We’ve never been able to track down the original source of it, but adherents of Major Douglas’s version of “social credit” claim that Douglas declared that it is “Christianity in action.” If he did, indeed, say it (and we’re not doubting it, just saying that we couldn’t find the source), it is fully consistent with what we do know about social credit and its antecedents in “the New Christianity.”
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| Major Douglas |
In the previous posting on this subject, we described in brief what the People’s Republic of China call “social credit” — certainly something most people would not be tempted to confuse with “Christianity in action.” Today we will look at the proposal of Major Clifford Hugh Douglas (1879-1952). The story begins with Richard Henry Tawney (1880-1962), one of the heads of the Fabian Society from 1920 to 1933, and whose attacks on private property have been taken as a guide to economics by many who otherwise don’t consider themselves socialists.
Tawney, however, has been called “the most influential theorist and exponent of socialism in Britain in the 20th century” (Back cover of Lawrence Goldman, The Life of R.H. Tawney: Socialism and History. London: Bloomsbury, 2014), as well as “the Democratic Socialist par excellence.” (Ross Terrill, R.H. Tawney and His Times: Socialism as Fellowship. Cambridge, Massachusetts: Harvard University Press, 1973, 276. Emphasis in original.) After having served on the Fabian Executive from 1920 to 1933, he left the Society after quarreling with Sidney James Webb (1849-1947), First Baron Passfield, and his wife Beatrice Martha Potter Webb (1858-1943), Baroness Passfield, over the form that applied socialism should take.
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| Richard Henry Tawney |
Concerned about the industrial proletariat, the Webbs advocated a strong central government. Tawney, a historian and economist, favored decentralized community control based on his interpretation of life in the Middle Ages (Ibid., 276-277; Goldman, The Life of R.H. Tawney, op. cit., 169-173), but not completely acceding to the presumably medieval guild ideal. (Terrill, R.H. Tawney and His Times, op. cit., 142-143.)
Schism begets schism. Splinter movements began to form. The two most notable of these were guild socialism and social credit.
Depending on which source is consulted, guild socialism grew out of concepts developed by George Douglas Howard Cole (1889-1959), Richard Orage, (Edward R. Pease, The History of the Fabian Society. London: Frank Cass and Co., Ltd., 1963, 230) or Arthur Joseph Penty (1875-1937), or perhaps a consortium of all three. Inspired by the syndicalist movement in France, guild socialism was held to be more reasonable and less revolutionary than the group that had been tainted by participation in the Paris Commune. (Ibid.)
Adherents of guild socialism declared that the immediate objective should be to put industry and commerce under control of the workers. Most Fabians disagreed, claiming that before workers could control production, the State would have to take over, the goal of centralized State control being the most common opinion among the Fabians. After attempting to “coerce” others to accept their point of view, “[t]he leading Guild Socialists resigned from the Society.” (Ibid., 254.)
Social credit, the idea of Major Douglas, split from guild socialism after a disagreement over the utility of technology and the natural right to own land, both of which Douglas supported: “[T]he Fabians and the Guild Socialists repudiated Douglas’s proposals, not for the technical reasons which one might suppose, but for the philosophical end towards which they were directed.” (J.W.D. Lee, “Douglas — The Man and the Vision,” The Social Crediter, Vol. 53, No. 6, September 1973, 4.) The philosophical difference was that Douglas claimed that it is unnecessary for workers to control directly the industries that employed them. Instead, workers could control industry indirectly through State manipulation of money, credit, and prices. (Frances Hutchinson and Brian Burkitt, The Political Economy of Social Credit and Guild Socialism. London: Routledge, 1997.)
Douglas’s proposal was contrary to guild socialism’s goal of decentralized control, agreeing with the Fabian program of vesting power in a central authority. As an engineer, however, he disagreed with the Fabian emphasis on the simple life, which in some of the guild socialists, notably Penty, manifested as rejection of technology. (G.K. Chesterton, The Outline of Sanity. Collected Works, Volume V, San Francisco, California: Ignatius Press, 1987, 152.)
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| Georg Friedrich Knapp |
A variation of the chartalism of the German socialist Georg Friedrich Knapp (1842-1926) (Georg Friedrich Knapp, Die Baurenbefreiung und der Ursprung der Landarbeiter (1887); Grundherrschaft und Rittergut (1897); and Die Staatliche Theorie des Geldes (1905). An abridged version of this last was translated into English as The State Theory of Money (London: Macmillan and Co., 1924), Douglas’s social credit proposal was that the government should emit bills of credit to the value of the annual incremental increase in production. This would be distributed as a “national dividend” after subtracting the costs of government, abolishing taxes, and keeping prices stable through the mechanism of the compensated or just price. (Major C. H. Douglas, The Monopoly of Credit, Sudbury, England: Bloomfield Books, 1979, 100-113.)
According to Dr. Harold G. Moulton of the Brookings Institution, we need put little credence in what, e.g., C.S. Lewis dismissed as “the Douglas Scheme” and Hilaire Belloc claimed lacked any appreciation of private property. As Moulton said in his “diagnosis” of Douglas’s proposal,
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| Dr. Harold G. Moulton |
No little publicity has been given to an analysis of the sources of economic difficulty by Major C. H. Douglas of the British Royal Air Force. (Credit Power and Democracy, 1920, and The Control and Distribution of Production, 1922) Major Douglas finds the roots of the economic disease in the discrepancy between payments for wages, salaries, and dividends, and the prices of products. He argues that since the aggregate price of all goods offered for sale greatly exceeds the aggregate disbursements to consumers, depression is inescapable unless bank credit is issued to individuals in sufficient amounts to make up the deficiency in purchasing power.
Douglas arrives at the conclusion that the money income available for the purchase of commodities is deficient by a process which eliminates from the picture a large part of the national income. He contends that the price of a given commodity must cover "(a) all payments made to individuals (wages, salaries, and dividends); (B) all payments made to other organizations (raw materials, bank charges, and other external costs) ."
Now the rate of How of purchasing power to individuals is represented by a, but since all payments go into prices, the rate of flow of prices cannot be less than a + B. The product of any factory may be considered as something which the public ought to be able to buy, although in many cases it is an intermediate product of no use to individuals but only to a subsequent manufacturer; but since a will not purchase a + B, a proportion of the product at least equivalent to B must be distributed by a form of purchasing power which is not comprised in the descriptions grouped under A. (Credit Power and Democracy, pp. 21‑22.)
This means that if the payments made by a given business under A amounted to one dollar and the payments made under B amounted to another dollar, the price of the commodity produced would be two dollars; but there would be only the A dollar available with which to buy it.
The fallacy in Major Douglas' analysis is that he concentrates attention upon a single business rather than upon the national economy as a whole. These "external" payments to other organizations do not involve sending the money outside the country, and hence their disbursement is a part of the national income as a whole. That is to say, the payments for raw materials, bank charges, etc., are also disbursed to individuals by raw material producing industries and "other organizations" in the form of wages, salaries, and dividends. Taking the national economy as a whole the aggregate prices of goods and services simply cover the aggregate disbursements of wages, salaries, rents, commissions, and profits to individuals engaged in the processes of production.
The analysis which we have made in America's Capacity to Consume, revealing a demand for consumption goods insufficient to call forth the full output of our productive establishment, is not to be regarded as supporting either the position of Major Douglas or of Foster and Catching. Our analysis did not show that the aggregate disbursements of national income to individuals were less than the aggregate prices of the goods and services turned out; on the contrary, we contended that they were virtually identical. We were concerned with the allocation of the national income as between savings for investment and expenditures for consumptive purposes; and we showed merely that the proportion of the total income received by individuals which found its way into consumptive channels was inadequate to induce full capacity production.
We will continue this discussion in the next posting on this subject.
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