The muddle in Social Credit’s manifesto

Press, Volume CXII, Issue 33067, 7 November 1972, Page 18

The muddle in Social Credit’s manifesto

Once again the Social Credit Political League has set out to inspire voters with many of the political, economic, and social goals to which almost every politician aspires; but Social Credit’s aspirations are founded on a woeful misunderstanding of the economic system. The misunderstanding has its origin in the “principles” of the late Major C. H. Douglas, the high priest of an economic theory that has never been put to the test, and has been roundly condemned by all who have examined it with common sense and without prejudice. The manifesto of the league is sprinkled with Inconsistencies. A Social Credit Government, it says, would not borrow money—but money in the Post Office Savings Bank would earn “ equitable rates of “ interest ”. The authors of the manifesto seem to be unaware that all the funds held by the Post Office Savings Bank—and the greater part of the funds held by the trustee savings banks and the private savings banks—are at present borrowed by the Government. The manifesto does not specify how a Social Credit Government would ensure that savings bank depositors would continue to receive Interest on their money if the Government is to cease borrowing money.

Would a Social Credit Government direct the Reserve Bank to create money to pay interest to savings bank depositors? If so, how could this arrangement match the manifesto’s insistence that credit would be limited to the value of the total production of goods and services? The league condemns interest rates as a cause of inflation and a curb on industrial growth. Yet it would encourage savings institutions, such as building societies, to invest in private industry—presumably at the rate of interest that has to be paid for the use of other people’s money.

Social Credit attributes inflation to interest rates and argues that the Government should create all the credit it needs, thereby avoiding the payment of Interest to lenders. At the same time the Government would reduce taxation. That this plan would simply add to the pressure of demand on goods and services without increasing the supply is a point which the league has to ignore to sustain its argument. Yet the league complains about “ the rapid “ turnover of the money supply ”. The league wants to Increase consumption and yet, in some way, manages to believe that when more money is pumped into the economy consumers will stop spending it—that the turnover of money would be reduced. The manifesto implies that the volume of money in circulation would be equal to the gross national product. Every dollar would be expected to change hands only once a year. Expanding credit to stimulate demand is no novelty. In spite of its distaste for socialism, the league propounds in its manifesto the most bureaucratic—and undemocratic—allocation of credit for investment and consumer spending, unrestrained by any clearly-defined limits. It is not surprising that the league itself was split and that a new party was formed this year among its dissident members. A theory so profoundly muddled in its conception could hardly produce a unified party of adherents; but any country which attempted to put the theory into practice would certainly plunge its economy into chaos.