DOUGLAS SOCIAL CREDIT.

Southland Times, Issue 25312, 15 June 1935, Page 15

DOUGLAS SOCIAL CREDIT.

To the Editor.

Sir,—l regret that, being away, my reply to the queries raised by the New Zealand "Welfare League has been delayed. ■ . ■ Mr Welfare (if 1 may, for convenience, shorten the longer title), says I have stated what is to be done under the Douglas Scheme, but failed to clearly show how it will be done—and this, he considers, is the main point, since it would be risky to introduce something which might prove impracticable. ... This “experiment” objection is by no means a new one. It reminds me of a well-meaning but rather fussed-up sort of person objecting to the “experiment of feeding a starving man on the grounds that the famished one might over-eat and soxkill himself. I think that analogy is quite applicable to our present problem—the community as a whole is starved for purchasing.power, with the dual result that not only do many citizens become famished, but also the very goods and services they so greatly need are accumulated and wasting around them, while the producers of these goods, unable to sell and so recover their cost and margin of profit, are likewise faced with impoverishment. '■ Even the most elementary sort of person attacking such a problem would recognize the need, in remedying this shortage, to avoid going to the other extreme and creating too much purchasing power, just a common sense would avoid any sudden over-feeding after a' period of starvation. Surely Mr Welfare can concede the possibility of some common sense in the general community? I recognize the virtue of tolerance in striving to spread an understanding of this money, business and the precise significance of the remedies proposed by Major Douglas. Nevertheless it is surely exasperating, if not slightly sus-

picious, after explaining at such considerable length how a remedy will be applied, to be presented with a query which emphasizes that the inquirer completely ignores, even the elements of what one has so painstakingly explained. _ For ihstance it is demonstrably true —and even generally recognized ana admitted—that the community in this country, as in practically every other country to-day, is possessed of insufficient purchasing power to buy the total of goods and services available. If Mr Welfare’s studies, ponderings, and researches have not yet revealed this situation to him then I am afraid he is simply too elementary to merit serious attention, since there are now thousands of citizens in every branch of the community who are well aware of this situation and are anxious to give their best and earnest attention to the remedies which have been suggested by Major Douglas. Mr Welfare suggests that “it appears that purchasing power does exist (by which, presumably, he means adequate purchasing power) though it may not be evenly distributed.” Peculiarly enough he here shares the views of the Communists against whom his literary efforts have been so largely concentrated for several years past, that is, that “the poor are poor, merely because the rich are rich.” How can Mr Welfare hope to be considered seriously in this objection when he makes no attempt to refute or rebut what I have already written on this point, showing that if all the immense incomes were confiscated and distributed it would not increase individual purchasing power by more than a shilling or two per week? Mr Welfare, however, calmly ignores this, although it obviously renders his argument entirely fatuous, and goes serenely along to say that in face of what he has said he cannot accept my claim that real wealth and potential production are far in excess of total purchasing power.” Likewise I cannot accept his claim to be a welfare league. I have no doubt there are certain objectors who are either deliberately applying “obsurantist” tactics (for reasons best known to themselves, but usually not hard to guess at), or otherwise are mentally incapable of bringing themselves out of that state of mesmerism which, until recent years, held us all in thrall so far as this money business is concerned. The latter condition is usually due to what we might call “mental sclerosis,” a hardening of the brain, rendering it incapable of admitting a new idea. Obvously, if we are going to succeed in correcting the flaws in our present monetary system so that present wasting abundance may be distributed to the people, we cannot hope for assistance from either of the foregoing types. So why waste time and energy on them? To quote the whole of the Welfare letter would require too much space and time which might be better applied in more receptive quarters.' I shall take the first example. He writes: “The purchasing power of a community is, surely, measured by the income derived or created through the production of goods and services—the purchasing power does not spring from the creation of money!” Even a child would see that if there are already goods for which no money exists then, of course, the creation of more money would increase purchasing power. Only one who is so devoted to organizing the general welfare of a country (whether they 'like it or not) could fail to see that.

Certainly purchasing power is released in the course of production—whether sufficient is thus released to buy total production is another matter. Purchasing power , is recorded in terms of money, either in cash or bank I credits operated on by cheque. The A plus B theorem draws attention to : the inescapable fact that the flow of I purchasing power released in the course of production to-day lags behind the flow of prices which are created, thus leaving the community as a whole with insufficient purchasing power to buy the whole output. Since no objection appears too elementary for Mr Welfare, let us anticipate his reaction here, which would probably be that, since a proportion cf our production is exported, there would be no -need for purchasing power to buy the lot in this country. This argument, however, ignores the fact that exports have the effect of paying for a more or less equivalent value of imports, so we see that the additional purchasing power is required, after all. But could one possibly debate the A plus B theorem with a gentleman who alleges that purchasing power does not spring from the creation of money? Now suppose I to-day manufacture a dozen counterfeit “tenners” and successfully get them into circulation. My purchasing power would not be increased? —you’re telling me, Mr Welfare! So long as the public accepts my tenners and has goods to sell my purchasing power is enhanced to the tune of £l2O. The Douglas proposals, however, do not embrace any form of counterfeit money. You see, our banking system is able to create money legally by the simple act of writing up credits which are circulated as money in the form of cheques, and the Douglas proposals merely set out a method of ascertaining by statistical returns whether our production and productive capacity are in excess of our purchasing power, and if so, to enable new credits to be legally written up to bridge the gap. Moreover they offer a mechanism, known as the Just Price Factor, to prevent inflation of prices when the new credits are distributed in the form of a national dividend, or as government wages. However, I am prepared to believe that all this, so far as Mi- Welfare League is concerned, is entirely meaningless. I shall therefore quote him again! “The system of national accountancy —which I had pointed out as obviously necessary)—“to discover total consumption of goods and services on the one side and total production, importation, and new processes—” (affecting productive capacity)—“etc., on the other, is one thing in theory, but is surely almost impossible in practice.” Here is surely a magnificent example of mental sclerosis. “It couldn’t be done!” Every business firm does it every day; the whole country is merely an aggregation of business firms, yet here is a “Welfare League” who claims that a system operating most efficiently in each unit could not be applied to the whole. Surely our accountants are not prepared to accept such a slight on their professional pride—these hawk-eyed experts who can almost off-hand tell you the entire depreciation and appreciation of their concerns to a fraction; who can compile the pay sheet, plus bonuses (if any), minus income tax, poll tax, dog tax, amusement tax, death tax; unemployment levy, sundry LO.U.’s, and so forth, without batting an eye.. '■ '■ <'A: Now it is obvious,that all these taxes are already more or less on a national > scale, since they represent our Government’s present feeble efforts to achieve an income for State purposes. Suppose we did apply our national accountancy and discovered the existence of a very considerable surplus of

production and productive capacity for which, so far, no equivalent purchasing power had been released by industry. Would not this justify the national credit authority writing up a new credit to that value? That, in other words, would become our Social Credit, and when this was monetised, would it not provide a financial credit from which the GoVemmen. might draw for its requirements in State expenditure? This new financial credit could be used to pay the wages of the Civil Service and so forth. Obviously, if this credit were sufficiently large (and its volume would depend on the extent of the previously non-monetised production and new productive capacity), then the need for the present multitudinous government taxes would disappear. Is it then not conceivable that the new mechanism would be much less complicated and unwieldy than the present one? I should not be at all surprised if, after all this, Mr Welfare League were to querulously ask “where is the money to come from?”

But wait! A gleam of vivid imagination flashes across the Welfare countenance. He writes:

“Suppose, however, this Credit Authority could work out the information, the next step apparently is to create money purchasing power in addition to the real purchasing power (the distinction is Mr Welfare’s) and to distribute this under the name of consumer credit —but not as a repayable loan. Surely this would be a gift rather than a credit?”

Through the obvious haze which surrounds the Welfare mind as to the meaning of consumer credits (our previous efforts to explain the difference between producers’ credits, which are manifestly repayable, and consumers’ credits for the purchase of ultimate goods, have undoubtedly been meaningless) our correspondent detects the idea of a “gift” and shies violently. “This is tantamount to paying a man for something he has not earned by his work—” exclaims Mr Welfare League in shocked surprise. It would be futile, I’m sure, to explain that it would be merely giving the community generally the benefit of the production from machines which have displaced human labour. Let us try another way. How would Mr Welfare League define “earned”? Presumably he obtains some income while he is engaged as the Welfare League. No doubt he believes he “earns” whatever standard of living he enjoys while engaged in his welfare activities. These activities are comprehensive and undoubtedly strenuous. At the inception of the present “depression” he was indefatigable in advocating reduced wages as the one and sure road to prosperity.' I have no doubt Mr Welfare earnestly believes he is labouring in the best interests of the community—his title leaves no doubt of this. «

Yet, has it ever occurred to him that the community might gladly concede him his income, whatever it may be, and which gives him a claim on the general store of production for his particular requirements in goods, not as a reward for his welfare activities, but as a reward for his ceasing them. You know that story of Mark Twain meeting his first alpine shepherd in Switzerland and giving him half a dollar to yodel, then later meeting a second Swiss shepherd and giving him a dollar not to yodel! Now, the application of a draft on the Social Credit as a price discount, in other words to finance a discount on prices as a means of enhancing existing purchasing, power, is essentially simple in principle. The normal adult intelligence can grasp the idea in a few minutes, yet Mr Welfare, after reading of it and quoting it at great length, says: “It is a most puzzling proposal.” Why, then, does thio Mr Welfare League, who admits his mental inefficiency insist on yodelling? If he is really striving for enlightenment why does he not obtain it nearer at hand in Wellington, where he will find ample literature and scores of excellent Douglas advocates who may have more patience with backward pupils than I have. —We are etc.

F.N.R. (Local branch of the N.Z. Anti-Yodel-ling League.)