THE DOUGLAS SCHEME

Otago Daily Times, Issue 22520, 14 March 1935, Page 18

THE DOUGLAS SCHEME

TO THE EDITOR

Sir, —It is not merely ignorance of the Douglas analysis or proposals that I impute to “A. W. B.' 1 It is an appalling ignorance of the existing money system. What need we of any further evidence than his remarks in the letter in your issue of Saturday last? The banks, ac cording to “A. W. 8.,” pass on the credit they receive from their depositors exactly as the grocer passes on the sugar he has received from the Colonial Sugar Company. There is the rather important difference, however, that the depositors’ credit still remains with the bank, whereas the sugar does not remain in the grocer’s bin; he would find it more profitable to Be a grocer if he could sell his goods without parting with them. “A. W. B.” has not apparently read the evidence of the representatives of the Associated Banks before the New Zealand Monetary Committee. These gentlemen when asked where the money came from when the Bank of New Zealand some years ago advanced about £450,000 to th§ Government —an actual transaction —were quite unable to say from what other account the amount was transferred to the Government’s credit. All they could sav in answer to the question as to what happened was summed up in the now historical reply, “ We wrote up the Government account by that amount and we put it to investments,” —again the “ not very arduous activity of writing in books.” Of course, according to the banking convention, all this writing is- the record of “ promises to pay ” something called money, ultimately gold; but in point of fact the promises are all we have nowadays and promises are easy to make. If we had the gold we should be no better off. but the banks would find it more difficult to furnish.

To take one more instance of the ignorance, or perhaps it would be more correctly called crude misunderstanding, that is evident throughout the letter, “A. W. B.” writes; “The Douglas scheme has been made by its advocates so nebulous that few really understand more of it than that it means a very large extension of the note issue by the Government —so large that the note issue would be valueless outside of New Zealand,” etc. New Zealand notes are not current outside New Zealand, and in the strict sense have no value at all outside New Zealand in any ease, in that they cannot be used to purchase goods, unless on the basis of their exchange value at the local banks, and that exchange value is alleged by orthodox economics to be dependent on the state of trade between the two countries, which in its turn depends on the price level and its tendency to attract custom or otherwise. If the application of the Douglas proposals by enabling us to lower prices without injuring the producer thereby enabled us to attract outside custom, the exchange value of our money would increase. “The more your money will buy in your own country, the more other people will be prepared to pay for it when they come shopping in your market.” As a matter of fact, “A. W. B.” is quite right as to one thing and one thing only—his failure to understand Douglas. Hut many people have failed to understand other propositions which have been and remain quite sound. Witness the learned gentlemen who protested that motion pictures were an impossibility, not to mention the many pupils in geometry who have failed to master the “ pons asinorum.” “A. W. B.” complains that Douglas made no reference when before the Monetary Committee to the A plus B theorem nor to his scheme for Scotland. Why should he refer to a scheme for Scotland when asked for one for New Zealand? Or why should he undertake to demonstrate the implications of the A plus B theorem to a set of gentlemen whose terms of reference precluded them from dealing with it? “Many people,” says “A. W. 8.," “ take this as evidence that he has largely found these two of big original ideas are not practicable.” But many peopld put two and two together and make six of them. In any case, a theorem is not something which can properly be described as “ practicable.” It is not a proposal: it is a statement, and demonstrable, but not practicable. - This is a misuse of language due obviously to confused thinking. “ Fixing the fair price and planning to equalise production to consumption would mean a very large Government bureaucracy,” says “A. W. B.” But it is not Douglas who is proposing to “fix” prices nor to “ plan to equalise production to consumption.” These are the openly-pro-fessed objects of all the schemes put forward by those who support the present system—from President Roosevelt and, Mr Neville Chamberlain to our own Mr Coates and Mr Forbes. What Douglas proposes is not the fixing, but the regulation of prices in accordance with productive capacity and actual consumption; not the restriction of production down to the level of present effective demand, but the equation of consumption to the limit of human need or of productive capacity,' whichever comes first. “ I have been able,” says “A. W. B 1.,” “to find in three years’ study of the Douglas scheme remarkably few new or worth-while facts.” Again that haziness in the use of terms! There is the fable of the ass who found a priceless manuscript. He passed it by because it was not good to eat. —I am, etc., Veritas.