£25,000,000

Poverty Bay Herald, Volume LXIII, Issue 19140, 8 October 1936, Page 4

£25,000,000

INCOME DEFICIENCY SOCIAL CREDIT THEORY APPLICATION IN DOMINION The statement that the deficiency of consumer-credit, in New Zealand under present conditions was estimated at about £25,000,000 was mado by Mr. D. M. Sherwood, London, in an address given in the Selvyn Hall last evening on the theories of ..Major Douglas. The speaker aimed at explaining the application of the Douglas theory to New Zealand, and his address was followed with keen interest by a considerable gathering, which included a number of Gisborne residents not personally identified with the Douglas social credit movement.

The speaker of the evening was introduced briefly by the deputy-Mayor, Mr. H. Holmes, who presided over the gathering and who stated that Mr. Sherwood would be glad to answer questions at the close of his- address.

Mr. Sherwood stated that he would deal first with the world conditions at present, the social, credit programme in general, and the application of social credit to New Zealand's problems.

He reviewed conditions in Europe, stating that year after-year since 1929 there had been a Series" of crises, the efforts to meet which had had one thing only in common—failure. He pointed out that four startling paradoxes existed today—on the one hand poverty and on the other plenty; men unemployed and men overworked; men being put out of employment by machinery, and politicians creating work to absorb the men; with the whole of the world's people praying for peace, and at the same time the whole world preparing for war. The tragic character of the situation could not he more keenly emphasised than by quoting those paradoxes. The world was full of food production, to a degree in which many nations had destroyed food sufficient for years of their own consumption : on the other hand there were plenty of people seeking supplies - of food. Any system which permitted such a situation to continue was doomed.

The speaker quoted statistics relating to earnings in England, adding that 50 per cent of Britain's people were living below subsistence level, and 85 per cent below the comfort level. Prominent bankers and other business men and educators were quoted by Mr. Sherwood, who declared that people in New Zealand had no conception of what real poverty meant. The health of the people of Britain was steadily declining-, owing to insufficient food; while the mental health was also declining, as was. the physical health of the community. Conditions in other countries were similar, said Mr. Sherwood.

It was right to compare conditions to-day, not wit.li those which existed IC. 53, or ICO years ago, but with what they could be in the present day. Distribution was the factor which had broken down in the world, not. production or consumption. Yet. rather than alter the system of distribution, the nations were destroying food and crops. If it had ever been true that "the poor were poor because the rich were rich." it was not true to-day. The poverty of to-day was due simply to the' lack of a logical system of distribution. The old rule-ol'-thumb capital labour production had worked fairly well, and had literally and metaphorically produced the goods. The trouble was that if all'the earnings! of Britain had been divided, given' an average of i!10D per annum to each wage-earner, it would not have been possible to distribute all the goods produced. INCOME AND DIET How dare the doctors investigating maternal and infant mortality in the Borough of Poplar, London, report that the mothers died because malnutrition had weakened their resistance, and that a diet including certain items should be accepted? asked'Mr. .Sherwood. How could those people possibly afford those items of food under the present system of economics? New Zealand, he continued, had had no reason in the world to have unemployed workers. There had been plenty of work to do, and plenty of men to do (he work, but the income in the hands of the consumers had simply been insufficient to finance the work being done. The same situation was found in other parts of the world.

When .St. Paul had laid down'the law that he that would not work should not eat, that law was fair and equitable, remarked Mr. Sherwood, but it was not applicable to-day, when machines placed at the 'disposal of mankind, millions of silent slaves needing no wages or holidays, and work was not ready to the hand of a large proportion of the men who sought employment to live. A man who could not work could not eat, but if ho could not find work, he had no choice but to starve. The present economic system, if carried to a logical though ludicrous length, would furnish eventually a machine to produce everything that civilisation needed, and humanity would perish because it would not have an income to live upon. DISPLACEMENT OF MEN The lecturer dealt at some length with the situation created by the multiplication of mechanical inventions. He also quoted many instances in which useful inventions had been deliberately wrecked because their adoption would have thrown more men out of work. Triumphs of engineering skill which should have been triumphs of humanity had paradoxically become threats to the security of men's incomes. Instead of adjusting the economic system to enable men to profit by their greater leisure, modern conditions perpetuated a system under which every invention adopted meant that more men, women and children must starve.

The lecturer spoke on the paradox of peace desires and war alarms on the lines of his address to the Rotary Club on .Monday, though at. lesser length. .Shortage, of income in the hands of the workers was (he dominating influence in the world to-day, he said. If a thing was physically possible, it should be financially possible; at, present there was ample money availanle for production, hut Utile for consumption. The problem was simple enough when viewed in the liglit of an analogy from medical treatment, he added. A doctor Lnding a patient's illness due to a lack of a certain element, the natural course was to supply the deficiency of that element. 'J he trouble with the economic system was a deficiency of income in the hands of the consumers, a deficiency which could be remedied in short order. MATERIAL EXPANSION

He did not propose to enter in detail into the manner in which income was distributed to the public, but he would emphasise that the income from industry una agriculture had never been sufficient to enable the people to consume the total of (heir production. The secondary avenue of distribution, through capital outlay on roads, buildings, railways, and similar projects, had raised the income of the people almost to the necessary level (hiring a. period of 150 years to the close of the Great War. This source had now been dried up, by (he cessation of building from capital resources. It was possible to borrow money to-day to build magnificent luxury liners, but" not to feed hungry people. Borrowing was the only method recognised by orthodox economists by which money" could be raised, and hence the breakdown of public spending power.

The accuracy of ' Major Douglas' analysis of the process by which the slump would develop was now of merely academical interest, continued Mr. Sherwood. It was a fact that the old economic system had broken down; that fact was beyond dispute. It would not be possible to secure such an admission from an orthodox expert, but it was* not necessary to pay 100 much attention to them. The orthodox experts of another day had declared emphatically that the world was flat, until it had been proved otherwise, So late as the close of the Great War, experts who iixed the German, war debt fixed it at a figure 20 times greater than the gold in circulation in Germany. They had not carried their investigations to the point of trying to find how Germany could ever meet such a burden without disturbing the economic balance of the world. FAULT OF DISTRIBUTION

Every impartial investigation into the present economic difficulties, said Mr. (Sherwood, had found that the fault was a monetary one—a fault of distribution in income. The remedy followed naturally, especially in the case of the countries which were monetary units, as was .New Zealand. Major Douglas had laid down the remedy, which was simply the payment of income to consumers in a degree correlated to the deficiency of income shown to exist at a given time. The national dividend would provide one way of distributing this additional income ; the alternative was by just-price discount scheme, by means of which retailers would be'able- to sell their goods at a certain scale of profit, the deficiency to be made up by the national social credit tribunal. The national

dividend would be payable to everyone in addition to their present income, regardless of the amount of that income. Money was purely a medium, and not a necessity; it could be issued in any degree desired, and to the speaker it seemed inconceivable, that there should bo any objection to the principle of free issue of money in order to provide the purchasing power that would move the present surpluses of national production. NO QUARREL WITH BANKS The speaker traced at some length the development of the monetary system, from the days of barter and tokens up to the present complicated stage, in which 98 per cent of the money and credit available in Britain .was controlled by private banking systems. The central banks system throughout the .world was supreme, and its monopoly was absolute, commanding governments and enslaving peoples. It treated money as a commodity, and controlled the supply of money and credit. It was not the profits of the banking system that social creditors attacked, but the power which it placed in the hands of a .small group to vary price levels at their own will. Even without any illwill oh the part of the banking monopoly, the time could not be long deterred when the greater part of the nations' assets would be mortgaged to the banking system. He had no quarrel with the banking system as such; it was merely doing the job which lay to its hand, just as an executioner was merely the instrument of a policy of capital punishment. The banks were doing a good job in financing production, but it did not finance consumption, and in that failure lay the whole cause of the present troubles of the world. THE NATIONAL DIVIDEND Dealing with the application of the Douglas social credit system, Mr. Sher- ! wood said that Major Douglas had slated that if would not be necessary to adopt Die national dividend at once. The first step would be to set up a national credit authority, flic second to ascertain the deficiency of income in the country, and (he third to distribute that amount, probably through price discounts to retailers.' It was estimated that' the deficiency of income in New Zealand for one year was £L\->,000,r)00, and he invited his hearers to consider what benefits would result from the distribution of that amount. Die Douglas credit supporters in New Zealand had supported the Labour Party, namely, in the last general election in the belief that that party was convinced of the value of the Douglas theory. .Subsequent events had proved that hope to be unfounded, in the meantime, but he urged that the supporters of Major Douglas should continue their efforts to register that conviction in the mindsof the present Government. The eventual victory he did not doubt, but the question was whether the victory could be attained before the world crashed in disaster. NEXT THRE.E YEARS CRITICAL Major Douglas in Canada last year, uad stated that within the next three years the future of the world for at least SCO years would be decided, either for good or ill, the alternatives being a return to barbarism, or the entry upon a new era of leisure for mankind'.

In conclusion, Mr. Sherwood declared (hat, conservatism and prejudice were the great enemies of the Douglas theory. The Conservatives had the satisfaction of knowing that they were always wrong! If they had been right, the world would still have been where it was hundreds of years .ago. He begged his audience to give thought to the sub>cl. and not to grudge that effort which might lead to the salvation of civilisation as known to-day. The address was concluded amidst warm applause, and the audience was. invited to ask questions of Mr. Sherwood. Mr. John. Jackson asked whether the proposed national dividend would he paid pro rata on the basis of the individual income. Mr. Sherwood replied (hat each person would receive the same dividend. ALT ERN ATI YE M ETHODS

11l reply to another question from Mr. Jackson, the lecturer stated that if it was proposed to build a railway, costing £4,000,000, that amount would lie paid from the consumer-credit vote for that period. If it was circulated by expenditure on public works, it would not be necessary to pay it in the form nf a national dividend. It was essentia' that the issue of the money should be debt-free, but the manner in which it was paid out was immaterial. Replying to Mr. C. A, Smith, the lecturer stated that if the Douglas credit orinciple were instituted in New Zealand, it, would not he necessary to take over the banks.

"Would the private banks be prepared to take the notes issued undo Ihe social credit scheme?" asked Mr Smith.

Mr. Sherwood replied that the money iesued would not be in (lie form of notes, ft would not lie, necessary to_ increase the present money in circulation. Of course, if the private banks refused to co-operate—there being no reason why they should object—they probably would have to be taken over.

Rallying to other 'questions', Mr. Sherwood said that his statement that a national dividend would not be necessary in New Zealand as a first step in the application of the social credit principle "was his own opinion. Ma'or DougIns held that the process of distributing social credit was riot as important as the adoption of the principle, (Applause.' He agreed that eventually it would Ik necessary to adopt the national dividend.

After a nuonber of further questions had been dealt with by Mr. Sherwood, he. was tendered a hearty vote of thanks on the motion of the' chairman, Mr. Holmes himself being accorded a vote of thanks in turn.