THE DOUGLAS CREDIT SCHEME.

Evening Star, Issue 20985, 26 December 1931, Page 11

THE DOUGLAS CREDIT SCHEME.

TO TU BDITOR. Sir, —Having had the opportunity of carefully reading Mr C. M. Hattersley’s book, * This Age of Plenty,’ I would like to offer a few criticisms of some of the suggestions made by Major Douglas and his disciples. To commence with, these people apparently do not deny that the operations of the system under which we live to-day, known as the Capitalist system, are controlled by banking combines, and that these combines have the power to expand or restrict credit to such an extent that through their operations we have periods either of prosperity, through increased circulation of money, or of poverty, starvation, and unemployment,. through deflation. Moreover, that banking is not merely a national business, but truly international, and that through federal reserve boards, central banks, and similar organisations in the different countries—each controlling the internal finance of its own country, or, rather, appearing to do so—just two years ago there came into existence the Bank of International Settlements, controlled by the heads of the various federal reserve boards and central banks. While this Bank of International Settlements was brought into existence ostensibly to deal with reparation payments, to any intelligent student it is really and truly an international bank that can and will bo used for the purpose of controlling the whole of the world’s finance in the interests, not of the people, but of the world’s banking magnates. On page 324 of ‘ This Age of Plenty ’ we learn that “it is important to note that the ownership of the shares ’’ (of the Bank of International Settlements) “ which may be issued to the public and are transferable carries no right of voting or representation at the general meeting. Both these rights arc reserved, in proportion to the number of the shares subscribed in each country, to the central bank of that country or its nominee.” <

While Mr Hattersley, as a disciple of tho Douglas scheme, does not hesitate to advocate tho trial of tho Douglas scheme as a cure for unemployment, he does not deny, as I have already stated, that tho banking combines are to-day in control of the operations of our system. In fact, ho even suggests tho possibility of the combine preventing the trial of what he so strenuously advocates. Doubtless such would be the case, apart from tho fact that to me the scheme is in many respects unsound and impracticable, although theoretically interesting to study. By reference to sections 73 (pages 171, 172, and 173) and 86 and 87 (pages 201, 202, 203, and 204) we learn about ‘ The Just Price ’ and ‘ The Practical Application.’ According to what we read therein it is suggested that it is possible for our Governments to create now money that will, without inflation troubles, increase tho purchasing power of tho people, and that by more goods being produced and consumed unemployment will bo at least reduced to a minimum. Without a very careful analysis it all appears so beautifully simple. On page 172 wo are told that “ prices woud bo reduced straight away, and the cost of so doing would not bo collected from consumers by taxation, but would be met by absolutely

new money.” As Mr Lloyd Ross has ably explained the questions of increased currency and inflation, I need not deal with the latter possibility except to refer readers to page 173, where Mr Hattersley advocates the “placing of some legal limit to the power of the banking system to create credit money,” because he (Mr Hattersley) is afraid that the banks have the power not merely of preventing the trial of any system opposed to their own, but, more serious still, of wrecking the whole of the present economic system if they so desired by creating excess credits. Is it because of this fear that he does not advocate the doing away with privatelyowned banks? In fact, on pages 203 and 204 we read that the purchaser “ takes that discount paper ” (another name for the new money) “ the next time he goes to the bank, and he turns it in just like a cheque. The bank receives it just like a cheque, and credits his account with £IOO. It is simply a book transaction, one way or another. At tlje end of an agreed period of time the bank submits to the Government the certificate that it has credited to this particular purchaser of the automobile, together, of course, with many others.” And now I would ask your readers to note very carefully what immediately follows (see top of page 204) : “The Government sends the credit in any form which may be agreed—again, it only being a book , entry; —to the bank, allowing it to write up its credits by the amount of this £IOO. There is, in effect, a transfer of national credit, public collective credit, to a private account.” The writer then _ adds: “ The transaction is then finished.” But is such the case? Let us see exactly what has happened. The purchaser buys an automobile for £4OO. The price factor for the period is 75 percent. He pays £4OO cash to the retailer, but receives a credit slip for £IOO (25 per cent.), such credit slip being payable by the Government. But he cannot take same to a branch of the Government Treasury _ and cash same. He must pay same into an account in one of the privately-owned and controlled banks, and can thereafter operate on same the same as with any other deposit. By arrangement between the Government and the banks the bank now holding the credit slip presents same to the Government for payment on a basis already agreed upon between them. The writer claims it is only a book entry, but such is not so. The credit slip in the hands of the bank shows that for the amount of the credit slip the Government is now in the bank’s debt for £IOO. How can the Government deal with that debt? Wo are told (see page 172) that it is not to be done by taxation, as this new money is not to bo wiped out, but is to remain as increased circulation. Such being the case, does it not follow that the Government must remain in debt to tho bank? By endorsing the credit slip tho Government Treasury could agree to tho £IOO being added to the Public Debt Account (overdraft), in which case interest would bo charged by tho bank.. Or it could issue non-interest-bearing’ Treasury notes free of interest in exchange for the credit slip, such Treasury notes to become legal tender. Or the matter may be arranged by exchanging the credit slip for Government scrip, ’cither interest-bearing (same effect as overdraft) or non-interest-bearing (same as Treasury notes). Again, if the business were settled by overdraft or scrip, it would need to be compulsory on the bank that bank notes equal to tho amount would have been put into and kept in circulation. If Treasury. notes, they would have to be kept in circulation by the, bank, otherwise the desired object of increased circulation would not be obtained. But how far could the bank be conipelled to agree to such transactions if, as probably would be the case, tho Government Treasury elected to pay by non-interest-bearing scrip or Treasury notes, and more especially when it was found that tho bank’s own interestmaking businesses were being interfered with at the expense of their profit and loss accounts? In any case, I fail to see how such transactions, with no taxation to counter-balance same, would do other than increase our already too large public debt, placing us, if possible, still further under the

control of the banking combine. I say, “ if possible,” because we are already completely at their mercy, and likely to remain so long as the present system of society lasts. On page 183 Mr Hattersley contends that the factors of production can be divided into: (1) Capital, (2) labour, and (3) common cultural inheritance, and claims that the last named belongs to all and not merely to those owning and controlling capital. Suffice it for me to say that everything he refers to as the “ common cultural inheritance ” —inventions, religion, education, etc.— are all controlled by the capitalists, who see to it that such are used according to their dictates. So we can wipe out the flowery name “ common cultural inheritance,” except as part of capital. The industrial bank scheme referred to on pages 198, 199, and 200 is merely a suggestion for the State to guarantee owners a fixed rate of interest on their capital ‘‘in porpetuo ” (for over), whether the workers earn good or bad wages, and whether the businesses pay good profits or become insolvent. Even in New Zealand “The Companies’ Empowering Act ”. provides for more equitable conditions than Major Douglas advocated in his “ Draft Scheme for the Mining Industry.” I could deal with many other points advocated in “this age of plenty ” by Major Douglas and his disciples, but will conclude with just one further reference. On page 209 we find the writer greatly concerned lest. the “engine” of the present economic system be scrapped too soon and the system overthrown. Surely needless worry! Depend upon it that those who control our economic system through their international finance ’'machinery will not throw away their “ engine,” but will make every possible attempt to keep patching it, and will never deliberately throw it away. Wo know, however, that no system lasts for ever, but what will happen is what happens all through Nature. “Every system carries within it the germs of its own destruction,” as can be illustrated in the case of the seed potato planted in the soil. The life of the new system is already within the old, and develops by feeding on the old (system or potato) until it has grown sufficiently strong of itself by absorbing all that it useful to it of the old, when the shell of the old can bo discarded as of no further use. When that time will come and exactly what form the new society will take we cannot definitely say, but we do know that present economic conditions —accumulated wealth versus poyerty —are making the owners of capital very anxious, though none the less greedy, on the one hand, and our workers very restless on the other hand, and desirous of finding out how they can best get control into their own hands, with a view to abolishing, if possible, unemployment, starvation, and every other misery that keeps them down.—l am, otc., G. S. Thomson. December 24.