Wednesday, October 26, 2016

A Brief Discourse on Social Credit, V: The Rationale

We’ve been looking at a few problems with social credit, but today we’re going into the matter in a little more depth.

"They create a wasteland and call it 'peace'." — Tacitus
Social credit assumes that concentrated private control over the creation of money and credit leads to concentrated ownership of the means of production.  In this, there is no contradiction between social credit and traditional Catholic social teaching (or Marxist socialism, for that matter).  To remedy the concentration of power over the creation of money and credit in private hands, however, social credit would put control over money and credit in the hands of the government.
To support the claim that they are not advocating socialism, adherents of social credit deny that the government would have any real control.  This is a little difficult to understand in light of Baron Rothschild’s possibly apocryphal statement that if you gave him control over money and credit, he did not care who made the laws.  It is, frankly, hard to interpret government-created money as being anything other than “control” over money and credit.
Right. Making the government the banker is a "good idea"?
Placing “a scientific control of money and credit” (George-Henri Levesque, O.P., Social Credit and Catholicism, Hawthorne, California:  The Christian Book Club of America, 18.) in the hands of “a commission of experts possessing an extensive autonomy” (Ibid.  Cf. Henry Simons’s “Chicago Plan.”) puts such a commission into the place that most central banks hold today.  Most central banks started out independent of government.  Many (such as the Federal Reserve) remain nominally so, although in practical terms are under the direct control of whatever administration is in power. (Harold G. Moulton, Financial Organization and the Economic System.  New York: McGraw-Hill Book Company, 1938, 416-417.)
This is because where the government is dependent on one major source for financing its programs, it soon finds ways to control that source. (Ibid.) This is apparent in the way that, regardless of the official autonomy of most of the institutions, governments generally control central banks, one way or another. (Ibid., 418-433, 472-483; Moulton, The New Philosophy of Public Debt.  Washington, DC: The Brookings Institution, 1943.)
Free money for everybody in the National Dividend!!
In a social credit arrangement, people would be assured of a “private and secure income” simply by having the government print the money and distribute it as a non-repayable grant — a “national dividend.”  This would transfer wealth from owners and producers, to non-owners and non-producers.  The private wealth of the nation is treated as if it were a common fund (without the permission of those who currently hold the wealth), against which the government issues claims in the form of newly created money (bills of credit) — the “national dividend.” (Major C. H. Douglas, “Dividends for All,” The Monopoly of Credit, Sudbury, England: Bloomfield Books, 1979, 100-101.) As Douglas stated,
In place of the relation of the individual to the nation being that of a taxpayer it is easily seen to be that of a shareholder.  Instead of paying for the doubtful privilege of being entitled to a particular brand of passport, its possession entitles him to draw a dividend, certain, and probably increasing, from the past and present efforts of the community of which he is a member. (Ibid., 112-113.)
Social credit thus violates several basic tenets of both sound monetary theory and morality.  Creation of fiat money that is simply spent into circulation for consumption purposes is purely inflationary, an indirect and hidden tax.  It causes an illegitimate redistribution of wealth from the people whose assets are measured in terms of monetary units, to those receiving the government largesse, and from producers to non-producers.
Belloc: social credit ignores private property.
Like chartalism, social credit therefore constitutes theft, as it diminishes or eliminates the property rights of some for the benefit of others.  Additionally, it places immense power in the hands of the government as the result of effective control over the creation of money and credit.  With the government as the source of people’s consumption income, the government gains direct power over every aspect of the lives of its citizens.  As Belloc pointed out,
To control the production of wealth is to control human life itself.  To refuse man the opportunity for the production of wealth is to refuse him the opportunity for life; and, in general, the way in which the production of wealth is by law permitted is the only way in which the citizens can legally exist. (Hilaire Belloc, The Servile State.  Section 1, “Definitions” Indianapolis, Indiana:  Liberty Fund Classics, 1977, 46.)
It is necessary only to substitute “income” for “the production of wealth” (virtually synonymous in any event, as Say’s Law of Markets acknowledges) in the above quote to perceive the dangers of social credit, which Belloc himself disparaged for ignoring property and focusing solely on income.  The basic assumption of many of today’s commentators, that Catholic social teaching and social credit are complementary (if not identical), is clearly unworkable.  The basic principles of one directly oppose those of the other.
If, as the commentators maintain, Catholic social teaching and social credit are inextricably linked, we have a sound reason why Catholic social teaching has been relegated to the sidelines in the debate between capitalism, socialism, and the search for a viable third way.  The attempt by latter-day commentators to include disparate elements in their amalgam only leads to ridicule or rejection of the system by those who can see or sense the contradictions.
"We stand for the value of a single human life."
The bottom line, however, is that even if social credit could do everything it claims, even if it is a “beautiful” system and “Christianity in action” and there are no theoretical flaws, it would still put total power over the lives of people into the State.  The State would be able to say who lives, and who dies.
For example, would everyone receive the “national dividend”?  After all, every cent that goes to someone deemed “undeserving” means less for you.  Should immigrants get it?  What about illegal immigrants?  Criminals?  Someone with too many traffic tickets?  What about the wrong attitude towards the government?  The wrong religion?  Someone who is going to die anyway?  Useless eaters?  Someone who already presumably has sufficient income?  The “Banksters”?  Someone who pissed off the local bureaucrat in charge of distributing the dividend and determining who is eligible?  Anyone with a bratty kid?
Social credit advocates need to keep one thing in mind: Power corrupts.  Absolute power corrupts absolutely.

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