represented as it is 
 by actual goods or development in the capacity 
 to produce goods when, where, and as required) 
 would thus be an effective backing to a Treasury 
 Issue of financial credit. Indeed, we have seen (n) 
 that without a money or credit-issue from some 
 source or other, a community is unable to 
 utilise its increased Real Credit, and Industry 
 is hampered rather than stimulated thereby. 
 Such issue, made by the Treasury as the purse 
 of the whole Community, to the Consumers, 
 who are the Community, up to a sum not 
 exceeding ^^200,000 would achieve at least this : 
 it would give to the Consumers as a whole a 
 power to purchase those commodities they 
 desired, or else a power to invest some of this 
 credit in Industry, — a power, that is, to initiate 
 the production of such commodities. 
 
 Distribution In making such an issue of pur- 
 of Purchasing" chasing-power to the Community 
 Power to as consumer, there are two pos- 
 
 Consumers. sible courses to adopt. The 
 first is to distribute purchasing- 
 power direct to the individual members of the 
 Community as such. The most obvious objec. 
 tion to such a course is that the general level 0£ 
 
 (n) Supra, Chapter II., page 41. 
 
 62 
 
PRICES AND PRICE-REGULATION. 
 
 prices would rise simultaneously and corres- 
 pondingly, and that in the end the nett effect 
 of such an issue would merely be to swell the 
 manufacturers' credits at the Banks. Inflated 
 prices would absorb the purchasing-power so 
 distributed, and the majority of the Consumers, 
 as such, would, in a very short space of time, 
 have no more credit-power than they have at 
 present. Such a course would lead to higher 
 prices, unaccompanied by any lasting compen- 
 sation. But the second course promises more 
 satisfactory results. If the prices of commodities 
 to the Consumer were to be regulated at some 
 percentage of production-cost, the Treasury might 
 then reimburse to the producers the amount they 
 were out of pocket by such action. The level 
 of prices being regulated by, and under, cost of 
 production, it would seem that the automatic 
 expansion of purchasing-power in circulation 
 corresponding to the increase in the Community's 
 Real Creait could not cause an inflation of 
 prices (o). 
 
 Recapitulation. Let us briefly re-state the position. 
 The foregoing analysis of the 
 present-day economic system and the industrial 
 conditions produced thereby points irresistibly 
 to the conclusion that so long as the prices of 
 goods to the consumer are limited only by the 
 purchasing-power available^ and must of necessity 
 
 (o) See also infra, pages 93 and 94. 
 
 63 
 
THE community's CREDIT. 
 
 include every cost incurred in the course of pro- 
 duction^ so long will it be utterly impossible for 
 an industrial community to avoid the evils 
 attendant upon a merciless competition for 
 foreign markets, the degradation and misery 
 that to-day wait upon compulsory unemploy- 
 ment at home, or the economic subjection of the 
 life, liberty and resources of the whole com- 
 munity to the service of the financial interests of 
 the few. " Consumer control of credit " (p) can 
 only become a glorious reality, instead of a mere 
 pious aspiration, through the regulation of 
 prices, not by the bureaucratic and unscientific 
 methods experienced during the Great War, 
 but in proportion to the cost of production, 
 and by the sale of ultimate commodities (q) to 
 the consumer at what is to-day termed " under 
 cost." The question immediately before us 
 reduces, then, to this : — Granted that it is 
 feasible to sell ultimate commodities to the 
 Consumer at a percentage of production-cost, 
 the Producer being reimbursed by Treasury 
 Issues based upon the increase in the Communal 
 Real Credit ; — granted this (and we have at- 
 tempted to show that this is not only possible 
 but absolutely necessary for our economic 
 salvation), what, then, is the right and proper 
 proportion of the cost of production to be charged 
 to the Consumer ? In short, what is the " Just 
 Price " ? 
 
 (p) See supra, pages 32 and 57. 
 (q) See See supra, page 39. 
 
 64 
 
PRICES AND PRICE-REGULATION. 
 
 But before we attempt to discover the answer 
 to this most pertinent question — which answer 
 provides the key to Douglas' constructive pro- 
 posals, as distinct from his analysis — it may, 
 perhaps, be well to consider shortly some of the 
 suggestions emanating from other quarters for 
 the solution of the economic riddle. This we 
 propose to do in our next chapter. Meanwhile 
 let us in a few words re-state the chief points 
 of the Douglas analysis. 
 
 Industrial i. The Industrial Stagnation of 
 Stagnation, to-day is not due to any breakdown 
 in Capacity to Produce but in our 
 methods of distribution. Effective Demand 
 (i.e., Demand backed by purchasing-power) is 
 not equal to the Capacity of Industry to 
 supply (r). 
 
 Unemployment. 2. Scientific inventions and 
 discoveries have lessened the 
 importance of the human labour element in 
 Industry. There is no longer sufficient Effective 
 Demand to employ all the available man- 
 power (s). 
 
 War. 3. Under the present system, an Indus- 
 trial Community is unable to purchase 
 goods equivalent to its own output at the price 
 
 (r) Chapter I., at pages 12 and 13. 
 (s) Chapter I., at page 13. 
 
THE community's CREDIT. 
 
 the Producer is, by that system, compelled to 
 charge. Hence arises an artificial necessity for 
 thrusting surplus production on to foreign mar- 
 kets, in fiercest competition with that of other 
 industrial communities (t). 
 
 Poverty. 4. Meanwhile, accumulated stocks 
 clog the wheels of industry ; real 
 demand goes unsatisfied because it is not 
 backed by purchasing-power ; fresh purchasing- 
 power is only distributed to consumers as pay- 
 ment for further production (u). 
 
 Plutocracy. 5. Ultimate control of policy, 
 national or industrial, rests with 
 Finance, that is, with those that hold the power 
 of Credit-manipulation. Unregulated prices de- 
 prive the vast majority of the Community of 
 whatever financial power they earn in Industry. 
 Credit-Power is vested in a few Financiers (v). 
 
 The WAY 6. (i) Scientific Price Regulation. 
 OUT (2) Consumer Control of Credit (w). 
 
 (t) Chapter III., at pages 51, 52 and 53. 
 
 (u) Chapter III., at pages 33, 41 and 48. 
 
 (v) Chapter II., at pages 30 aud 31, and Chapter IV., at pages 36 and 37. 
 
 (w) Chapter IV., at pages 63 and 64. 
 
 66 
 
Part II. 
 
 A Brief Survey of 
 Various Suggested Remedies. 
 
 CHAPTER FIVE. 
 ECONOMIC PANACEAS. 
 
CHAPTER V. 
 Economic Panaceas. 
 
 Proposed Having now concluded our Analysis 
 Economic of the Causes of the Present-Day 
 Remedies. Economic Impasse, it may not be 
 altogether without profit if, before we 
 turn to an examination of the Social-Credit 
 Proposals for the removal of those causes, we 
 first of all briefly consider certain of the remedies 
 advocated by other schools of current economic 
 thought. If upon examination these various 
 schemes are found to afford no sure road to a 
 permanent betterment of conditions, and if we 
 are able to lay our fingers upon the weak spot 
 in each so-called remedy, we shall find ourselves 
 well-equipped to criticise Major Douglas' own 
 proposals, and to form an accurate estimate of 
 their merits. 
 
 A A year or eighteen months ago, one 
 
 Dual was, at every turn, confronted by 
 
 Solution, posters and other forms of propaganda, 
 urging upon all and sundry the need 
 for increased output. To-day those posters 
 have disappeared from our hoardings, and they 
 have not been replaced. The propaganda leaf- 
 lets have in their turn gone the way of the world, 
 and they have not been reprinted. Seeing how 
 great is the number of those for whom no 
 
 69 
 
THE community's CREDIT. 
 
 employment can be discovered or created, owing 
 largely to the closing down of factories unable 
 to find a market for their products, such propa- 
 ganda at the present time would seem, to say 
 the least, somewhat tactless. Nevertheless even 
 to-day there are not a few whose pet theories 
 are too cherished to be upset by facts, and who 
 still believe, and endeavour to impress on others, 
 that the only solution of the present impasse 
 lies in (i) Increased Production, coupled with 
 (2) A general reduction in wages. 
 
 Increased In his demand for increased output, 
 Production, the orthodox economist has, or at 
 any rate until very recently had, 
 the influential support of what the employing 
 classes refer to as " sane labour." And, indeed, 
 to examine his arguments superficially, he has a 
 plausible case to present in support of his call 
 for a general speeding up of production of all 
 kinds. The more products a factory can turn 
 out in a given time, he argues, the less does 
 each several product cost to produce. This 
 enables prices to be lowered to the mutual 
 benefit of all concerned. Such an argument 
 demands further consideration. Would increased 
 production really enure to the mutual benefit of 
 all concerned ? Or even to the benefit of the 
 majority ? Let us examine this question in the 
 light of the Analysis of the previous chapters. 
 One of the primary causes of the prevailing 
 
 70 
 
ECONOMIC PANACEAS. 
 
 economic distress is, as we have sought to 
 demonstrate (a), the inability of the members 
 of a progressive industrial community, with the 
 purchasing power distributed to them in the 
 course of production, to buy up or absorb all the 
 products manufactured by that community. 
 Consequent accumulations of stocks cause a 
 slackening of production, as producers naturally 
 cannot afford to manufacture new goods before 
 they have disposed of those on hand. This 
 slackening of production leads to a diminution 
 of the amount distributed in wages, etc. . Seeing 
 that by far the greater portion of the income 
 of an industrial community is distributed to it 
 in the course of production as wages to weekly 
 wage-earners, there immediately follows a fur- 
 ther reduction in effective demand. Increased 
 Production is no remedy for Deficient Demand. 
 It matters little that individually the several 
 articles are cheaper — the deadweight of the 
 '' market-topheaviness " as a whole tends to 
 be increased rather than diminished by such 
 a policy. At the best, increased production 
 can only afford a temporary alleviation : it 
 offers no permanent remedy for the existing evils. 
 
 Lower Commonly allied with the above is the 
 
 Wages, suggestion of a general reduction in 
 
 wages. This can never be a solution. 
 
 In the first place, it is a fact frequently overlooked 
 
 (a) Supra, page 48. 
 
THE community's CREDIT. 
 
 that prices rose before wages, and that therefore 
 logically they should be the first to fall. And 
 secondly, a fall in the amount distributed in 
 wages only serves to emphasise the existing 
 discrepancy between the purchasing power of 
 the Community and the total charges against 
 such purchasing power. Industry to-day is 
 hampered by lack of demand. Demand, to be 
 heard and catered for, must be backed by 
 purchasing power. A general lowering of wages, 
 and the consequent curtailment of what effective 
 demand still exists, would hardly appear a 
 logical way of setting the wheels of industry in 
 motion once again. Eventually, of course, 
 prices would tend to be favourably affected by 
 the lowering of the cost of one of the chief 
 essentails of production, viz., labour ; but this 
 result would not follow immediately ; and even 
 when prices fell, as a consequence of reduced 
 wages, they would not in the aggregate fall by 
 a greater amount than the total of such reduc- 
 tions — by a greater amount, that is to say, than 
 the decrease in the available purchasing power 
 of the Community. When all is said and done, 
 an article costing onlyj^5o to produce is no more 
 within the reach of a man earning his £^ a 
 week than is an article costing as much aSj^ioo 
 to produce within that of a man whose weekly 
 wage is ^4. The solution of the problem does 
 not lie along these lines (b). 
 
 (b) See supra, page 54 and 55. 
 
 72 
 
ECONOMIC PANACEAS. 
 
 Higher And those members of the Community 
 Wages. who regard higher wages as a panacea 
 are but victims of a kindred delusion. 
 It is still the old story of the vicious circle — 
 higher wages, higher prices, ad infinitum — and 
 many of the remarks made just previously with 
 regard to the effect of a general reduction in 
 wages may be applied mutatis mutandis to the 
 effect of an all-round rise. 
 
 The A very influential body of opinion, 
 
 Gold particularly amongst Bankers, is in 
 
 Standard, favour of a return at the earliest 
 opportunity to a Gold Standard of 
 Currency. We have already (c) discussed this 
 matter at some length, and we have seen that 
 such a return would be nothing less than a 
 calamity, except perhaps to that small propor- 
 tion of the Community to whom it would bring 
 additional opportunities for self - interested 
 manipulation of credits and values. It is un- 
 necessary to add anything here to what has 
 been already said (c), except to repeat with all 
 possible emphasis that a return to the Gold 
 Standard is a step backwards. Such a standard 
 for our currency is illogical, and exposes the 
 community to unnecessary dangers, whilst effec- 
 ting little or nothing in the way of a solution 
 of its problems. 
 
 {c) Supra, pages 58, 59 and 60. See also infra, page 111. 
 
 73 
 
THE community's CREDIT. 
 
 Abolition It might conceivably be concluded, 
 of then, that as neither the raising nor 
 
 Money. the lowering of wages can in any way 
 materially assist in the solution of the 
 economic riddle, the radical evil must lie in the 
 system of wages itself, of payment for work done, 
 and that therefore the abolition of money would 
 bring order out of chaos. So thought M. Lenin, 
 and calling to his aid the Communal Printing 
 Press, he deliberately proceeded so to flood 
 Russia with notes and paper currency of all 
 kinds that soon Russian money became value- 
 less, and was no longer regarded as an effective 
 title to goods and services. Now, men are 
 induced to work in return for money only so 
 long as money is a means to them of obtaining 
 the goods and services that they desire. When 
 money ceases to be regarded as an effective title 
 to goods and services, men can no longer be 
 induced to work for monetary payment. Having, 
 then, destroyed the inducement to work, M. 
 Lenin had perforce to resort to compulsion. But 
 compulsion is never so effective as inducement 
 (one man, as most people are aware, may lead 
 a horse to the water, but twenty can't make 
 him drink) — and it is remarkably uneconomical 
 in its working. For when one-half of the nation 
 is employed in compelling the other half to work, 
 national efficiency is necessarily low. And, 
 besides all this. Money is a very useful servant 
 to man^ when it is not his master, 
 
 74 
 
ECONOMIC PANACEAS. 
 
 Administrative Another school of thought, and 
 Control one which receives much pub- 
 
 by the Hcity and even a modicum of 
 
 Workers. support, both in the Capitalistic 
 
 and Labour Press, would place a 
 far greater share of the administrative control 
 of industry in the hands of the workers them- 
 selves. Those who by their labour, either with 
 hand or head, contribute to the production of 
 goods should, it is plausibly contended, have a 
 substantial voice in the control of production, 
 as regards the amount produced, the methods 
 employed, the hours worked, and the wages paid. 
 Because of this, we find existing Whitley Coun- 
 cils, Trade Boards, Shop Stewards' Committees, 
 and other similar ingenious machinery for admit- 
 ting Labour to a greater share in industrial 
 administration. But these devices, in effect, 
 merely replace a manager by a committee of 
 management, and united by divided control. 
 Details may be altered here and there ; factory 
 life may, on the whole, become more wholesome ; 
 but the principal cause of the prevailing eco- 
 nomic distress will remain still untouched. To 
 continue to exist. Industry must still " pay its 
 way," and so long as the present financial con- 
 ditions hold sway, no mere transference of 
 administrative powers from the few to the 
 many can possibly effect any radical benefit to 
 either party. The impotence of merely adminis- 
 trative control in the face of financial opposition 
 
 75 
 
THE community's CREDIT. 
 
 is aptly illustrated by the failure of the Italian 
 Communists' venture a year or two ago. These 
 Communists seized and obtained entire physical 
 control of several large factories, chiefly devoted 
 to engineering and motor production. There 
 was no real difficulty about producing motors ; 
 the factories, doubtless, were somewhat less 
 efficient under divided control, but none the 
 less the question of output was not the most 
 pressing problem. What was of paramount 
 importance to our band of direct-actionists was 
 that, having turned out a motor, it was necessary 
 to sell it, or exchange it for other commodities. 
 Here the tremendous power of Finance was seen. 
 Modern Industry cannot carry on without credit ; 
 and credit was withdrawn. Consequently it 
 became impossible either to dispose of the finished 
 products or to buy further stocks of raw material. 
 In a very short space of time the movement 
 petered out, strangled by financial opposition. 
 Control of administration can only go a very 
 little way towards a general betterment of con- 
 ditions. To effect anything permanent there 
 must be Financial Reform. 
 
 Profit Some there are who urge that the 
 Sharing, workers should have, not indeed a 
 share in the administration of industry 
 (which they recognise as a technical matter, far 
 better left in the hands of experts), but, in 
 addition to their wages and other remuneration, 
 
 76 
 
ECONOMIC PANACEAS. 
 
 a share in the profits. Quite apart from any 
 ethical question as to whether or not it is right 
 on principle that an employee of a well-paying 
 concern should receive correspondingly more than 
 one who does equally good work for a firm that 
 is only just managing to struggle along, it is 
 obvious that profit-sharing schemes fail in at 
 least three directions to provide any solution to 
 the economic problem. In the first place, the 
 profit-sharing concern has as great an interest 
 as any private manufacturer in the maintenance 
 of high prices, if high prices mean enhanced 
 profits. It is purely selfish in its attitude 
 towards the Community as a whole. Secondly, 
 the obvious policy of the participators in any 
 such scheme is to do as much work as possible 
 with as few workers, in order that the profit- 
 shares of each may be as large as possible. 
 When it is remembered that Industry to-day 
 is unable to absorb all the available man-power — 
 in spite of the marvellous ingenuity displayed 
 in the direction of making work — it is clear that 
 if a Community's production were carried on 
 entirely by profit-sharing societies, there would 
 still remain outside the charmed circle of pro- 
 ducers an ever-increasing number of unemployed, 
 whose prospect of obtaining employment would 
 be even more remote than at the present day. 
 The idea of allowing non-producers to share in 
 the aggregate profits of the industry of the 
 Community is entirely foreign to the inherent 
 
 77 
 
THE community's CREDIT. 
 
 conception of profit-sharing schemes, which is, 
 broadly speaking, to admit to participation in 
 the profits of industry all those and only those 
 who either by their labour or their capital 
 contribute to production. Thirdly, those profit- 
 sharing schemes that have temporarily proved 
 fairly successful, such as that of Mr. Austin 
 Hopkinson, have achieved that success by the 
 incorporation of a Hve " team-spirit " among the 
 employees owing to the active interest of all con- 
 cerned in the financial returns of the particular 
 factory in which they work. This team-spirit, 
 which is in itself a very admirable thing, and 
 worthy of all encouragement, makes possible 
 successful competition with other factories where- 
 in such a spirit does not exist. Bur if all industry 
 was run on profit-sharing lines, then the team- 
 spirit of one factory, fostered by self-interest, 
 would give it no such advantage over its rivals, 
 and industry would tend to be carried on by fewer 
 people working at high pressure. However 
 excellent in conception, and however beneficial 
 under different financial and economic conditions. 
 Profit-sharing affords no solution under the 
 present system. Competition would tend to 
 become keener ; and prices might fall in conse- 
 quence : but the freedom of the employee would 
 become progressively less, and the condition of 
 the unemployed, in all probability, steadily 
 worse. Control of policy would remain precisely 
 where it rests nowadays, with Finance ; and 
 
 78 
 
ECONOMIC PANACEAS. 
 
 the artificial necessity for export, with its 
 attendant dangers, would continue unabated or 
 even intensified. 
 
 Two Two of the remedies advocated by 
 
 Labour thinkers (and some others) in the 
 
 Suggestions, ranks of Labour deserve fuller 
 consideration than there is space 
 for in these pages. These are (i) The Nation- 
 ahsation of Industry, and (2) the Capital 
 Levy. Major Douglas has, however, dealt 
 specifically with these suggested remedies in his 
 book, "Credit-Power and Democracy" (d), and 
 we shall here touch only briefly upon the more 
 obvious objections to them. 
 
 Nationalisation. First, then, to deal briefly with 
 the Nationalisation of Industry, 
 or, in other words. State Ownership of the means 
 of production. Apart from the almost insuper- 
 able difficulties entailed by an extensive expro- 
 priation carried out, we may be sure, in the face 
 of a tremendous and organised opposition (and 
 for the moment assuming a point that is certainly 
 debateable, namely, that Industry so national- 
 ised could be got working more or less smoothly), 
 it needs no lengthy argument to show that the 
 greater part of the claims advanced in favour 
 of Nationalisation is far from being probable of 
 realisation ; that it is by no means the panacea 
 that its advocates would have us believe. 
 
 (d) Chapters 5 and 7. 
 
 79 
 
THE community's CREDIT. 
 
 Nationalisation is, in fact, the substitution of 
 State Ownership for Private Ownership, — an 
 administrative change. Administration of Indus- 
 try would be carried on by officials, and, in 
 addition to all the other evils of departmental 
 and bureaucratic control, the one (State) em- 
 ployer would be supremely powerful. The 
 workers might, perhaps, be given some ill-defined 
 control over local administration by means of 
 Committees, Soviets, or what you will ; but 
 administration would still be a technical business, 
 rapidly becoming more and more centralised. 
 More and more would the individual worker 
 become a mere cog in the industrial wheel, and 
 an easily replaceable cog at that, while in trade 
 disputes there would be no appeal from the fiat 
 of the employer. Besides, under the existing 
 financial system, the present-day economic 
 dependence of the worker would continue, even 
 in his hard-won Utopia, and so would the other 
 evils of the present system, in greater or less 
 degree. 
 
 The Let us now briefly outline the main 
 
 Capital objections to Labour's second sug- 
 Levy. gested remedy, namely, a Levy on 
 Capital. If the total purchasing-power 
 in the possession of the individuals comprising 
 an Industrial Community is inadequate to pur- 
 chase all the production of that Community^ 
 mere transference of purchasing power from one 
 
 80 
 
ECONOMIC PANACEAS. 
 
 pocket to another cannot effect any lasting better- 
 ment in its economic conditions. It is certain, 
 also, that the financial disturbance such a levy- 
 would cause would greatly outweigh any gain 
 that might, at any rate temporarily, accrue 
 to the Community therefrom. But what exactly 
 is it that is proposed ? Broadly speaking, it is 
 that an extraordinary tax of a certain percentage 
 of each man's capital wealth should be made, 
 the proceeds of which should go to reduce the 
 vast National Debt accumulated during four 
 years of war (e). Such a tax on Capital would 
 in practically every case be met by the realisation 
 of securities. Lands, houses, stocks, shares, and 
 all manner of property, real and personal, would 
 flood the market, and, if sold at all, necessarily 
 fetch a very low figure. It is not likely that the 
 Government would be in a position to accept any 
 extensive payment in kind, and the market would 
 be glutted, with demand practically non-existent. 
 On whatever principle the tax worked, it would 
 still leave some persons richer than others, and 
 anyone able to purchase while the market was 
 still glutted, would be materially wealthier than 
 before. Those creditors who were paid off out 
 of the proceeds of the tax would be able to take 
 advantage of the prevailing conditions, and the 
 financial discrepancies of to-day would remain 
 unabated — perhaps augmented. But beyond and 
 
 (e) It is well, perhaps, to bear in mind that " extraordinary " taxes tend to 
 recur and become permanent. Income tax was first imposed by Peel in 1842 as 
 an " extraordinary " tax of 9d. in the £ on every man's income above £150. 
 
 8l 
 
THE COMMUNITY S CREDIT. 
 
 above all this, the clamour which would cer- 
 tainly arise for bank overdrafts with which to 
 meet the Levy would result in still further 
 mortgaging the national resources to cosmo- 
 poHtan finance (f). 
 
 A It will have been observed that so far 
 
 State none of the remedies suggested for the 
 
 Bank. cure of the economic malady have 
 touched the one really vital matter — 
 Credit. With one exception they are concerned 
 either with minor adjustments of the existing 
 economic machinery, or else with administrative 
 changes on a lesser or greater scale. The impor- 
 tance of Credit, however, is at last forcing itself 
 into general recognition, and there are at the 
 present day two suggestions in addition to the 
 Social Credit Proposals, that demand serious 
 attention, if for no other reason than that they 
 concern Credit. One such suggested remedy is 
 the creation of a State Bank, whereby the issue 
 and restriction of Credit would be taken out of 
 private hands and come directly under Govern- 
 ment control. Let it be admitted at once that 
 this suggestion marks a great step forward. 
 Then we should no longer see the Government 
 pledging the Public Credit with private Finan- 
 ciers in exchange for the inferior Credit that these 
 Financiers create upon the strength of that same 
 
 (f) This alternative method of realising the Levy by means of Bank Overdrafts 
 would, as pointed out by Douglas in " Credit-Power and Democracy," Chapter 7, 
 merely favour the Capitalist Producer, — the one man it is virtually impossible to 
 tax. 
 
 82 
 
ECONOMIC PANACEAS. 
 
 Public Credit (g). But the establishment of 
 such a Bank is open to many and obvious 
 objections. Centralised financial power would 
 be a very dangerous weapon in the hands of an 
 unscrupulous, or what is almost worse, a short- 
 sighted Government. The possession of such 
 power might prove an irresistible temptation to 
 use it for political purposes. Such a Bank, too, 
 would presumably conduct its business on 
 strictly " sound " lines, that is, of course, along 
 the lines of orthodoxy. Credits would be issued 
 only to producers, and the idea of issuing 
 financial credit to consumers as such would, 
 then as now, be regarded as foolishness by the 
 financial " experts." And yet, without such 
 issues, direct or indirect, " market-topheaviness," 
 unemployment, enforced export and economic 
 wars would continue in their present seemingly 
 inevitable cycle. 
 
 Credits The second Credit-Scheme, which is 
 for the one at present favoured by the 
 
 Export. Government in an endeavour to ame- 
 liorate the situation along orthodox 
 lines, is to borrow and issue financial credit for 
 the purpose of enabling our manufacturers to 
 export their wares to such foreign countries as 
 cannot at present afford to buy from us. The 
 proposals involve the pledging of the Public 
 Credit — to whom ? To the Bankers and Finan- 
 
 (g) See supra, pages 27 and 28. 
 
 83 
 
.p- 
 
 ciers. For what purpose ? In order that our 
 factories may continue to produce goods. For 
 whom ? For the foreign buyer. It is superfluous 
 to point out that the Credit-manipulators will 
 receive ample interest for their valuable assist- 
 ance ; but what of the great mass of the Com- 
 munity whose credit is pledged ? How will they 
 benefit ? The newly-created financial credit will, 
 if the scheme be ever taken up seriously^ be paid 
 out in this country as wages, salaries, dividends, 
 etc., entirely unrepresented by goods on the 
 home market. The purchasing-power so paid 
 out will represent pure inflation, and, being 
 ->= . unaccompanied by any method of price-control, 
 \f\ i will inevitably entail a rise in prices. Any 
 ' diminution that may be effected in the prevailing 
 market top-heaviness will be of merely tem- 
 porary duration. To which must be added the 
 further consideration that those exported goods 
 being in fiercest competition with similar pro- 
 ducts of other industrial communities, will help 
 to bring a little nearer the next great economic 
 war (h). 
 
 The It would be impossible to omit from 
 
 Marxian this Chapter all reference to two 
 School. other schools of thought that exercise 
 a not inconsiderable influence at the 
 present time. The school that is favoured 
 by many Labour economists of the more extreme 
 
 (h) See " The New Age" for November 3rd, 1921. 
 
 84 
 
ECONOMIC PANACEAS. 
 
 type is that of the followers of Karl Marx. 
 Yet, in truth, whilst it denounces, and rightly, 
 with bitterest invective, the social and eco- 
 nomic conditions of this present industrial 
 civilisation, this school seems to offer no 
 constructive solution for its many problems. A 
 friend of the writer's was quite recently con- 
 fronted by one of Marx' more vehement disciples. 
 After listening for some time to a heated denun- 
 ciation of the prevailing state of affairs, he 
 naturally enquired what remedy was advocated 
 by Marx and his followers. " First of all, the 
 proletariat must be educated in class-con- 
 " sciousness," was the reply. " And then ? " 
 " Then will come the Revolution." " And then ?" 
 " Then, as a temporary measure, the Dictator- 
 " ship of the Proletariat." " And then ? " No 
 reply. Then, of course, having waded through 
 blood and sorrow to proletarian dictatorship, 
 the Community — or what was left of it — ^would 
 be faced with the same problem it has to meet 
 to-day. In other words, there would still be 
 men and machinery, producers and consumers, 
 and the same economic problem of production, 
 distribution and consumption. Far better face 
 this question now than, having undergone all 
 the horrors of internecine strife, find it still 
 awaiting solution at the end. 
 
 85 
 
THE community's CREDIT. 
 
 A The other school of thought holds 
 
 Change widely different views. It would teach 
 of us that the need of the industrial 
 
 Heart. world to-day is a Change of Heart 
 and unlimited Goodwill. Such would 
 often seem to be the message of the Industrial 
 Christian Fellowship, and kindred associations. 
 But a change of heart without a change of eco- 
 nomic conditions is powerless to avert industrial 
 collapse. There is any amount of goodwill and 
 reasonableness existing to-day between masters 
 and men, but no amount of goodwill unattended 
 by economic reform will, for instance, enable an 
 industrial community to absorb all its own pro- 
 duction, nor remove the economic necessity for 
 export, with its attendant dangers. A change in 
 the economic system attended by general good- 
 will may yet prove the salvation of civilisation ; 
 Goodwill and a Change of Heart by themselves 
 can effect nothing permanent. 
 
 Such, then, are the principal remedies variously 
 offered for the cure of the economic malady of 
 Industry. None is adequate ; few are even 
 alleviatory ; some are frankly worse than the 
 disease they profess to cure. We have seen in 
 each case some of the reasons why this is so. 
 Now at last we are in a position to examine the 
 Social-Credit Proposals of Major Douglas, and 
 to see whether they, in their turn, afford the 
 remedy the industrial world to-day so urgently 
 needs. 
 
 86 
 
Part III. 
 
 Some Constructive Principles and 
 Proposals. 
 
 CEAPIER SIX, 
 
 THE SOCIAL CREDIT PRINCIPLES. 
 
 (i) The Just Price. 
 
 CHAPTER SEVEN, 
 THE SOCIAL CREDIT PRINCIPLES. 
 
 (2) National Dividends. 
 
 CHAPTER EIGHT, 
 THE PRACTICAL APPLICATION. 
 
 CHAPTER NINE, 
 THE INTERNATIONAL ASPECT. 
 
CHAPTER VL 
 
 The Social-Credit Principles, 
 (1). The Just Price. 
 
 Major Douglas' constructive proposals are 
 based upon two outstanding principles, — first, 
 the Just Price, and secondly. National or 
 Communal Dividends. Of each in its turn, and 
 first with regard to 
 
 THE JUST PRICE. 
 
 The We have already seen (a) that to 
 Just enable an industrial community to benefit 
 Price, l^y ^w extension of productive capacity, 
 such extension must be accompanied by 
 an equivalent expansion of purchasing-power in 
 the hands of consumers ; otherwise the increased 
 productive capacity acts not as a stimulus to but 
 as a clog on industry. At the conclusion of a 
 previous Chapter (b) we saw that the community 
 as a whole would receive most benefit from an 
 influx of new purchasing-power if it came in 
 the form of reduced prices3-if, in fact, new 
 financial credit were issued to Producers to 
 reimburse them for selling " under cost." And 
 so we found ourselves face to face with this vital 
 question : In a community whose financial sys- 
 tem is based on Real Credit, what is the Just 
 
 (a) Supra, page 43. 
 
 (b) Chapter IV., at pages 63 and 64. 
 
 89 
 
THE community's CREDIT. 
 
 Price of an article to the Consumer ? Or, in 
 other words, what proportion of the production- 
 cost of an uhimate commodity should be borne 
 by the Consumer, and how much refunded to the 
 Producer out of newly created financial credit ? 
 
 The In " Economic Democracy," Chapter 
 Price- X., and " Credit-Power and Democ- 
 Factor. racy," Chapter XII., Major Douglas 
 has approached this question along 
 somewhat technical lines. Perhaps, however, 
 the very simplest method of approaching the 
 problem of the Just Price is as follows : — If 
 in the course of any accounting period the gross 
 production of Communal Real Credit be repre- 
 sented by, say, lo, and the simultaneous gross 
 consumption thereof be represented by 8, then it 
 is clear that the nett appreciation of Communal 
 Real Credit during that period must be repre- 
 sented by 2. The total Real Benefit (if we may 
 temporarily so term it) received by the Consumers 
 as such is, undoubtedly, the total Real Credit 
 absorbed during the period under consideration, 
 namely 8. The total Real Benefit received by 
 the Community as a whole, apart from the 
 individual Consumers (i.e., the nett increase in 
 its Real Credit) is, in these circumstances, 2. 
 It is submitted, therefore, that under the given 
 conditions, any price paid to the Producers for 
 their commodities (that is, production-cost, 
 including profit), should be borne, as to 8 parts 
 
 90 
 
THE JUST PRICE. 
 
 thereof by the Consumers, and as to the remain- 
 ing 2 parts thereof by drawing on the credit of 
 the Community as a whole. In other words, 
 8/ioths of the seUing-price of an article should 
 be borne by the Consumer, and the remaining 
 2/ioths credited to the Producer by the Treasury 
 on behalf of the Community in its entirety. It 
 is, of course, superfluous to point out that there 
 is no peculiar virtue in the numbers eight and 
 ten. The result is a perfectly general one, and 
 the conclusion reached may be enunciated thus : 
 In a Community wherein the Financial System 
 is based on Real Credit, the Just Price of an 
 article to a Consumer bears to the cost of its pro- 
 duction the same ratio as does the Gross Deprecia- 
 tion of Communal Real Credit bear to the Gross 
 Appreciation thereof. This ratio we will hence- 
 forth refer to as the Price-Factor. 
 
 Just Price __ Total Consumption of Real Credit _, Price- 
 Cost Price Total Production of Real Credit Factor 
 
 An Major Douglas would, then, have us 
 
 Illustration* break away finally and completely 
 from any pretence of maintaining a 
 gold standard for our monetary system, and, 
 having done so, regulate the price of each 
 ultimate commodity (c) to the consumer at a 
 figure arrived at by multiplying the cost of its 
 production (which would include a fixed per- 
 centage of profit for the producer) by the price 
 factor as just defined. Intermediate products 
 
 (c) See suprOf page 39. 
 
 91 
 
THE community's CREDIT. 
 
 would be priced, as to-day, at something over 
 the bare cost of labour and materials, which 
 something would, however, be limited to a fixed 
 percentage by way of profit. In our hypotheti- 
 cal community in Chapters I. and IV. (d) the 
 gross decrease in the Communal Real Credit 
 bore to the gross increase therein the ratio of 
 8 to 10. The price-factor for the period would 
 therefore be 4/5, and the Just Price of an article 
 to the consumer would be 80% of the production- 
 cost. The j^8oo,ooo gross decrease in Real 
 Credit represents the production-cost (including 
 capital depreciation) of all goods consumed, 
 and therefore either immediately or later appears 
 in prices. Were the Social-Credit Proposals in 
 force, the Consumers would be called upon to 
 pay 4/5ths of this sum, that is, ^640,000, while 
 the remaining £160,000 would be refunded to the 
 producers by means of new Treasury Issues of 
 credit and currency, based upon and backed by 
 the £200,000 worth nett increase in the Com- 
 munity's Real Credit. 
 
 Inflation. It is, however, perfectly true to 
 say that whenever there is any 
 suggestion of making an issue of paper money, 
 however regulated and safeguarded, the bugbear 
 of Inflation is conjured up in one form or 
 another. Financiers and so-called experts point 
 to the diminished value of the Russian rouble, 
 
 (d) See supra, pages 10 and 60. 
 
 92 
 
THE JUST PRICE. 
 
 and in well-feigned alarm cry out, " See what 
 paper money leads to ! " And the general 
 public, gulled by a blind or servile Press, re- 
 echoes the cry. But, as Mr. Arthur Kitson has 
 pointed out in his treatise entitled " Unemploy- 
 ment, the Cause and a Remedy " (wherein he 
 advocates Douglas' proposals as a solution of 
 the unemployment problem), " Russia's experi- 
 " ence with paper money has no more to do 
 " with these proposals than the act of drinking 
 " a glass of water has to do with the act of 
 " committing suicide by drowning. . . . The 
 " Russian paper-money was used, as Lenin 
 " admitted, for the purpose, not of assisting 
 " trade, but of destroying it, and of getting rid 
 " of what they term the * Capitalistic Financial 
 " System.' It is one thing to issue currency for 
 " the purpose of assisting trade ; it is quite 
 " another thing to issue currency for the purpose 
 " of destroying it,'''' (e) 
 
 No "Inflation" By Inflation, presumably, is 
 under Social- understood a rise in the general 
 Credit Proposals, level of prices brought about by 
 an undue expansion of money 
 in relation to goods on the market. But if the 
 principle of the Just Price were adopted no such 
 inflation could possibly occur, for the following, 
 among many other excellent reasons : (i) The 
 periodical issues of financial credit from the 
 
 (e) At page 83. 
 
 93 
 
THE community's CREDIT. 
 
 Treasury would merely represent in money the 
 expansion in the capacity of the community 
 to deliver Goods and Services since the last 
 issue. (2) Such issues, far from increasing 
 prices, would be a means of reducing and 
 maintaining them below cost of production. 
 
 Legal Tender There is one source of monetary 
 and Bank expansion, however, to which 
 
 Credit the adoption of the Social 
 
 Issues. Credit Proposals might possibly 
 
 expose the Community, although 
 it is not quite easy to see how, with scientifically 
 regulated prices, such expansion could entail any 
 undesirable consequences. At the present day, 
 if there is an abundance of legal tender in 
 circulation (be it paper or gold), the Banks are 
 in a strong position for the issue of credits (f). 
 For instance, during the late War, the Govern- 
 ment felt itself obliged to borrow vast sums from 
 the Bankers (g). In order to enable the Banks 
 to give this accommodation without exceeding 
 their so-called " margin of safety " (h) the 
 Government issued paper money as legal tender 
 to strengthen the Bank Reserves. This paper 
 money would not have been required had there 
 been no need to extend the total of Bank Credits, 
 nor would such fresh issues of Bank Credit have 
 been safely made had there been no increase 
 
 (f) See supra, page 59. 
 
 (g) See supra, page 26. 
 
 (h) See supra, page 23, and infra, page 113. 
 
 94 
 
THE JUST PRICE. 
 
 in the amount of legal tender in circulation. It 
 may therefore be raised as an objection to the 
 foregoing principle of the regulation of Prices 
 " under cost " and the reimbursement of Pro- 
 ducers by newly created credits issued by the 
 Treasury, that, even if the amount so issued 
 were itself justified by the Real Credit Increment 
 within the Community, such an issue would 
 almost^ inevitably be made the basis of a quite 
 unjustifiable expansion of Bankers' Credit. 
 
 Avoidance of In reply to this very plausible 
 an Undue objection there are one or two 
 
 Expansion points that may be raised. First, 
 
 of Bank i^ i^ hard to see how the general 
 
 Credits. level of prices could rise if regu- 
 
 lated at a percentage of production 
 cost, and the jungle law of Supply and Demand 
 replaced by a scientific price-law based upon 
 the productive capacity of the Community. 
 Next, as we shall see when we come to consider 
 the suggested machinery for the operation of 
 the Social-Credit Principles (i), these reimburse- 
 ments to producers would generally take the 
 form of the issue of new financial credit (as dis- 
 tinct from currency), or the cancellation of prior 
 indebtedness. Indeed, the issue of new legal 
 tender would be the exception and not the rule, 
 and would be made only to suit the convenience 
 of the public. If, however, an undue expansion of 
 Bank Credit were still regarded as a danger, 
 
 (i) Infra, Chapter VIII. 
 
 95 
 
THE community's CREDIT. 
 
 there would seem to be no valid objection to 
 placing some legal limit on the power of the 
 Banks to issue financial credit. This might 
 be done by retaining their present legal 
 liability to exchange such credit for legal tender 
 upon demand, or even by fixing some reasonable 
 maximum amount beyond which Banks 
 might not issue financial credit uncovered by 
 legal tender in their possession (j). If some such 
 precaution were taken, it is submitted that fresh 
 issues of financial credit by the Treasury could 
 only increase the total amount of money in 
 circulation by an amount justified by the 
 simultaneous increase in the Community's Real 
 Credit. 
 
 The The psychological effect of price-regu- 
 
 Psycho" lation along the lines suggested by 
 logical Major Douglas is highly important. 
 Effect. -^^j ^^^ instance, owing to the expansion 
 of purchasing-power, there was tem- 
 porarily a marked increase in the community's 
 consumption unaccompanied by any corres- 
 ponding increase in its production, then (as the 
 price-factor varies directly as the total com- 
 munal consumption, and inversely as the total 
 communal production), prices would automati- 
 
 (j) It may be objected that this entails relating credit to currency, and is there- 
 fore unsound. It is, however, submitted that as the Treasury would still be free 
 to issue, and would issue, all new financial credit justified by increased Comniunal 
 Real Credit, the precautionary restriction of the power of the Banks to issue 
 new financial cretht would not in any way relate the total amount of financial 
 credit within the Community to the amount of legal tender in circulation. 
 
 96 
 
THE JUST PRICE. 
 
 cally increase until this disproportionate con- 
 sumption was checked. Whilst it is clear that 
 in practice the price-factor for any accounting 
 period would have to be determined from the 
 statistics of some previous period, the general 
 psychological effect would, of course, be the same. 
 It would quickly be realised that increased pro- 
 duction without a similarly increased consump- 
 tion was followed by a general lowering in the 
 level of prices, and that increased consumption 
 unaccompanied by a corresponding increase in 
 production entailed a general rise in the level 
 of prices. Which is exactly as it should be. 
 There is then an incentive to greater production 
 at the lowest possible cost, and for a sufficient 
 though moderate consumption. Moderation in 
 consumption, however, would not then be due 
 to a lack of purchasing power on the part of 
 the Community, but to a sane realisation of 
 cause and effect. 
 
 Unemployment. Such, then, are the Social-Credit 
 Proposals with regard to Price 
 Regulation. Accompanying and equivalent to 
 the steadily expanding capacity of the Com- 
 munity to meet demands upon it, there would 
 flow into the Community by this means, a 
 mechanism for making these demands effective. 
 It has been the endeavour to lay the bogey of 
 " inflation " that rears its head whenever these 
 proposals are first considered, and it may now 
 
 97 
 
THE COMMUNITY S CREDIT. 
 
 be well to spend a moment or two in considering 
 what effect the application of this portion of 
 Major Douglas' proposals would have with 
 regard to the most vital problem of the industrial 
 world to-day, that of Unemployment. 
 
 An Inherent " Unemployment,^^ said " The 
 Feature of Times " in a leading article, " is 
 The Present " ^^ inherent feature of the Eco- 
 Economic " nomic System.^^ (k). The truth 
 
 System. ^^ ^^^^ statement is unhappily 
 
 only too apparent. Given the 
 above premises, it would naturally occur to 
 anyone unacquainted with newspaper eco- 
 nomics that the obvious duty and interest of 
 everybody was to cast about for some other 
 system to replace this present one — a system 
 whereof compulsory unemployment was not an 
 inherent feature, or wherein, at any rate, its ugly 
 consequences were eliminated. Not so, it seems ; 
 the article continued to fill up a platitudinous 
 half-column with counsels of acquiescence in the 
 inevitable, coupled with exhortations to work 
 harder, to consume less, to beware of inflation, 
 to do anything, in fact, except breathe against 
 the established order of things. It is too sacred. 
 And this although "The Times" realised that 
 so long as the present Economic System endures, 
 so long will Unemployment and its attendant 
 miseries continue. Temporary alleviations may 
 
 (k) See " Times " Leading Article dated Sept. 30th, 1921. 
 
 98 
 
THE JUST PRICE. 
 
 occur. Total eradication is impossible. How 
 can it be otherwise ? 
 
 Revitalising Let us now take a flight of fancy, 
 Industry. and let us suppose that by some 
 means or other every member of 
 the Community were suddenly to find himself 
 or herself possessed of j^io more than he or she 
 had a moment before. What would be the effect 
 on Industry ? Human nature being what it is, 
 prices would of course tend to rise until all this 
 extra spending power was absorbed (1). But 
 suppose that it was found possible in some way 
 to prevent prices from rising, what then ? The 
 money would be spent on what its recipients, 
 wisely or foolishly, desired. However spent, the 
 effect would be an immediate and substantial 
 diminution of the stocks at present carried by 
 retailers. Orders would flow thence to the 
 wholesale houses. The wheels of industry would 
 speed up. More men would be taken on. More 
 money would flow into the Community as wages. 
 Unemployment would be substantially reduced. 
 
 By the But, of course, as things are at present. 
 Just prices would rise. Suppose, however, 
 
 Price. that instead of increasing each indivi- 
 dual's money byj^io, the Government 
 declared that if prices were reduced to a fixed 
 percentage of production-cost they would refund 
 
 (1) See supra, Chapter IV., at page 63. 
 
 99 
 
THE community's CREDIT. 
 
 the difference to the producers : suppose, in 
 other words, that the Social Credit Principles, 
 so far as they relate to the Just Price, were 
 adopted, — what then ? Prices would drop imme- 
 diately, but there would not necessarily or even 
 probably be any corresponding drop in wages. 
 Each unit of money flowing into the pockets of 
 the individual members of the Community would 
 purchase more. Stocks would gradually be 
 cleared, and in a little while Industry would 
 be employing many more than its present normal 
 quota (m). Since the incentive to produce on 
 the part of the worker would be no longer coun- 
 tered by the fear of undue profits being made at 
 his expense by his employer, the increased 
 demand would lead to a fuller utilisation of our 
 present capacity. It is true that to some 
 extent the nature of the demand might modify 
 the type of commodities turned out, but this 
 effect would probably be wholly beneficial. 
 There would be less energy devoted to the 
 production of armaments, as the gradual con- 
 version of our capacity to consume more at home 
 into an effective demand removed the artificial, 
 though at present very real, necessity to fight 
 for foreign markets. On the other hand, there 
 would certainly follow increased attention to 
 agriculture, and a real effort to stimulate it 
 and assure its position as a national industry. 
 But, however the changed demand modified the 
 
 (m) As to the proper figure for the first price-factor, see infra^ Appendix " A," 
 at page 147. 
 
THE JUST PRICE.:.; 
 
 nature of the goods producecj, . the imm^djate 
 effect of the application of the pjinciple of the 
 Just Price would be to offer more and more 
 chances of employment, and, with employment, 
 remuneration that could procure for the recip- 
 ient far more in the way of goods and services 
 than he can ever hope to obtain to-day. 
 
 National This much is clear, however, that 
 Dividends, even if by the means just indicated 
 unemployment could be very mater- 
 ially reduced, and the standard of living raised 
 all round, our factories could and would cope 
 with the entire demand without employing the 
 whole available man-power. There would still 
 be, and there must always henceforward be, 
 some for whom Industry has no place ; but 
 there is no ethical or necessary reason why 
 compulsory unemployment should bring in its 
 train the ugly consequences we see on all sides 
 to-day. It is to meet, in particular, the case of 
 those not directly engaged in production, and 
 in the interests of communal justice in general, 
 that Douglas enunciates his second principle, 
 that of National Dividends (n). 
 
 (n) See infra, Chapter VII, 
 
.;^ :/';'« ^ -CMAPTER VII. 
 
 The Social-Credit Principles, 
 (2), National Dividends. 
 
 Inadequacy The inadequacy of an unsupple- 
 of the mented wage system to meet the 
 
 Wage System, requirements of a modern pro- 
 gressive industrial Community be- 
 comes more apparent every day (a). The ob- 
 ject of the application of Science to Industry 
 is the production and distribution of goods and 
 services for the use and enjoyment of mankind 
 with the minimum expenditure of human energy; 
 and as the years pass, and scientific invention and 
 discovery succeed still further in replacing human 
 energy by the power of machines, increasing 
 unemployment will render an already inadequate 
 system more and more so. So much the more 
 necessary does it therefore become with every 
 advance made in this direction to devise some 
 means of distributing purchasing-power to those 
 for whom Industry has no longer any need. 
 
 The Among the many outward and visible 
 
 Dividend signs of the gradual, if mainly sub- 
 System, conscious, recognition of the inade- 
 quacy of the wage system at the 
 present day, may be instanced the seeming 
 
 (a) See also supra, pages 12 and 13. 
 
NATIONAL DIVIDENDS. 
 
 anomalies of Old Age Pensions and Unemploy- 
 ment Relief. The former, in particular, is in 
 effect nothing other than a system of conditional 
 National or Communal Dividends, in that the 
 right to receive an Old Age Pension is based on 
 membership of the Community alone, and not 
 on work done or services rendered (b). As it is, 
 many people to-day derive their whole income 
 from dividends of one sort and another. It 
 may, indeed, be affirmed with confidence that 
 the natural and logical partner of the wage 
 system is some system of dividends, distributed 
 to the members of the Community as such, and 
 entirely independent of their remuneration for 
 work done or any other exterior consideration. 
 On grounds of expediency alone it must be 
 admitted that some such supplementary system 
 is eminently desirable. But the objection,heard 
 on many sides to-day with reference to the 
 pecuniary relief of unemployment distress, that 
 it amounts, actually or virtually, to *' something 
 for nothing," and is therefore immoral, is sure 
 to be raised sooner or later in this connection 
 also. It may therefore be well to point out at 
 once that not only is some system of National 
 Dividends eminently desirable, but that it is, 
 in addition, ethically justifiable in principle. 
 
 (b) The fact that receipt of a pension is subject to certain arbitrary conditions 
 as to the age and means of the recipieiit has no bearing on the fact that the only 
 title to such pension is membership of the Community. 
 
 103 
 
THE community's CREDIT. 
 
 The three Production by Industry to-day 
 
 Factors is the result of the combined 
 
 in Industry. effort of three distinct factors. 
 
 (1) Capital. There is, in the first place, 
 
 (2) Labour. Capital, the immediate provid- 
 
 (3) Common ^j- of plant and machinery. 
 Cultural Secondly, there is Labour, the 
 Inheritance, provider of mind, muscle, and 
 
 human energy in the widest 
 sense. Thirdly, there is the Common Cul- 
 tural Inheritance of the Community. If it 
 be asked what exactly is implied by the 
 term " Common Cultural Inheritance," we 
 cannot, perhaps, do better than quote 
 a few words from a brochure issued by the 
 Manchester Credit Reform Group. We read there- 
 in how " Science has lengthened the arm of man, 
 ' and has strengthened his fist. It has enlarged 
 ' his eye and extended his ear. He can throw his 
 ' voice across an ocean or a continent, and his 
 ' body through space. The power of a thousand 
 ' horses is at his command by the opening of a 
 ' valve. Wealth production is made so easy by 
 ' machinery, that the human-labour factor de- 
 ' creases daily. . . . This is our real heritage 
 * as against that of the cave-man." (c) Our 
 inheritance is, however, greater even than this. 
 It comprises ordered government, industrial, 
 social, and political organisation, education, 
 religion, and the hundred and one amenities of 
 
 (c) " Socialisation of Credit," page 9. 
 
 104 
 
NATIONAL DIVIDENDS. 
 
 civilisation. These collectively form what we 
 have called the Community's Common Cultural 
 Inheritance. Capital without Labour is impo- 
 tent. Labour without Capital is practically 
 powerless. Machinery, mind and muscle, apart 
 from the Common Cultural Inheritance, would be 
 disorganised and inefficient. But who can fail 
 to have noticed that our unhappy industrial 
 disputes almost invariably turn upon the division 
 of profit between Capital and Labour, and that 
 the share due to the Common Cultural Inheri- 
 tance is forgotten or disregarded ? 
 
 Morality Common Cultural Inheritance — who, 
 of National then, are the heirs ? The heirs to 
 Dividends, this splendid heritage are the mem- 
 bers of the Community as such. 
 The individual members of the Community are 
 interdependent, and every member is co-heir 
 to the Common Cultural Inheritance of the 
 whole. So much is this the case that it is, 
 strictly speaking, impossible for any one man 
 to be said to be the sole creator of even " his 
 own " idea or invention. He has merely manipu- 
 lated mentally the inventions and ideas of a 
 hundred others. The members of the Com- 
 munity, as such, as well as Capital and Labour, 
 are justly entitled to a share in the produce 
 of Industry. Now it is quite true that the 
 Community comprises both the CapitaHst and 
 the Worker, and in so far as an indivdual 
 
 105 
 
THE community's CREDIT. 
 
 member of the Community is also a member 
 of one or both of the other partners in 
 production, his or her share as a member of the 
 Community should be additional to his or her 
 share derived from that other source. But 
 there are certain members of the Community 
 who can claim to belong to neither of the other 
 two groups, and such members should in common 
 fairness receive at any rate such just proportion 
 of the increased Real Credit of the Community 
 as is due to them as inheritors of the discoveries, 
 inventions, culture, civilisation, order, thought, 
 and accumulated resources of the past. Finally, 
 as Douglas maintains in his preface to " Credit- 
 Power and Democracy," (d) ethically speaking, 
 " That is moral which works best,^^ If this be 
 true, then, indeed, it is the present economic 
 system which is frankly and flagrantly immoral. 
 
 Necessity And so we look forward to the time 
 for National when every member of the Com- 
 Dividends. munity as an individual shall, apart 
 from and in addition to his or her 
 remuneration as a producer, receive, as a matter 
 of course and of right, his or her Communal 
 Dividend — his or her proper share in the increase 
 in the Real Credit of the Community as a whole. 
 National Dividends as such should be distributed 
 irrespective of whether the recipient is employed 
 or noty or of his or her financial status. At the 
 
 (d) At page vii. 
 
 Io6 
 
NATIONAL DIVIDENDS. 
 
 present day, as a matter of economic necessity 
 and political expediency, there are distributed, 
 out of the proceeds of taxation, weekly " doles " 
 to persons who are out of employment, with 
 the manifestly evil result that a man is penalised 
 by the cessation of his Government grant 
 directly he begins to earn a wage. There is 
 thus afforded to him a direct incentive to remain 
 unemployed. At the present time also, it must 
 be borne in mind that the amount distributed 
 in unemployment relief bears no necessary 
 relationship to the capacity of the Community 
 to pay it, but is the minimum amount required 
 to keep the unemployed from open revolt. 
 Unemployment pay to-day is, in effect, a kind 
 of National Insurance against the evil effects 
 of the present economic system, and the tendency 
 is, of course, to keep the premiums as low as 
 possible. Under the Social-Credit Proposals, the 
 aggregate amount distributed in National Divi- 
 dends, to employed as well as to unemployed, 
 would be directly proportioned to the Com- 
 munity's ability to pay, and it would therefore 
 be to the direct advantage of every member of 
 the Community to increase this ability. 
 
 Benefits In his brochure, " The Cure for 
 of National " High Prices," H. M. M. has 
 Dividends, touched upon further substantial 
 advantages that would accrue from 
 the adoption of a scheme of National Dividends 
 
 107 
 
THE community's CREDIT. 
 
 paid to each member of the Community as such. 
 He writes : " The possession of a right to an 
 " income as a member of the Community by 
 " every man, woman and child, apart from what 
 " they earn by their labour, would solve several 
 " difficult problems. It would put the family 
 " man on an equality with the bachelor : it 
 " would make women financially independent 
 " of their male relatives, and enable them to 
 " choose their way in life and their partners in 
 " marriage free from ulterior considerations, 
 " besides testing the strength of their professed 
 " desire to remain in industry. It would pro- 
 " vide for the case of the widow and orphan, 
 " the sick, the helpless and the aged, as well as 
 " for the man of genius who does not fit kindly 
 " in to the economic structure, and for many 
 " more. In addition, it would put everyone in 
 " the strongest possible position to resist tyranny 
 " from whatever quarter it might threaten.'* 
 
 Financing Here the question very naturally 
 National arises : " Where, then, is the money 
 Dividends. " necessary to pay such Dividends 
 " to come from ? " Major Douglas' 
 reply to that question is that National Dividends 
 could and should be financed out of the increas- 
 ing Real Credit of the Community. They might 
 be made, as are wages, salaries, and dividends to- 
 day, a charge upon Industry, appearing as a fur- 
 ther item in production-cost. For instance, the 
 
 io8 
 
NATIONAL DIVIDENDS. 
 
 periodic contribution towards National Dividends 
 made by each industry might be fixed at some 
 definite, though strictly moderate, percentage 
 of the capital invested in that industry. It is 
 not, however, proposed at this juncture to 
 examine in any detail the possible or probable 
 methods of financing National Dividends. This 
 can better be deferred until we come to deal 
 with the means and methods suggested for 
 carrying the Social-Credit Principles into effect. (f) 
 All that is aimed at for the present is to render 
 acceptable the principle of dividends for all mem- 
 bers of the community as such, and to suggest that 
 there do exist feasible methods of financing the 
 same out of the Community's Real Credit, without 
 adding to the load borne by the taxpayer to-day. 
 
 A In this connection, however, it is 
 
 New necessary to point out that, far from 
 
 Incentive, being an added burden upon Industry, 
 the application of such proposals would 
 provide a distinct incentive to further industrial 
 progress. As the Community's productive cap- 
 acity increased, the amount available for periodic 
 distribution as National Dividends would increase 
 also. Those engaged directly in production 
 would receive, then as now, remuneration for 
 their work in the form of wages or salaries, in 
 addition to and quite apart from their dividend. 
 As pointed out by Mr. Allen Young in his 
 
 (f) See infra, Chapter VIII. at pages 117, 118. 
 109 
 
THE community's CREDIT. 
 
 pamphlet entitled " Dividends for All "(g), wage- 
 earners are at the present time admittedly 
 hostile to the introduction of labour-saving 
 methods and devices, since the tendency of 
 such is to take away employment, whereas to-day 
 it is practically only through employment that 
 the majority of the population have purchasing- 
 power distributed to them. But if each addi- 
 tion to the productive capacity and efficiency of 
 the Community were accompanied by an increase 
 in the amount available for distribution as 
 National Dividends, there would no longer be 
 any ground for this hostility. Undeterred by 
 the fear of causing wide-spread misery through 
 unemployment. Science could then proceed 
 apace towards the industrial emancipation of 
 mankind. Gradually, too, the need for unem- 
 ployment doles, — baneful anomalies that they 
 are, — would diminish, until eventually they were 
 banished, together with slums and sweated 
 labour, into outer darkness. 
 
 Economic The application of the Social- 
 
 Development. Credit Principles would plainly 
 found our economic system upon 
 a Real Credit rather than on a pseudo-gold basis. 
 But this would cause no sudden break in the 
 continuity of economic development. Rather 
 would it be a scientific moulding of natural 
 economic tendencies. In the infancy of the 
 human race, the economic system rested, mani- 
 
 (g) At page 24. 
 
NATIONAL DIVIDENDS. 
 
 festly, upon a barter basis. Goods and services 
 were exchanged directly for goods and services. 
 In course of time, as Society evolved, it was 
 found more convenient to effect exchanges by 
 means of currency tokens. Such tokens were 
 things desirable in themselves — hides, plumes, 
 coloured stones, cattle — anything, in fact, suffi- 
 ciently rare to be valuable and at the same time 
 sufficiently common to be adequate to the needs 
 of primitive commerce. This marks the second 
 stage of economic development. It is the stage 
 reached to-day by those who hanker after a 
 return to a gold basis for our currency and 
 economic system as a whole. The notion that 
 money could have value apart from the intrinsic 
 worth of the token itself is of much later origin. 
 The third stage was reached when, with expand- 
 ing trade and development of ideas, there 
 entered into economic life a new factor, and 
 it gradually became realised that a medium 
 of exchange need not be in itself a thing of 
 value, so long as attached thereto was a 
 certain something, which we to-day know as 
 Credit. Tokens, valueless in themselves, began 
 to be accepted in exchange for goods and ser- 
 vices simply because, attached to each such token 
 was the belief that, by its means, other goods 
 and services might be procured. It was imma- 
 terial of what these tokens consisted. The 
 notched stick and the modern Treasury Note are 
 equally good examples of the intrinsically value- 
 
THE COMMUNITY S CREDIT. 
 
 less token being recognised as valuable because 
 of the Credit attached thereto. So long as such 
 tokens are accepted as title to goods and ser- 
 vices, they are money. 
 
 Bank Credit. The issue of " money " has 
 from the earliest times been the 
 prerogative of Government. But with the ad- 
 vance of Industry and the extension of Com- 
 merce, there was felt keenly the need for a still 
 more liquid medium of exchange, or, more 
 correctly, of Credit. This need was in due 
 course supplied by the Banking Houses. There- 
 after, in addition to the legal tender issued by 
 the sovereign authority, there came into circula- 
 tion a mass of credits issued by private persons 
 and firms, fostered by which trade prospered 
 exceedingly. These new credits, which we shall 
 hereafter refer to as Bankers' Credits (h), were 
 matters of book entry, and it has to-day become 
 a usual and convenient practice to pay debts and 
 settle accounts by means of mere transfers of 
 such credits in the books of the Bank. With 
 expanding Commerce and Industry, there has 
 been a corresponding expansion of Bankers' 
 Credit, until to-day the aggregate amount of 
 such credit in circulation in this country is 
 between five and six times the total amount of 
 legal tender. To this extent, then, have the 
 Bankers usurped the functions of Government. 
 
 (h) For a more detailed consideration of the Subject of Bankers and Credit, see 
 supra Chapter II. 
 
NATIONAL DIVIDENDS. 
 
 The power of Credit-Issue and Credit-Restriction 
 is in private hands, while Bankers' Credit, not 
 Legal Currency, is becoming more and more the 
 life-blood of industry, (i) 
 
 The There would seem to be but one 
 
 Logical restriction to the amount of Bank- 
 
 Development. Credit that may be put into cir- 
 culation at any one time ; that 
 is the statutory liability of the Banks to pay out 
 legal tender in exchange for their own Credit 
 when called upon to do so, which liability in 
 effect restricts the total amount of Bankers' 
 Credit to a certain number of times the total 
 amount of legal tender simultaneously in circu- 
 lation. The Bankers must, in fact, preserve a 
 kind of safety limit. But the raison d^etre of 
 Financial Credit being the proper distribution 
 and utilisation of Real Credit, it would seem 
 an absurd restriction to limit the amount of 
 such credit, not by the needs of industry, but 
 by the amount of legal tender there happens to 
 be in circulation. And the absurdity is greater 
 still if the aggregate amount of such legal tender 
 is in its turn restricted by the amount of gold 
 within the Community.(j) The natural and 
 logical development of the economic situation 
 will undoubtedly be the ultimate withdrawal 
 of the function of credit-manipulation from the 
 
 (i) In the year 1920 the London Clearing House passed through £39,000,000,000, 
 representing transfers of pure Bankers' Credit. 
 
 (j) See supra, pages 58, 59 and 60. 
 
 113 
 
Financier and Banker, and the regulation of the 
 issue and, if necessary, the restriction of Credit 
 automatically with the needs of Industry — that 
 is, by the simultaneous increase or decrease in 
 the Communal Real Credit. Expanding Indus- 
 try and Commerce will then be nurtured by 
 expanding Financial Credit, unhampered by 
 artificial and irrelevant restrictions. As part of, 
 and quite auxiliary to such credit, there will 
 be placed in circulation such amount of currency 
 — which Douglas aptly terms " the small change 
 of credit " — as might be deemed generally 
 convenient. And finally, with automatic credit- 
 expansion there must be correspondingly auto- 
 matic price-regulation (k). 
 
 A In this way, then, would the adoption 
 
 Step of the Social-Credit Principles assist 
 
 Forward, the logical development of economic 
 tendencies. In place of the present- 
 day system, under which financial credit is 
 virtually a monopoly serving private interests, 
 there would arise a financial and economic 
 system under which financial credit was directly 
 controlled by the consumers in the interests of 
 the Community as a whole. The amount of 
 financial credit in circulation would tend more 
 and more to become an accurate reflection of 
 the National Real Credit. Economic develop- 
 ment would have been carried another step 
 forward. 
 
 (k) See supra pages 62 and 63. 
 
 "4 
 
CHAPTER VIII. 
 The Practical Application 
 
 "Machinery." It is obviously not to be expected 
 that proposals embodying the 
 principles of the Social Credit Movement can 
 be operated without some appropriate mach- 
 inery ; but, considering how these, principles 
 strike at the very roots of the present indus- 
 trial and economic malaise, it is remarkable 
 how unobtrusive and simple are the means 
 needed to carry them into effect. It has, how- 
 ever, never been Major Douglas' aim or intention 
 to dictate how his principles ought to be material- 
 ised : such matters of administration are prob- 
 ably better left to those to whom it would fall 
 to work the Scheme when once the principles 
 themselves had been adopted ; and it must 
 therefore be clearly understood that the following 
 pages attempt to shew, not how the Social Credit 
 Proposals must he applied — not even how they 
 ought to be applied — but how they very well could 
 and might be applied. When once the principles 
 themselves have been approved, that form can 
 be adopted for their application which seems 
 best fitted to achieve the end in view. 
 
 Producers* or Perhaps the most convenient and 
 Industrial effective method so far suggested 
 
 Banks. is the creation of Producers' or 
 
 "5 
 
THE community's CREDIT. 
 
 Industrial Banks. Each such Bank would 
 be connected with some particular industry, 
 be it that of Mining, of Ship-building, or of 
 Agriculture, and would be affiliated to the 
 Bankers' Clearing House in the same way as 
 are Banks at the present day. These Banks 
 would not be run primarily with the object of 
 gaining dividends for shareholders, in the ordin- 
 ary sense of the term, but, as will shortly appear, 
 with a different object in view. Into each such 
 Bank would be paid all the wages and salaries 
 due to persons connected with that particular 
 industry, which would be duly credited to the 
 accounts of the various recipients. Much of this 
 money would, of course, be withdrawn to meet 
 the current needs of the workers, but a substan- 
 tial and increasing amount would remain on 
 deposit. Now, a Bank, as we have seen (a), is 
 an organ for the creation and issue of Financial 
 Credit upon the security of Real Credit. By 
 means of the money so deposited and on the 
 security of the Real Credit of the industry itself 
 (inherent in the ability of the workers in that 
 industry to produce the goods and services re- 
 quired by the Community), the Producers' Bank 
 would be in a position to create and issue finan- 
 cial credit to that industry, in precisely the same 
 manner as do the Banks at the present day. 
 
 It is suggested that when an industry found 
 itself in need of new capital, such new capital 
 
 (a) Chapter II., supra. 
 
 ii6 
 
THE PRACTICAL APPLICATION. 
 
 should be subscribed by the Bank connected 
 with that industry jointly with the owners 
 thereof, and that the amount subscribed by the 
 owners should not exceed such proportion of 
 the whole as the amount paid in dividends 
 bears to the sum of the wages, salaries and 
 dividends distributed to persons connected with 
 that industry. For the sake of illustration, let us 
 imagine an industry in which the ratio borne by 
 dividends plus wages and salaries to dividends 
 only is ten to one. When there arose a need 
 for j^ioo,ooo more capital in that industry the 
 owners or the public generally would have the 
 right to subscribe a sum not exceeding ^10,000, 
 and the remainer would be advanced by the 
 Bank. In this way, as time after time fresh 
 capital was required in a particular industry, the 
 Bank connected therewith would create and 
 supply an increasing proportion of such capital 
 and acquire a correspondingly increasing share 
 in the control of its policy. 
 
 National Capital credits so obtained would 
 and probably be secured by Deben- 
 
 Industrial ture Stock bearing a fixed, albeit a 
 Dividends, strictly moderate rate of interest. 
 Some definite proportion of the 
 interest payable on the amount advanced by 
 the Producers' Bank would be periodically 
 credited to the Producers' Bank concerned, 
 while the remainder, possibly one-half or three- 
 
 117 
 
quarters of the total (which proportion could, 
 however, be settled or adjusted from time 
 to time by Act of Parliament), would be carried 
 to the National Credit Account. The amount 
 credited to the Producers' Bank would be 
 available for distribution amongst the workers 
 in that particular industry, and as year by year 
 the holding of each Bank in its connected 
 industry increased, so would the amount for 
 distribution as Industrial Dividends grow also. 
 So, too, would the amount available for periodic 
 distribution from the National Credit Account 
 amongst the members of the Community as a 
 whole, in the form of National Dividends, 
 increase from year to year. 
 
 No It must be particularly noted 
 
 Expropriation, that these objects would be at- 
 tained without the expropriation 
 of any existing capital, which it has been tenta- 
 tively suggested should be guaranteed a fixed 
 dividend of, say, 6% in perpetuo, and should, 
 together with new capital invested from time 
 to time either by the Industrial Banks or private 
 persons, continue to enjoy the same rights and 
 privileges as at present, except that of price- 
 fixing. On the other hand, every customer 
 of the Industrial Bank, that is, every worker in 
 that particular Industry whether by hand or 
 head, would be regarded as a shareholder of the 
 Bank, and as such be entitled to vote at share- 
 
 ii8 
 
THE PRACTICAL APPLICATION. 
 
 holders' meetings. Thus gradually through their 
 Bank the producers themselves would acquire an 
 effective control in the administration of their 
 particular industry. 
 
 G>n8umer This, at first sight, does not look at all 
 G>iitrol like an approach towards our primary 
 of object, the Consumer Control of Credit 
 
 Credit. ^^^ therewith of industrial and na- 
 tional policy. But let us consider the 
 psychological aspect a little. We have already 
 seen (b) that, in a community whose monetary 
 system is based on Real Credit, the Just Price 
 of a commodity to the Consumer is the produc- 
 tion-cost of such commodity multiplied by the 
 Price-Factor for the period. We have seen, too, 
 that it is a feasible proposition for producers to 
 sell goods at this Just Price, and for the Treasury, 
 as the purse of the Community, to recoup by 
 means of new financial credits the amount the 
 producers are thereby out of pocket. What 
 would happen in practice, then, is this : at the 
 end of every accounting period an official calcu- 
 lation would be made of the ratio of National 
 Real Credit Consumption to National Real 
 Credit Production during that period, and the 
 Price-Factor so ascertained would be published. 
 The price of all ultimate commodities sold during 
 the ensuing period would be regulated by that 
 factor. Seeing that the direct interest of every 
 consumer as such is to keep prices as low as 
 
 (b) Supra, page 91. 
 
 119 X 
 
THE community's CREDIT. 
 
 possible, it follows that if prices are fixed at a 
 proportion of production-cost, the vital interest 
 of every consumer is to keep down the cost of 
 production. Every producer, that is, every 
 individual shareholder in every Industrial Bank, 
 is at the same time a consumer. It is therefore 
 morally certain that the psychological effect of 
 putting the control of the policy of Industry 
 into the hands of the majority of the producers 
 themselves, who are at the same time vitally 
 interested in prices from the consumers' point 
 of view, combined with the regulation of prices 
 strictly in accordance with the cost of production, 
 would tend to check any arbitrary rise in such 
 cost of production, and would lead instead to a 
 general lowering thereof, due to increased effi- 
 ciency all round. 
 
 A Such, then, is one suggested 
 
 Commencement, step towards the realisation of 
 the Social-Credit Proposals. The 
 formation of Producers' or Industrial Banks is 
 a suggestion particularly interesting in that it is 
 suitable for application to a single industry or 
 group of industries by way of making a start. 
 One of the outstanding merits of the Social- 
 Credit Proposals is that it is not at all necessary 
 to convert the whole world to one way of thinking 
 before they can be carried into effect. One 
 country — a single Industry — can be selected as 
 a commencement. Nor is it suggested that the 
 proposals need necessarily be applied to each 
 
THE PRACTICAL APPLICATION. 
 
 industry in an identical manner. Major Douglas 
 has, however, worked out in some detail a draft 
 Scheme for application to the Mining Industry (c) 
 which the reader is recommended to consider 
 carefully, together with the full and most lucid 
 commentary thereon by Mr. A. R. Orage (d). 
 
 Regional An alternative method which has been 
 Clearing suggested would entail the establish- 
 Houses. ment of what we may, for want of 
 a better term, call Regional Clearing 
 Houses. To this end the country might be divided 
 into convenient areas — the precise extent of 
 which is immaterial at this juncture — and in each 
 of such areas might be set up one such House. 
 These Clearing Houses would have a double 
 function to perform : they would be responsible 
 for the issue and administration of financial 
 credit within their respective areas, and they 
 would collect the statistics necessary for the 
 calculation of the Price-Factor. In addition to 
 these Regional Houses, it might also be necessary 
 to establish one Central Clearing House for 
 purposes of co-ordination (e). 
 
 Hypothetical In his first work, " Economic 
 Illustrations : Democracy " (f). Major Douglas 
 Manufacturers, has sketched out how such a Clear- 
 ing House System might operate 
 
 (c) See infra, Appendix " B," page 153. 
 
 (d) " Credit-Power and Democracy," pages 147 et seq. 
 
 (o) It is necessary not to confuse these Clearing Houses with the present Bankers' 
 Clearing House mentioned above (page 1 16) — an entirely different institution, 
 (f) At pages 130 et seq. 
 
 121 
 
THE community's CREDIT. 
 
 in practice. His illustration is, of course, merely 
 
 hypothetical, shewing how such a System might, 
 
 but not necessarily would be worked. " Let us 
 
 imagine," he says, " such a Clearing House to 
 
 exist, and endeavour to analyse its operations 
 
 in respect to Messrs. Jones and Company, who 
 
 tan leather, Messrs. Brown and Company, who 
 
 make boots, and Messrs. Robinson, who sell 
 
 them ; and let us further imagine that all 
 
 these undertakings are run on the basis of a 
 
 commission or profit on all labour and salary 
 
 costs, an arrangement which is, however, quite 
 
 immaterial to the main issue. Messrs. Jones 
 
 receive raw hides of the datum value of ^loo, 
 
 ' which require semi-manufactures value ^^500 
 
 ' to turn out as leather, together with ;^5oo in 
 
 ' wages and salaries. Messrs. Jones order the 
 
 ' hides and semi-manufactures by the usual 
 
 * methods from any source which seems to them 
 ' desirable, and on receipt of the invoices turn 
 ' these into the Clearing House, which issues a 
 ' cheque in favour of Messrs. Jones for the total 
 ' amount of £600, by means of which Messrs. 
 ' Jones deal with their accounts for supplies. 
 
 * The Clearing House writes up its Capital 
 ' Account by this sum and by all sums issued 
 
 * by it. The out-of-pocket cost to Messrs. 
 ' Jones of their finished product is, therefore, 
 '^500. Let us allow them 10% profit on this, 
 ' and the cost, plus profit, at the factory under 
 
 * these conditions is ^^550, and a sum of £600 
 
 122 
 
THE PRACTICAL APPLICATION. 
 
 " remains owing to the Clearing House. Messrs. 
 " Brown, who require these hides for bootmaking, 
 " order them from Messrs. Jones, and other 
 " suppHes from elsewhere amounting to ^^500, 
 " and similarly transmit Messrs. Jones' invoices 
 " (which include the sum advanced by the 
 " Clearing House) with the rest to the Clearing 
 " House, which issues a cheque for ^1,650 to 
 " Messrs. Brown, who pay ^1,150 to Messrs. 
 " Jones, who in their turn retain ;^55o and pay 
 " back £600 to the Clearing House " (which at 
 " once writes down its Capital account by that 
 " amount). Messrs. Jones are now disposed of. 
 " They have made their own arrangements in res- 
 " pect of quantity of labour, etc., and have made 
 " a profit of 10% on the cost of this labour." 
 
 Three At this juncture it may be well to 
 
 Comments, make three more or less parentheti- 
 cal remarks. In the first place, the 
 cost of intermediate production would, under 
 such a system, be covered by a loan from the 
 Community as a whole, which loan must be repaid 
 directly the article is sold. Secondly, such a sys- 
 tem as here described would need no new method 
 of costing on the part of Messrs. Jones, but it 
 would entail the necessary consequence that 
 their books of account would have to be open 
 to official inspection. This object might easily 
 be attained by admitting to the privileges of 
 the system only those firms that were registered 
 
 133 
 
THE community's CREDIT. 
 
 in the books of the Clearing House, and making 
 such registration conditional on submission of 
 all the firm's costing and other books of account 
 to the periodical inspection of the Clearing House 
 auditors. The third point worthy of comment 
 is this : as Messrs. Jones in our illustration are 
 allowed as profit a fixed commission on the wages, 
 etc., paid to labour employed by them, it might 
 be thought that there would be strong induce- 
 ment to them to pay extravagant wages and 
 salaries in order to obtain greater profit. But 
 there are, it will be remarked, three equally 
 strong incentives against such a policy, (i) 
 Messrs. Jones and their employees know full 
 well that as ultimately price is regulated strictly 
 according to cost of production, it is advan- 
 tageous to them as consumers to keep the cost 
 of production as low as possible. (2) Messrs. 
 Jones have to face the competition of other 
 persons and firms in a similar line of business to 
 their own, and in order to induce Messrs. Brown's 
 custom, they will naturally strive to keep down 
 factory costs. (3) The fact that their books 
 are open to the inspection of the officials of the 
 Clearing House, upon which they depend very 
 largely for a continuance of credit facilities, 
 would doubtless act as a stringent check upon 
 any action that seemed to run counter to the 
 public interest. 
 
 Retailers. To continue our hypothetical illustra- 
 tion. Let us suppose that Messrs. 
 
 124 
 
THE PRACTICAL APPLICATION. 
 
 Robinson are a firm of retailers, registered with 
 the Clearing House of their particular area. 
 They order boots from Brown and Co. at an 
 invoice value of ^2,200. This invoice they turn 
 into the Clearing Mouse, and receive therefrom 
 a cheque for that amount, with which they pay 
 Brown and Co., who, in their turn, cancel their 
 indebtedness to the Clearing House. As regis- 
 tered retailers, Robinsons would probably be 
 restricted to a fixed commission of, let us for 
 the sake of our illustration say, 20%. This 
 commission, we will assume, has to cover all 
 wages, salaries, purchases from other retailers, 
 and in short, all selling expenses as well as profit. 
 Therefore Messrs. Robinson are at once able to 
 calculate the Basis-Price (as we will term it) of 
 the boots just bought from Messrs. Brown, 
 namely ^^2,200 plus £^^0 (the 20% allowed for 
 selling expenses and profit), making in allj^2,640. 
 Knowing, then, the Basis-Price and the Price- 
 Factor for the period, Messrs. Robinson are 
 immediately aware what is the Just Price of 
 the goods — the price they are permitted to 
 charge to the public (g). By the time that 
 Messrs. Robinson have sold the whole consign- 
 ment, they will (supposing the Price-Factor 
 for the period to be 4/5) have received four- 
 
 (g) It is suggested by Mr. Allen Young at page 24 of his pamphlet "Dividends 
 for AH," that a retailer might be permitted to sell at some higher price if he 
 could find a market, receiving from the Clearing House only suificient financial 
 credit to balance total price received with total Basis Price. With all due deference, 
 however, it is here submitted that if the consumers are to receive the fullest benefit, 
 the Just Price must be regarded as a maximum, and charges in excess thereof 
 iUegal. 
 
 125 
 
THE community's CREDIT. 
 
 fifths of the ^2,640, that is ^2,112, from 
 consumers in prices, while the remaining fifth, 
 a matter of ^^528, will have been written off their 
 indebtedness at the Clearing House upon receipt 
 there of the necessary vouchers. There should 
 be no more difficulty in applying for and obtain- 
 ing this reimbursement of ;^528 than there is 
 to-day in the submission of an extremely simple 
 claim for the return of Income Tax. The effect 
 of this is to leave a balance of indebtedness at 
 the Clearing House of ^1,672. But Messrs. 
 Robinson have received from the general public 
 j^2,ii2 in respect of goods sold. Therefore, if 
 they now proceed to pay off their remaining 
 indebtedness at the Clearing House, they are 
 finally left with £wo in hand. This is the 
 amount, it will be remembered, allowed them 
 for selling expenses and profit. Though the Just 
 Price should be regarded as a maximum selling 
 price there would seem to be no good reason why, 
 if Messrs. Robinson were prepared to forego a 
 portion of their permitted profit, they should 
 not sell at some price less than the Just Price : 
 but in that case the only reimbursement they 
 could subsequently claim would, of course, be 
 the j^S28 — the difference in our illustration 
 between the Just and the Basis Prices. 
 
 Simplicity Perhaps at first sight it may seem 
 
 of the that all this is rather complicated. 
 
 Suggested ^^t is it ? Can it not rather be 
 
 " Machinery." maintained with truth that the 
 
 126 
 
THE PRACTICAL APPLICATION. 
 
 apparent complexity of the process just 
 described arises from its unfamiliarity rather 
 than from any intricacy in the process itself ? 
 The work of the Clearing Houses would be 
 largely the making and cancelling of book-entries 
 of substantial amounts, book-keeping by no 
 means as complicated as much of that carried 
 on by Banks to-day. Be that as it may, how- 
 ever, it cannot be too strongly emphasised, even 
 at the risk of weariness, that what the Social 
 Credit Movement is concerned with at present is 
 policy and principles, not precise form, and that 
 when once the principles themselves have been 
 approved, the form and method of adoption can 
 be determined in accordance with the particular 
 needs of the community or industry seeking to 
 apply them. 
 
 A In making the above suggestions for 
 
 Gradual the practical application of the Social 
 
 Supersess" Credit Principles, the fact has not 
 ion, been overlooked that the present-day 
 
 financial and industrial system has 
 developed amidst the economic vicissitudes of 
 long years past, and that it is far too elaborate 
 and delicate a piece of machinery to be ruth- 
 lessly cast aside and replaced in the twinkling 
 of an eye. The dangers underlying too precipi- 
 tate action are sufficiently plain to all but the 
 most reckless or the wilfully blind. The present 
 system must first be supplemented, and only 
 
 127 
 
THE community's CREDIT. 
 
 gradually superseded altogether. But, as a first 
 step, the inauguration of Producers' Banks, 
 together with the application of the Just Price 
 to some important Industry, such as that of 
 Mining, would immediately have markedly bene- 
 ficial results. As these Banks grew in financial 
 strength, capacity and prestige, they would tend 
 to replace the present Banks as the prime 
 repositories of financial credit, and a monopoly 
 of credit control by private interests would thus 
 yield place to Consumer Control of Credit. 
 
 Results Finally, what would be the effect of 
 
 Anticipated : the adoption of the Social-Credit 
 Proposals ? " It is obvious indeed 
 * that no change of system or machinery can 
 ' avert those causes of social malaise which 
 ' consist in the egotism, greed and quarrelsome- 
 ' ness of human nature. What it can do is to 
 ' create an environment in which these are not 
 ' the qualities which are encouraged. It cannot 
 ' secure that men live up to their principles. 
 ' What it can do is to establish their social order 
 ' upon principles to which, if they please, they 
 can live up, and not live down " (h). We have 
 already seen how the application of these prin- 
 ciples, based, as their advocates believe, upon 
 right and justice, acknowledging, as they do, the 
 inherent interdependence of the different mem- 
 bers of the body politic, would remove the many 
 
 (h) R. H. Tawney, in " The Acquisitive Society," at page 222. 
 128 
 
THE PRACTICAL APPLICATION. 
 
 hindrances to human progress that exist in the 
 present financial and economic system. The 
 problem of unemployment, for instance, ever 
 growing more acute under the present system, 
 would disappear under a comprehensive sys- 
 tem of National Dividends. Again, as pointed 
 out by H. M. M. in the brochure to which 
 reference has already been made (i), by this 
 method of price-regulation, the man in the 
 street would gain an exact knowledge of the 
 economic condition of his country ; goods would 
 rise in price if the rate of consumption increased 
 disproportionately to the rate of production, 
 and vice versa. The psychological effect of this 
 would be to afford a direct incentive to keep 
 production well ahead of consumption. There 
 would, moreover, be an immediate fall in the 
 price of all commodities required by the ultimate 
 consumer : but this fall would not be due to any 
 lack of purchasing power on the part of con- 
 sumers, nor would it entail (as is invariably the 
 case under the present industrial system) stagna- 
 tion of trade, coupled with the widespread misery 
 that to-day accompanies wholesale compulsory 
 unemployment, (j). More important still, there 
 would come, at last, an end to the seemingly 
 interminable struggles, acrimonious and waste- 
 ful, between Capital and Labour, and the tjrans- 
 formation of the structure of Industry from a 
 mesalliance of apparently conflicting interests 
 
 (i) " The Cure for High Prices," at page 10. 
 (j) See supra, page 54. 
 
 129 
 
THE community's CREDIT. 
 
 into a free union of fellow-workers, engaged in 
 common enterprise. Finally, by increasing the 
 effective purchasing power in the hands of con- 
 sumers, the appHcation of these principles would 
 enable the Community as a whole to purchase 
 and absorb, should it so desire, an amount 
 equivalent to its whole production : there would 
 thus be removed the present artificial economic 
 necessity for exporting more in value (either in 
 the form of goods or services) than the Com- 
 munity actually imports. External trade could 
 then resolve itself into an unfettered and willing 
 exchange of superfluous for needed commodities. 
 So, with the passing of the present necessity 
 for thrusting surplus production on to foreign 
 markets already glutted with the goods of rival 
 nations, there would pass also from the horizon 
 the ever-threatening clouds of impending war. 
 
 130 
 
CHAPTER IX. 
 The International Aspect. 
 
 Overseas In the course of the foregoing Chapters 
 Trade. it is not at all improbable that some 
 such argument as the following will 
 have presented itself : " Yes, there are obvious 
 merits and possibilities in the Social Credit Pro- 
 posals. One can quite well realise that many sub- 
 stantial benefits would follow the application of 
 these proposals to a self-contained community. 
 But how would a country like Great Britain be 
 affected ? Great Britain depends so very largely 
 upon her overseas trade ; she relies upon her 
 imports of corn for food, and of cotton for her 
 looms ; she looks to her exports of steel goods 
 and coal, and to her services as the great carrying 
 nation of the world, to pay for these imports. 
 If the avowed object of these proposals is to 
 enable an industrial community to absorb all 
 its own production at home, how could we, here 
 in Great Britain, pay for those things which we 
 are bound to import ? " To a great extent such 
 a question arises from a misconception of the 
 general aim of the proposals. There is admit- 
 tedly no benefit to be gained in hampering or 
 curtailing in the slightest degree the free inter- 
 change of commodities between nation and 
 
 13X 
 
THE community's CREDIT. 
 
 nation. The proposals simply aim at removing 
 the artificial compulsion that at the present day 
 forces an industrial community to strain every 
 nerve in an endeavour to export goods and 
 services to a greater value than it imports, or, 
 as the phrase goes, maintain " a favourable 
 balance " of trade. One of the main objects of 
 these proposals is to make of international trade 
 a mutually voluntary exchange of those com- 
 modities which each country has in super- 
 abundance for those it desires but cannot so 
 profitably produce at home. For instance, 
 Douglas Scheme or no Douglas Scheme, we here 
 in Great Britain shall probably still require to 
 obtain the bulk of our wheat from abroad, say 
 the Argentine Republic (a). In return we shall 
 still have to export the coal and steel products 
 that Argentina needs. But the fundamental 
 difference lies here : were the Social Credit pro- 
 posals in force among us, it would only be 
 necessary to export sufficient to pay for our 
 imports ; we should not need to be perpetually 
 striving to unload surplus production on to 
 Argentine markets with a modified " Your- 
 money-or-your-life " attitude towards the native 
 population. 
 
 (a) See, however, Kropotkin's " Fields, Factories and Workshops," wherein he 
 declares that " if the population of this country came to be doubled, all that would 
 be required for producing the food for ninety milhon inhabitants would be to cul- 
 tivate the soil as it is cultivated in the best farms of this country, in Lombardy and 
 in Flanders, and to utilise some meadows, which at present lie almost unproductive, 
 in the same way as the neighbourhoods of the big cities in France are used for 
 market gardening." 
 
 132 
 
THE INTERNATIONAL ASPECT. 
 
 Imports, Perhaps the first point that arises in 
 Exports, considering the international aspect of 
 and the these proposals is this : In the Social- 
 Price- Credit Scheme of price-regulation (b) 
 Factor. what would be the bearing of importa- 
 tion and exportation upon the price- 
 factor within the community ? The answer to 
 this question is not a difficult one. When a 
 country or a community imports a commodity, 
 or any quantity of commodities, the capacity of 
 that country or community to deliver goods and 
 services is thereby increased : its Real Credit, 
 as distinct from its Financial Credit, appreciates 
 by the value of the goods imported. Similarly, 
 whenever a country or a community exports 
 goods to another, although its financial position 
 relative to the importing country or community 
 may be thereby enhanced, its Real Credit (i.e., 
 its capacity to deliver goods and services) is 
 correspondingly diminished. Imported goods are^ 
 so far as Real Credit is concerned, equivalent to 
 Goods Produced, while on the other hand, exported 
 goods are equivalent to Goods Consumed. As the 
 Price-Factor for any period is calculated on a 
 Real Credit basis, it follows that import must for 
 this purpose be regarded as production, and 
 export as consumption. Under the Social 
 Credit Proposals, the purchasing-power of the 
 Community expands automatically with the 
 increased Real Credit thereof, so that an influx 
 of foreign goods would not result (as to-day is 
 
 (b) See supra, Chapter VI. 
 
 133 
 
THE community's CREDIT. 
 
 most certainly the case) in aggravating the evils 
 of existing unemployment, but would instead 
 tend to raise the standard of living of the whole 
 Community (c). 
 
 Price of The price of imported goods to the 
 Imports to ultimate consumer is our next con- 
 Consumer, sideration. Would these be sold at 
 cost-price plus profit, or at what we 
 have hitherto known as '' the Just Price " ? 
 It seems logical to conclude that, as the value of 
 imported goods is taken into consideration in 
 determining the price-factor for any period, the 
 price of such goods to the Consumer should be 
 regulated by such factor, and that therefore 
 imported as well as home-produced articles 
 should be sold at the Just Price. Practical 
 convenience also dictates such a course. In the 
 first place, there are many goods not wholly 
 imported nor wholly made up at home — (cotton 
 goods, for instance, manufactured in Lancashire 
 from imported raw cotton) — and were imported 
 goods and home products to be regulated in 
 price upon different bases, confusion would know 
 no end. And again, the average retailer could 
 hardly be expected to discriminate between 
 home-products and imported commodities. When 
 once goods have been imported into a com- 
 munity, they immediately, in the same way as 
 goods produced at home, augment that com- 
 
 (c) It should be noted that under these proposals the payment to us by Germany 
 of her treaty-obligations could safely be received in goods. Such payment would 
 then enure, as in all sanity it should do, to the unquestionable benefit of the 
 recipient community. 
 
THE INTERNATIONAL ASPECT. 
 
 munity's Real Credit, and it is therefore logical 
 and ' convenient to regulate the price of both 
 upon the same basis. 
 
 Price of And what should be the price of 
 Exports to exported goods to the foreign pur- 
 Foreign chaser ? This question presents a 
 Purchaser. ^^^^^^ more difficulty. On the one 
 hand, the matter may very well be 
 argued along some such lines as these. When a 
 community exports goods, as we have already 
 seen, its Real Credit is thereby decreased. If 
 therefore exported goods are to be treated on 
 the same basis as goods sold for consumption 
 at home, it is not logical nor economically 
 feasible to charge to the foreign buyer a price 
 less than the production-cost of those goods 
 multipHed by the current price-factor. At the 
 same time, any sum charged to him in excess 
 of this minimum would be merely determined by 
 policy, and represents so much -clear gain to the 
 exporting community. In support of which 
 contention it may also be argued that the 
 retailer cannot be expected to discriminate in 
 his sales to various purchasers between those 
 buyers who intend to consume their purchases 
 at home and those who intend to take them out 
 of the country for disposal abroad. Any goods, 
 then, sold within a community by retailers 
 should be priced without regard to their ultimate 
 destination, or, as we have already seen, to their 
 
 135 K 
 
origin. On the other hand it may plausibly be 
 argued that if imported goods are paid for at 
 their full price to the foreign merchant, there is 
 little logic in allowing him the benefit of the 
 Just Price in his purchases from the community, 
 unless by selling to him at such reduced price 
 the exporting community reaps some other 
 direct or indirect benefit. For it is quite 
 possible to conceive the case of a foreign 
 trader sending his wares into the community 
 to a wholesale house at their full price, and 
 re-buying the goods from a retailer (for re- 
 exportation) at the current Just Price. Perhaps 
 the logical solution of w^hat is after all merely 
 a technical difficulty lies here : goods, whether 
 for export or home-consumption, would as a 
 general rule be priced to the purchaser at the 
 current Just Price. But in addition to such 
 Just Price, it might be deemed expedient to 
 charge against the foreign buyer Export Duty 
 equivalent to the difference between the Just 
 and the Basis Prices (d) of the goods taken out 
 of the country. The proceeds of such Duty 
 would be available for National Dividend dis- 
 tribution, or for the relief of taxation. It must 
 be borne in mind, however, that in many cases 
 it might be considered commercially or politically 
 expedient to remit some or all of this Duty where 
 circumstances afforded adequate safeguards 
 against abuse of the concession (e). As, in any 
 
 (d) See supra, page 12v'5. 
 
 (e) See also " Dividends for All " at page 23. 
 
THE INTERNATIONAL ASPECT. 
 
 case, in any industrial community adopting the 
 Social Credit Proposals, low production cost 
 would tend to become the aim and interest of 
 producers and consumers alike, it seems certain 
 that it would soon be possible to cope with 
 foreign competition, wherever and whenever it 
 was desired to do so, far more successfully than 
 at the present day (f). 
 
 International It will possibly be argued that if 
 CreditSi a community such as Great Brit- 
 
 ain were to adopt a Real Credit 
 basis for its financial system, whilst all other 
 countries and communities retained their present 
 so-called gold basis, exchange of goods between 
 Great Britain and foreign countries would there- 
 fore (for some reason not explained) become 
 impossible except by direct barter. Let us 
 consider. At the present day, as we know 
 only too well, producing communities are com- 
 peting and clamouring for markets. If, then, 
 we maintained our demand for Argentina's 
 wheat or America's cotton, without doubt both 
 Argentina and the United States would be only 
 too glad to supply us. But to attract such 
 goods to our markets, it is necessary for us to 
 pay for what we import in cash, credit, or com- 
 modities. The cash payment we can disregard 
 as obsolete. International transactions of to-day 
 are carried out upon credit, with an occasional 
 
 (f) See supra, page 120. 
 
THE community's CREDIT. 
 
 shipment of bullion to adjust matters. The 
 fact that our credit was nominally secured upon 
 a different basis from that of the foreigner ought 
 to occasion no difficulty in practice. Whether 
 we pay for our imports in gold or credit, it 
 simply means that in the long run Argentina or 
 the U.S.A. has a claim upon us to supply to their 
 demand goods or services of equivalent value. In 
 its essentials international trade is, even to-day, 
 merely direct or indirect barter. So long as 
 the foreign seller is satisfied that the credit 
 advanced to him in exchange for his cotton or 
 his wheat will be exchanged for goods or services 
 upon demand, so long will he be willing to supply 
 us with all the wheat or cotton we require. 
 The value of the credit we offer is what chiefly 
 interests the foreign merchant, The basis of that 
 credit does not greatly concern him. 
 
 Foreign Or it may be suggested that the 
 
 Exchanges; application of the Social Credit 
 Proposals to an individual unit 
 among the interdependent communities of the 
 world would ruin that community's foreign 
 trade, " because of the rates of exchange." 
 What exactly is implied by this phrase is a 
 Httle hard to fathom. Is it feared that the 
 purchasing-power of our credit or currency 
 would depreciate to such an extent that we 
 should be unable to buy from abroad, or that 
 it would appreciate so greatly that we, as a 
 
 138 
 
THE INTERNATIONAL ASPECT. 
 
 community, should be unable to sell ? In either 
 case the fear is unfounded. A moment's reflec- 
 tion will serve to show that, political and senti- 
 mental considerations apart, and apart from 
 merely temporary money-market fluctuations 
 due to financial jobbery and speculation, the 
 rate of exchange prevailing between independent 
 communities normally varies with, and is 
 governed by, two considerations : (i) The com- 
 mercial indebtedness of the communities inter se, 
 and (2) the level of prices prevailing within them. 
 In other words, the value of the sovereign in 
 foreign markets tends to fluctuate directly with 
 the purchasing-power of the pound at home, and 
 inversely with the number of pounds owing to 
 foreign creditors. If a community imports con- 
 siderably more than it exports in goods and 
 services, the rate of exchange becomes less 
 " favourable " to that community, which means 
 that it becomes harder for that community to 
 buy in foreign markets, but on the other hand, 
 easier for it to sell there. From this it 
 seems to follow that one of the principal 
 effects of fluctuations in the rates of exchange 
 under normal conditions is to maintain auto- 
 matically an approximate balance between the 
 money-value of a community's imports and 
 exports : nor is it easy to see why this would 
 not continue to be so under the Social Credit 
 Proposals. As for the tendency of the rate of 
 exchange to fluctuate directly with the level of 
 
 139 
 
prices on the home-market, it is natural to 
 expect that, as a consequence of the lower- 
 production-cost anticipated from the adoption 
 of these proposals (g), foreign exchanges would 
 move more and more in favour of the community 
 adopting them. That community would there- 
 fore find little difficulty in buying abroad the 
 various commodities it did not produce at home. 
 And, under a sane economic and financial sys- 
 tem, if a community finds itself able to buy 
 from abroad the food and raw materials it needs 
 or desires, it is surely a matter of little moment 
 to it whether, owing to the prevaiHng rate of 
 foreign exchange, its manufactures are or are 
 not for the moment readily saleable in foreign 
 markets. 
 
 Barter. Let us, however, for the sake of argu- 
 ment, assume that the pessimist's worst 
 fears came to be realised, and that foreign 
 "merchants, influenced by the threats or blandish- 
 ments of Cosmopolitan Finance, refused to accept 
 Great Britain's financial credit. It can easily 
 be seen that, were our foreign trade to assume 
 absolutely the form of direct barter, the advan- 
 tage we should have over foreign rivals would be 
 considerable. For instance, we want wheat. 
 We have a number of superfluous locomotives. 
 So, let us suppose, has the United States. 
 Argentina wants locomotives. U.S.A. quotes a 
 
 (g) See supra, pages 120 and 137. 
 
 140 
 
THE INTERNATIONAL ASPECT. 
 
 price calculated at production-cost plus profit. 
 Great Britain, under the Social Credit Proposals, 
 balances, not financial cost but real need, and 
 quotes, in Argentinian dollars, a lower figure. 
 We get the order, and deliver the goods, receiving 
 Argentinian credit in exchange. With this we 
 approach the Argentinian farmer, to buy his 
 wheat. He can have no hesitation in accepting 
 the credit we offer him, being that of his own 
 country, and based, presumably, on what he 
 would call a good, honest, gold foundation. 
 What, then, has this wheat cost us ? No 
 British financial credit has been used to buy it. 
 It has cost us Real Credit to the extent of 
 certain locomotives. And if wheat were scarcer, 
 and locomotives more plentiful with us, we could, 
 if necessary, send abroad more locomotives for 
 the same quantity of wheat. In any case, we 
 could undercut any possible rival when we wished 
 to sell, and offer more than any competitor when 
 we wished to buy. It is obviously true that the 
 producer of locomotives does not personally 
 want to receive payment in wheat, but in money. 
 This could be adjusted through a National Clear- 
 ing House for Imports and Exports. The whole 
 argument, in effect, reduces once more to this. 
 International trade is still, as it has always been, 
 essentially barter. There is no international 
 currency, though there is a commodity which, 
 by general consent, is employed to assist in, 
 measure, and adjust the balance of trade rela- 
 
THE community's CREDIT. 
 
 tions. Indeed, so long as gold was still con- 
 sidered the best lubricant to ensure the smooth 
 running of the wheels of International Commerce, 
 and so long as its use was confined to purely 
 external trade, there seems no good reason why 
 gold should not continue to be so used. But 
 gold is only a commodity, the same as corn or 
 coal, however much the language of Finance in 
 relation to foreign exchanges may have obscured 
 this fact. Looked at as a development of pure 
 barter, the broad principles of international 
 trade relations do not seem to offer any insur- 
 mountable obstacles to the adoption of the Social 
 Credit Proposals by a single community. These 
 Proposals are merely a matter of internal 
 arrangement. Minor difficulties of detail there 
 may be, but even these would seem to exist 
 mainly in the imagination. So long as principles 
 and policy are sound there is no need to be unduly 
 pessimistic about administrative detail. Where 
 there is a will, there can generally be found a 
 way. 
 
 Shipping. One final consideration before we draw 
 to' a close. Great Britain is the prin- 
 cipal carrying nation of the world. Especially 
 since the great cycle of wars we call Napoleonic, 
 our merchantmen above all others have borne 
 the world's produce over the Seven Seas. How 
 would the application of the Social Credit Pro- 
 posals to Great Britain affect her shipping and 
 
 142 
 
THE INTERNATIONAL ASPECT. 
 
 her carrying trade ? So far as this trade consists 
 in bearing the produce of one foreign country to 
 another (as, in fact, a great proportion of it does) 
 it would in all probability be unaffected, and 
 by services so rendered, Great Britain would 
 pay, at any rate partially, for the goods she 
 imported from other countries. So far as her 
 cargoes consist of imports for home-consumption, 
 or of home-manufactures exported to foreign 
 markets, her carrying trade might conceivably 
 diminish somewhat, though this is by no means 
 certain. The fact that our foreign trade par- 
 took more of the nature of free exchange, and 
 less of that of enforced export, does not neces- 
 sarily mean that there would be less of it. In any 
 case, the percentage reduction in Great Britain's 
 carrying trade due to the application to our 
 country of the Social Credit economic proposals 
 would probably be of the slightest. Nor would 
 it be inherently harmful that a smaller number of 
 our population should spend their lives upon the 
 seas, manning the big steamers of commerce. 
 Our shipping would, like our other industries, 
 tend to become operated, perhaps by fewer 
 persons, certainly with greater efficiency. As 
 for the others, they would then be able to 
 devote themselves to more congenial pursuits. 
 Their National Dividends would enable them 
 to live in comfort, if not luxuriously, and their 
 new leisure, directed aright, would lead to the 
 arising of a brighter, cleaner, less material 
 
 X43 
 
THE community's CREDIT. 
 
 generation, no longer servants of industry, but 
 masters thereof. 
 
 Envoi. But this could not happen all at once. 
 Time, that great healer, must first efface 
 from the minds of men the prejudices and mis- 
 directed hatreds and desires engendered by- 
 present conditions. Yet, with a change of 
 system, there will come a gradual change of 
 outlook, and be it to-morrow or a thousand 
 years hence, 
 
 " These things shall be. A loftier race 
 Than e'er the world has known shall rise 
 With flame of freedom in their souls. 
 And light of knowledge in their eyes." (h). 
 
 (h) J. A. Symonds. 
 
 M4 
 
APPENDICES. 
 
 APPENDIX "A." 
 THE FIRST PRICE-FACTOR. 
 
 APPENDIX "B." 
 
 THE DRAFT SCHEME FOR THE MINING 
 INDUSTRY. 
 
 APPENDIX "C" 
 BIBLIOGRAPHY. 
 
APPENDIX "A." 
 The First Price-Factor 
 
 The We have seen (a) how under the Social- 
 
 Problem. Credit Proposals the Just Price of a 
 commodity to the ultimate consumer 
 is found by multiplying the production-cost 
 (including profit) of that article by the current 
 Price-Factor. We have also seen (b) that in 
 practice the Price-Factor of any period is deter- 
 mined by the ratio of Real Credit Consumption 
 to Real Credit Production within the community 
 during the preceding accounting period. Yet, 
 though we have seen how, when once the propo- 
 sals were in practical operation,the Price-Factor 
 for each successive period would be determined, 
 we have never, so far, approached the question 
 as to what would be the actual numerical value 
 of the first- Price-Factor. 
 
 Existing If the aggregate purchasing-power 
 
 "Market- immediately available at the 
 
 Topheaviness." present day was such that there 
 was no "Market-Topheaviness"(c)» 
 then we should be faced with a comparatively 
 simple task. We should select our period (say, 
 for instance, one year), calculate the gross 
 
 (a) Supra, page 91. 
 
 (b) Supra, pages 97 and 1 19. 
 
 (c) Supra, page 41. 
 
 U7 
 
THE community's CREDIT. 
 
 consumption of Real Credit during that period, 
 and the simultaneous gross production thereof, 
 and an elementary division sum would supply 
 the Price-Factor. But we know that, very far 
 from there being no Market-Topheaviness, there 
 is indeed a serious discrepancy existing at the 
 present day between the total available pur- 
 chasing power and the total charges against such 
 purchasing-power. This fact affects the situa- 
 tion considerably. In determining the first 
 Price-Factor, it is necessary to take into con- 
 sideration, not only the present tendency to 
 Market-Topheaviness caused by contemporary 
 industrial expansion, but also, an equally serious 
 matter, the accumulated Topheaviness which is 
 our heritage from past decades. So the question 
 of the actual numerical value of the first Price- 
 Factor must be approached from a rather differ- 
 ent standpoint. 
 
 Ratio of We know full well that, at the 
 Industrial present time, the capacity of Indus- 
 Capacity to try to supply is greatly in excess 
 Actual ^^ i^s actual output, limited as this 
 
 Output. letter is by lack of effective demand 
 
 (that is, demand backed by purchas- 
 ing-power). In the absence of any authoritative 
 statistics as to what figure exactly represents 
 the ratio of this capacity to supply to the actual 
 output, we shall have perforce to rely upon the 
 estimates of those who have made a study of 
 
 148 
 
THE FIRST PRICE-FACTOR. 
 
 the subject. It is perhaps only natural that such 
 estimates should vary somewhat widely. The 
 most conservative computation places the cap- 
 acity of Industry to supply at, at least, four 
 times its present actual output. A more liberal 
 estimate declares it to be in the neighbourhood 
 of fifteen, not four, times. Let us, for safety, 
 take the lower figure, and henceforth assume that 
 our Industry can, in its present state of develop- 
 ment, if called upon, turn out as much as four 
 times its present normal output. Output, to- 
 day, is limited by lack of effective demand. 
 Effective demand is limited by lack of purchas- 
 ing-power. If, then, the amount of purchasing- 
 power in the hands of consumers was increased 
 to four times its present amount, and at the same 
 time means were taken to prevent a corres- 
 ponding rise in prices, effective demand would 
 also rise, to something less than four times what 
 it is to-day. Nor would this increased Effective 
 Demand be in excess of Industry's capacity to 
 meet it (d). 
 
 Possible In order to increase the amount of 
 Price'- purchasing-power in the hands of con- 
 Factor, sumers, and thus obtain the full benefit 
 of Industry's capacity to produce, the 
 number of units of purchasing-power at present 
 in circulation might be multiplied by four, or it 
 could be arranged for every existing unit to buy 
 
 (d) It has been estimated by Mr. H. L. Gantt that in America the Industrial 
 Efficiency is only about 5%. An Industrial Efficiency of at least 75% ougnt to be 
 well within the bounds of possibility. 
 
 149 
 
four times as much as it does to-day. The latter 
 alternative is the one advocated by Major 
 Douglas. We might, then, conceivably inau- 
 gurate the Social Credit era with a Price-Factor 
 of one-quarter, and this is the fraction generally 
 suggested when the actual working of the Just 
 Price is under discussion (e). If the Social- 
 Credit Proposals are, as a beginning, only to be 
 applied to one particular industry, and the 
 initial Price-Factor is intended to be applied to 
 the products of that industry only, there would 
 seem no possible objection to the adoption of 
 this figure. But if the initial Price-Factor is 
 to have an extensive or national application, 
 then it is submitted that the advisability of such 
 a sudden and drastic expansion of purchasing- 
 power must be considered very seriously from a 
 psychological and practical point of view. 
 
 Dangers Quite briefly to enumerate the more 
 of too obvious dangers of a too sudden 
 
 Sudden application of the full price-reduc- 
 
 Application ^i^n possible, we can, first of all, be 
 of full morally certain that a sudden great 
 
 Reduction, expansion of purchasing power would 
 lead to a drain upon the stocks held 
 by retailers to an extent that Industry, not yet 
 fully revitalised, might for the moment be unable 
 to replace. There would follow a disorganisation 
 
 (e) See, for example, " Draft Scheme for the Mining Industry " (Appendix " B ") ; 
 " The Cure for High Prices," " Socialisation of Credit," and similar Social- 
 Credit Publications. 
 
 X50 
 
THE FIRST PRICE-FACTOR. 
 
 that might do as much harm as the evils it was 
 intended to remedy. At the very least, it would 
 give the new system a somewhat inauspicious 
 start. Secondly, the sudden acquirement pf 
 comparative affluence might, to a certain type 
 of mind, perverted by present-day conditions and 
 unaccustomed to the possession of more than 
 sufficient to satisfy life's barest needs, afford a 
 great temptation to revel in a far from beneficial 
 indulgence. Thirdly, the vast majority of the 
 people, whilst realising the immediate advantages 
 of expanded purchasing-power, having as yet had 
 no practical experience of the system in opera- 
 tion, would have no firm appreciation of the fact 
 that this present expansion was only possible 
 because of the excess of Real Credit production 
 over Real Credit consumption in the past, and 
 that low prices could only be maintained in 
 future by still keeping Real Credit production 
 well ahead of simultaneous consumption. In 
 short, there is a danger that this new-found 
 economic liberty, if too precipitately entered 
 upon, might, as has so often happened before in 
 cases of too sudden realisation of freedom or 
 wealth, lead to the natural abuses of reaction. 
 Instead of there being an immediate and pro- 
 gressive, if gradual, revival of industry, a 
 diametrically opposite effect might be produced. 
 When changes of a fundamental nature are to 
 be made, it is well that they be gradual. 
 
 151 L . 
 
THE community's CREDIT. 
 
 Suggested On the other hand, however, a 
 
 First more moderate reduction of, say. 
 
 Price " Factor. 20% off prices could only do 
 good. Therefore it is here sub- 
 mitted that, if the first Price Factor is not to 
 be merely of local application or confined to one 
 particular industry (in which case it might well 
 be fixed at one-quarter), but is rather to be of 
 national application, it should be fixed at, say, 
 four-fifths or three-quarters, and the first account- 
 ing period at one year or even longer. During 
 that first period, our productive capacity would 
 have been more and more fully utilised, and, 
 fostered by increased effective demand, greatly 
 extended. So, gradually and successfully, the 
 whole system would enter its stride. 
 
 15a 
 
APPENDIX "B." 
 
 Draft Scheme for the Mining 
 Industry (a) 
 
 I. 
 
 1. For the purpose of efficient operation each 
 geographical mining area shall be considered as 
 autonomous administratively. 
 
 2. In each of these areas a branch of a bank, 
 to be formed by the M.F.G.B., shall be estab- 
 lished, hereinafter referred to as the Producers' 
 Bank. The Government shall recognise this 
 Bank as an integral part of the Mining Industry 
 regarded as a producer of wealth, and repre- 
 senting its credit. It shall ensure its affiliation 
 with the Clearing House. 
 
 3. The shareholders of the Bank shall consist 
 of all persons engaged in the Mining Industry, 
 ex-officio, whose accounts are kept by the Bank. 
 Each shareholder shall be entitled to one vote 
 at a shareholders' meeting. 
 
 4. The Bank, as such, shall pay no dividend. 
 
 5. The Capital already invested in the Mining 
 properties and plant shall be entitled to a 
 fixed return of, say, six per cent., and, together 
 with all fresh capital, shall continue to carry 
 with it all the ordinary privileges of capital 
 
 (a) First issued in January, 1919, and reprinted here by permission of Major 
 Douglas. 
 
THE community's CREDIT. 
 
 administration other than Price-fixing. Depre- 
 ciation shall be set against appreciation. 
 
 6. The Boards of Directors shall make all 
 payments of wages and salaries direct to the 
 Producers' Bank in bulk. 
 
 7. In case of a reduction in cost of working, 
 one-half of such reduction shall be dealt with in 
 the National Credit Account, one-quarter shall 
 be credited to the Colliery Owners, and one- 
 quarter to the Producers' Bank. 
 
 8. From the setting to work of the Producers' 
 Bank, all subsequent expenditure on capital 
 account shall be financed jointly by the Colliery 
 Owners and the Producers' Bank, in the ratio 
 which the total dividends bear to the total 
 wages and salaries. The benefits of such financ- 
 ing done by the Producers' Bank shall accrue to 
 the depositors. 
 
 II. 
 
 1. The Government shall require from the 
 Colliery owners a quarterly (half-yearly or 
 yearly) statement properly kept and audited 
 of the cost of production, including all dividends 
 and bonuses. 
 
 2. On the basis of this ascertained cost, the 
 Government shall by statute cause the price 
 of domestic coal to be regulated at a percentage 
 of the ascertained cost. 
 
 3. This Price (of domestic coal) shall bear 
 
 154 
 
DRAFT SCHEME FOR THE MINING INDUSTRY. 
 
 the same ratio to Cost as the total National 
 Consumption of all descriptions of commodities 
 does to the total National Production of Credit, 
 i.e., Cost : Price : : Production : Consumption. 
 
 Price Cost Cost value of T otal Consumption 
 
 per ton per ton Money value of I'otal Produccion 
 
 (Total National Consumption includes Capital 
 depreciation and Exports (b). Total National 
 Production includes Capital appreciation and 
 Imports (b).) 
 
 4. Industrial Coal shall be debited to users 
 at Cost plus an agreed percentage. 
 
 5. The Price of Coal for Export shall be fixed 
 from day to day in relation to the world market 
 and in the general interest. 
 
 6. The Government shall reimburse to the 
 Colliery Owners the difference between their 
 total cost incurred and their total price received, 
 by means of Treasury Notes, such notes being 
 debited, as now, to the National Credit Ac- 
 count (c). 
 
 (b) See supra, page 133. 
 
 (c) For a full and explicit commentary upon the above Draft Scheme, see Appendix 
 to " Credit-Power and Democracy," pages 147-212. 
 
 155 
 
APPENDIX "C." 
 
 Bibliography. 
 
 The Social Credit Movement is still in its 
 infancy, and it is only natural that as yet it 
 has no extensive literature. The following list 
 of publications dealing with the various aspects 
 of the Movement may, however, prove useful 
 as a guide to those who desire to become more 
 closely acquainted with its aims and activities. 
 
 BOOKS. 
 
 COUSENS, HiLDERic. 
 
 " A New Policy for Labour.*' 
 
 (Cecil Palmer, 5/-) 
 
 This book, described as An Essay on the Relevance of 
 Credit-Power, is designed to afford a topical introduction 
 to the ideas, economic and social, propounded by Major 
 Douglas. It deals chiefly with the part played by Finance 
 in the life of a modern industrial community. Mr. Cousens 
 is the general co-ordinating secretary of the Social Credit 
 Movement. 
 
 156 
 
BIBLIOGRAPHY. 
 
 DOUGLAS, Major C.H. 
 
 ** Economic Democracy .'' (Cecil Palmer, 6/-) 
 
 ** Credit-Power and Democracy ^ 
 
 (Cecil Palmer, 7/6) 
 " The Control and Distribution of Production.'' 
 
 (Cecil Palmer, 7/6) 
 
 In the first two volumes, Major Douglas has propounded 
 his Analysis of the economic conditions prevailing in a 
 modern industrial community, and has formulated certain 
 principles for the Solution of the present economic impasse. 
 Both volumes were set for the 1921 Economic Tripos at 
 Sidney University, Australia. It is suggested that, of the 
 two, ** Credit-Power and Democracy " is the book more 
 suitable to be read first. The third volume is a re-state- 
 ment of Major Douglas* views from various standpoints, 
 and consists mainly of the republication of lectures and 
 articles delivered or written by him during the past three 
 years. 
 
 KITSON, Arthur. 
 
 '' Unemployment^ The Cause and a Remedy.'' 
 
 (Cecil Palmer, 5/-) 
 
 In this interesting little book the Author, President 
 of the Banking Reform League, and a well-known writer 
 on economic subjects, advocates Major Douglas' proposals 
 as a solution of the unemployment problem. As an 
 introduction to the closer study of these proposals, this 
 book can be very highly recommended. 
 
 VOWLES, Hugh P. 
 
 " Under New Management." (Geo. Allen and 
 
 Unwin, 6/-) 
 
 A very readable book, surveying the present industrial 
 malaise from different viewpoints — social, economic and 
 political. This book, while not going at all deeply into 
 the Social Credit Proposals, affords a good introduction 
 to a closer study of the Movement. 
 
 157 
 
THE community's CREDIT. 
 
 PAMPHLETS. 
 
 SHORT, N. Dudley. 
 
 '' It's Like This:' (Cecil Palmer, 6d.) 
 
 A pamphlet in the form of a story. It describes 
 the economic vicissitudes of an imaginary island, and is 
 intended to stimulate interest in the Social Credit Proposals. 
 
 YOUNG, Allen W. 
 
 *' Dividends for AIL" (Cecil Palmer, 6d.) 
 
 A short and lucid outline of the Social Credit Proposals. 
 A very useful pamphlet. 
 
 In addition to the above there are several smaller 
 pamphlets, of which it is only necessary to mention two. 
 " The Socialisation of Credit," published for the Manchester 
 Credit-Reform Group by the William Morris Press,, at 
 twopence a copy, and " Industrial Stagnation, Unemploy- 
 ment and War," issued at the same price by the Stockport 
 Group of the Social Credit Movement, are both excellent 
 little pamphlets, and can be recommended as particularly 
 useful for distribution to persons likely to become interested 
 in the Movement. For particulars of other pamphlets 
 and publications, application should be made to the Credit 
 Research Library, 70, High Holborn, London, W.C.i. 
 
 PERIODICAL. 
 
 " Credit-Power:' (Monthly, 6d.) 
 
 This little paper deals more especially with the practical 
 side and activities of the Social Credit Movement. Printed 
 for, edited and published by Arthur Brenton, 70 High 
 Holborn, London, W.C.i. 
 
 158 
 
INDEX. 
 
 ABOLITION OF MONEY 74 
 
 Accumulations of Stock. 
 
 Causes of .. 36,41,44-46 
 Effects of .. 41,66,71 
 
 Acquisitive Society, The. 128 
 Administrative Control of 
 Industry. 
 
 By State 80 
 
 By Workers . . • • 75 
 
 Contrasted with Financial 
 Control . . . . 76 
 
 Agriculture 
 
 Stimulation of . . 100, 132 
 Amalgamation of Banks 30 
 America. 
 
 Competition with 3, 9, 52 
 Unemployment in . . i 
 
 Analysis of Present 
 Situation. 
 Detailed Analysis 1-64 
 
 Summarised . . . . 65, 66 
 
 Assumptions. 
 
 Of Orthodox Economists 5 
 
 Considered .. 6-14 
 
 Amended Assumptions 1 5 
 
 Audits, Official 124, 154 
 
 BAGEHOT, Walter 19 
 
 Balance of Trade 
 
 9,15,51,132 
 Bank, 
 
 Amalgamations . . . . 30 
 
 Deposits 21-23,25,26,116 
 Investments by . . . . 22 
 
 Overdrafts .. 21,82 
 
 Bank of England . . 26 
 
 Ban k- Credit-Issues . 
 
 Basis of .. 17,18,59.94 
 
 Effect on prices 20, 2 1 -26, 50 
 Extent of .. 23,112 
 
 To Government 25-27, 94 
 
 To trade . . 26, 27, 49 
 
 Industrial dependence on 
 
 20, 29, 48, 49, 56, 76 
 Restriction by currency 
 
 94-96, 113 
 Banks, Industrial or 
 Producers' 
 Purpose of .. 116-118 
 
 Credit Issue by . . 116,153 
 Effects of 119, 120, 128 
 
 Bankers' Clearing House. 
 Annual Clearance . . 113 
 
 Affiliation of Producers' 
 
 Banks .. .. 116,153 
 
 Bankers' Magazine, The . . 59 
 Barter 
 
 Earliest Economic System 1 1 1 
 International Trade still 
 
 140-142 
 Basis Price .. 125, 136 
 
 Bibliography .. 156-158 
 " Big Five, The." .. 3° 
 
 ** Bolt and Nut 
 
 Illustration " 35 
 
 CAPACITY TO PRODUCE. 
 Adequacy of .. 12,65 
 
 Bank Loans for increasing 49 
 Basis of Credit 11 , 17, 62, 149 
 In excess of Demand 1 48 
 
 Source of Wealth 6 
 
 Undiminished by War . . 8 
 Capital. 
 
 Credit Issues 42, 61 , 1 1 6 
 
 Levy, Criticised 80 
 
 Production , Loans for 50 
 
 Capital v. Labour. 
 
 Mistaken Antagonism 3 1 , 1 29 
 
 159 
 
INDEX CONTD. 
 
 Capitalist Producer. 
 
 Distinct from Financier 31 
 
 Place in Industry 104, 105 
 
 Capitalist System. 
 
 Attempts to abolish 5, 93 
 
 Capitalisation of Profits. 
 Effect on Industry . . 43 
 
 Carrying Trade . . 143 
 
 Causes of War. 
 
 Economic .. 3,4, 15,52 
 
 Removal of .. 130,132 
 
 Change of Heart . . 86 
 
 Clearing House System. 
 
 Suggested .. 121 -127 
 
 Illustration . . 122-126 
 
 Common Cultural 
 
 Inheritance . . 104, 105 
 
 Communism . . 74, 76 
 
 Competition, Foreign. 
 
 Increasing 3>9)S2 
 
 Dangers of 4, 52, 64, 84 
 
 Under the S.C. Proposals 
 
 130, 141 
 
 Consumer Control of Credit. 
 The Ideal 32, 57, 58 
 
 The Method 62,119,128 
 
 Control of Policy, 
 Financial 30, 56, 76, 1 17 
 
 Control and Distribution 
 
 of Production .. 157 
 
 Co-operative Societies . . 5 
 
 Cost of Living . . 21, 25 
 
 Cost of Production. 
 
 How calculated 34, 35 
 
 Price to-day not less than 
 
 10,25,55 
 Costing, Public .. ..123 
 Credit. 
 
 Defined, Real and Finan- 
 cial . . . . 16-18 
 Growth of conception of 
 
 16, 111-114 
 Controlled by private 
 
 interests . . 30, 31 
 
 Public .. ., 28,83,84 
 
 Credit Power .. ..158 
 
 Credit-Power. 
 
 The supreme factor 30-32, 56 
 Basis of . . . . . . 28 
 
 Credit-Power and Democracy 
 Referred to 
 
 i, 79, 90, ISS, 157 
 
 Quoted . . 34, 57, 106 
 
 Cuncliffe Policy . . 29 
 
 Cure for High Prices, The. 
 
 Referred to .. 129,150 
 
 Quoted . . . , 108 
 
 Currency. 
 
 Limitation of Credit by 
 
 **The Small Change' of' "^ 
 Credit" .. ..114 
 
 DEFLATION, Policy of 29, 48 
 Demand. 
 
 Deficient 65,71,148 
 
 Effective . . . . 65, 149 
 
 Change in nature of .. 100 
 Supply and Demand, 
 Law of . . 24, 54 
 
 Deposits, Bank. 
 
 Amount of .. .. 21 
 
 Loans and Deposits 21,23 
 
 Dictatorship of Proletariat 85 
 Dividends for All 
 
 110,125,136,158 
 Dividends, National. 
 
 Necessity for .. 101-103 
 Morality of .. 105 
 
 Benefits of 107,143 
 
 Incentive to Industry 
 
 107, 109, 129 
 Financing of .. 108,117 
 Disarmament Conferences. 
 _ 3,52 
 
 Distribution of Purchasing- 
 Power. 
 Through Industry 
 
 12,34,40-46 
 Diagram of . . . . 44 
 
 By Community to 
 
 Consumer 62, 89, 149 
 
 160 
 
I 
 
 INDEX CONTD. 
 
 Douglas, Major C. H. 
 Referred to 
 
 i,4>5. i6,79.90>i57 
 Cited 34-36,57,122,153 
 
 Douglas Analysis, The 
 
 Six Main Points of 65-66 
 
 Draft Scheme for the Mining 
 
 Industry, The . • i53 
 
 Dual Law of Prices . 25,55 
 
 ECONOMIC DEMOC- 
 RACY. 
 Referred to i, 5, 90, 121 , 1 57 
 Quoted .. .. 35,122 
 
 Economic System, Present 
 Breakdown of . . ..1,2 
 
 Cause of Wars 9, 5 1 "53, 84 
 
 Suggested Remedies for 69-86 
 Employment. 
 
 A means to an end 12-14 
 
 (See also Unemployment.) 
 Exchanges, Foreign 138-140 
 Export. 
 
 Artificial necessity for 
 
 9, 51,83 
 
 Credits 83 
 
 Under Social Credit 
 
 Proposals .. 1 33-137 
 
 Expropriation .. ..118 
 External Trade. 
 
 Under Social Credit 
 
 Proposals . . 131- 144 
 
 FACTORS IN INDUSTRY, 
 
 The Three. .. 104 
 
 Factory Costs . . 3 4- 3 6 
 
 Financial System, Present. 
 
 Development of . . no- 11 4 
 
 Evils of .. ..4,59,65,66 
 
 Financial Credit. 
 
 Defined . . . . • • i7 
 
 Issues of, by Banks 
 (See Bank Credit Issues) 
 Issues of, by Treasury 
 
 11,28,62,91.95, 119, 155 
 Finance, Power of 
 
 29-32, 56, 66, 75, 76 
 
 Fields, Factories, anj Work- 
 shops 132 
 
 First Price Factor i 47- i 5^ 
 "Flow Theory, The." 
 Enunciated and 
 
 Illustrated . . 33-3^ 
 
 Criticism of . . 37, 3^ 
 
 Another Aspect 39-41 , 44-46 
 Foreign Markets, Struggle 
 
 FOR 3,9,51.65 
 
 Foreign Exchange i 38- i 40 
 
 Foreign Purchaser. 
 
 Price to.. .. 1 35-137 
 
 Foreign Trade .. 131-143 
 
 (See also Foreign Markets.) 
 
 Fraudulent Standard, A 
 
 Quoted . . 59, 60 
 
 Function of Industry 12,14 
 
 GANTT, H. L. 
 
 Estimate of Industrial 
 
 Efficiency . . • • i49 
 
 Germany. 
 Problems of Reparations 
 
 1,134 
 Economically forced to 
 War .. .. 52 
 
 Gold Basis of Monetary 
 System. 
 Dangers of . • 58-60, 73 
 
 Obsolescent 58,111,113 
 
 Attempt to return to 73 
 
 Goodenough, F. C. 3,48 
 
 Government Borrowing 
 
 25-27, 94 
 Great Britain. 
 
 Fallacious supposition of 
 
 poverty . . .-7,8 
 
 Effects of application of 
 Social Credit Proposals 
 
 131-143 
 HIGH PRICES 21,24-27,50 
 Higher Wages .. .-73 
 Hostility to Machinery i 10 
 
 161 
 
INDEX CONTD. 
 
 Home Demand. 
 Stimulation of 
 
 IMPORTS. 
 
 Under S.C. Proposals 
 Price of, to Consumer 
 
 99, loo, 130 
 
 133 
 134 
 
 Increased Production 69-71 
 
 Industrial Banks. 
 
 115-120, 128, 153 
 
 Industrial Christian 
 
 Fellowship . . . . 86 
 
 Industrial Dividends .. 117 
 
 Industrial Efficiency . . 149 
 
 Industrial Stagnation. 
 
 Causes of . . 33-42, 65 
 
 Removal of 99,100,129 
 
 Industry. 
 
 Control of . . 56, 75 
 
 Function of 12, 14, 39 
 
 Nationalisation of 79, 80 
 
 Static View of 37, 38 
 
 Three Factors in 104 
 
 Inflation. 
 
 Defined . . . . • • 93 
 
 By Bank- Credit Issues 
 
 63,84,92 
 
 Inter- factory Payments 34-38 
 
 Intermediate Production 
 
 Defined . . . . . . 39 
 
 Rapid increase in 42 
 
 Price of, under S.C. 
 
 Proposals . . . . 92 
 
 International Aspect of 
 
 Proposals .. 131- 144 
 
 Italian Communists . . 76 
 
 It's Like This .. ..158 
 
 JAPAN. 
 
 Competition with 3,9,52 
 
 Just Price, The. 
 
 The Problem . . 64 
 
 The Solution . . 89-91 
 
 Operationof 99,119,125 
 
 Exports and Imports 134-136 
 
 KITSON, Arthur. 
 
 Referred to .. ..157 
 
 Cited . . . . 58-60, 93 
 
 Kropotkin . . . . 132 
 
 LABOUR. 
 
 Mistaken antagonism to 
 Capital . . . . 31 
 
 Diminishing factor in 
 Industry . . 12, 65, 102 
 
 Solutions . . 79-82 
 
 Labour Saving Devices. iio 
 Law of Supply and 
 
 Demand . . 24, 25, 54 
 
 Legal Tender. 
 
 Volume of . . . . 22 
 
 Relation to Bank Credit 
 
 23,94-96, 112-114 
 Lenin. 
 
 Economic Policy of 74 , 93 
 
 Levy on Capital . . 80-82 
 
 Lombard Street . . 19, 20 
 
 Loan Capital 
 
 Industrial dependence on 
 
 19,24 
 L.y.CM. Bank, Monthly. 
 
 Review . . . . 42 
 
 Lower Wages . . . . 71 
 
 MACHINERY and MAN 
 
 POWER 12-14,65,110 
 
 Market Topheaviness, 
 
 Real Credit Increment 
 and . . 39-48 
 
 The key problem 64, 7 1 , 83 
 
 The solution 100, 147, 148 
 
 Marx, Karl. 
 
 Economic Policy of 5, 85 
 
 McKenna, Reginald. 
 
 Cited .. 21-23,25,26,29 
 
 Mining Industry. 
 
 Draft Scheme for 153-155 
 
 M.F.G.B 153 
 
 Monetary Deflation 29, 48 
 Monetary System. 
 
 Basis of . . . . 58, 60 
 
 Growth of .. 110-114 
 
 Money. 
 
 A Mechanism . . . . 7 
 
 Its relation to Credit 
 
 17, 111-114 
 
 Z62 
 
INDEX CONTD. 
 
 Volume of . . 21, 113 
 
 Prime source of power 
 
 30,76 
 
 Abolition of, no solution 74 
 NATIONAL CREDIT 
 
 ACCOUNT 118,154,155 
 
 National Debt. 
 
 Burden of, increased by 
 Deflation . . . . 30 
 
 Proposed Levy to meet .. 81 
 National Dividends. 
 (See Dividends.) 
 National Poverty. 
 
 Fallacious assumption of 7 
 Nationalisation . . 79, 80 
 
 New Age, The . . i, 5, 84 
 
 New Capital Issues 42, 116- 11 8 
 Neio Policy for Labour . . 156 
 OLD AGE PENSIONS . . 103 
 Orage, A.R. . . i, 121 
 
 Orthodox Economists. 
 
 Assumptions of .. 5-15 
 
 Output. 
 
 A Source of Wealth 6,15 
 
 Limited by Demand 33,148 
 Overdrafts, Bank. 21,82 
 
 Overseas Trade. 
 
 Under the S.C. Pro- 
 posals .. .. 131-143 
 Owen, Robert. 
 
 Economic Policy of . . 4 
 PAPER MONEY. 
 
 The scape-goat 24, 93 
 
 Token of Public Credit 28 
 
 Peel, Sir Robert . . 81 
 
 Policy, Control of. 
 
 Through Finance 
 
 29-31, 56, 66, 76 
 Poverty, National. 
 
 Fallacious assumption of 7 
 
 Price- Factor. 
 
 Defined . . . . . . 91 
 
 Discussed . . 90-92, 133 
 
 In operation 119,125,126 
 
 First Price Factor 147-152 
 
 Price of Exports. 
 To Foreign Purchaser 
 
 135-137, 155 
 
 Price of Imports. 
 
 To Ultimate Consumer 1 34 
 
 Price- Regulat ION . 
 
 Necessity for . . 64, 66, 1 14 
 
 By the Just Price 91,97, 1 1 9> 
 
 125, 129, 134,135, 150, 155 
 
 Prices. 
 
 How composed 34, 36 
 
 Law of .. .. 25,54,63 
 
 Necessity for Regulation 
 
 of . . . . 64-66, 114 
 
 (See also Just Price.) 
 
 Producers' Banks. 
 
 (See Banks.) 
 Production, Policy of. 
 
 Controlled bv Finance 
 
 56,76,78 
 Productive Capacity. 
 
 (See Capacity to Produce.) 
 
 Profit Sharing Schemes 76-79 
 
 Profiteering. 
 
 Aggravation, but not prime 
 
 cause of industrial evils 43 
 Encouraged under pre- 
 sent System . . . . 56 
 
 Proletarian Dictatorship 85 
 
 Psychological Effect of 
 S.C. Proposals 96,119,129 
 
 Public Credit. 
 
 A source of private profit 
 
 27,82 
 
 Purchasing-Power. 
 
 "Flow Theory" 33-35 
 
 Diagram of Circulation . . 44 
 Expansion of .. .. 149 
 
 Lack of 33-36,48,71,72 
 
 RATES OF EXCHANGE 
 
 138-140 
 
 Real Credit. 
 
 Defined 16 
 
 163 
 
INDEX — CONTD. 
 
 Basis of Financial Credit 
 
 i8, ii6 
 Increment 42,43,61 
 
 Proper Basis of Monetary 
 
 System 58-60, 92 
 
 Pledged to Banks ^7, 82 
 
 Imports and Exports 133 
 
 Industrial . . ..116 
 
 Reduction of Wages 71,72 
 
 Regional Clearing Houses 
 
 121-127 
 Regulation of Prices. 
 
 (See Price Regulation.) 
 Reparations. 
 
 The Problem .. .. i 
 
 The Solution . . . . 134 
 
 Retailers. . . . . 124-126 
 
 Revitalising Industry 
 
 99, 100, 153 
 Russia. 
 
 Economic Experiments 
 
 74,92,93 
 SALE UNDER COST. 
 Impossible under Present 
 
 System . . , . 10 
 
 Not inherently impossible 
 
 II, 63 
 Science and the Present 
 
 System . . 13, 65, no 
 
 Shipping . . . . 142-144 
 
 Shop Stewards Committees 75 
 Social Credit. 
 
 Movement . . . . i 
 
 Proposals — 
 
 Just Price 89-101, 119 
 
 National Dividends 
 
 102-110, 117 
 Effect of 
 
 110-114, 128-130, 144 
 Socialisation of Credit. 
 
 Referred to .. ..158 
 
 Quoted . . . . . . 104 
 
 Spectator y The . . . . 8 
 
 State Bank, . . . . 82 
 
 State Ownership. 
 
 Of means of production 79 
 
 Stagnation of Industry. 
 
 Causes of 33, 65 
 
 Removed . . 99 
 
 Static View of Industry 37, 38 
 
 Supply and Demand, Law 
 of .... 24,25,54 
 
 Surplus Production. 
 
 Problem of . . 48 
 
 (See also Accumulations 
 OF Stock.) 
 
 TAWNEY.R.H 128 
 
 Taxation. 
 
 Increasing burden . . 30 
 
 Income Tax .. .. 81 
 
 Relief of . . . . . . 136 
 
 Times, The .. ..98 
 
 Topheaviness of Market. 
 (See Market-Topheavi- 
 
 NESS.) 
 
 Trade. 
 
 Boards . . . . • • 75 
 
 Balance of . . 9, 132 
 
 Combines . . 55 
 
 Loans for 19, 26, 27, 56 
 
 Trusts, An Era of • • 55 
 
 " Triangle Illustration, 
 The." .. .. 59 
 
 Treasury Issues. 
 
 Of Financial Credit 
 
 11,28,62,91-95,155 
 (See also Just Price.) 
 
 ULTIMATE 
 
 COMMODITIES. 
 Defined . . . . • • 39 
 
 Price of .. 50,64,91,119 
 
 Under New Management. 
 
 1,157 
 Unemployment . 
 
 Causes of 12-14,29,54,65 
 
 Increasing . . i , 49 
 
 Inherent feature of present 
 
 System . . . . 98 
 
 Relief . . . . 103, 107 
 
 Solution .. 100,110,129 
 
 Unemployment, The Cause 
 
 and a Remedy. 
 
 Quoted 93 
 
 164 
 
INDEX — CONTD. 
 
 Referred to .. .-157 
 
 WAGES. 
 
 Must be recovered in 
 prices . . 34> 4° 
 
 Principal element in De- 
 mand . . 72 
 
 Wage Reduction. 
 
 Effect of .. .. 54,71*72 
 
 Wage System. 
 
 Inadequacy of .. .. 102 
 
 War, Causes of. 
 
 Economic 3, 4» 52,65, 84 
 
 Removal of . . . . 1 30 
 
 Washington Conference 3, 52 
 Wealth, Real . . . • 6, 7 
 
 Whitley Councils . . 75 
 
 Women, Economic Inde- 
 pendence OF . . . . 108 
 Work .. .. 11,14 
 
 (See also Employment.) 
 YOUNG, ALLEN 109, 125, 158 
 
 165 
 
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