We have, in recent issues, examined these aspects of our economic system:
First: The rich heritage of knowledge, skills, machines, factories and harnessed power which has been developed and accumulated down through the ages and passed on to us today — an inheritance in which every individual in the year of 1955 has a right to share.
Second: This heritage of technology and resources has resulted in a productive machine of practically unlimited capacity which pours forth goods to satisfy our needs and mountains of so-called "unsaleable surpluses." But the distributive system (the money system) failed to keep pace with the productive machine. People did not, in the process of production in this power-machine age, get enough purchasing power to enable them to buy back the full product of industry. The result was 'unsaleable surpluses' — more underconsumption than overproduction — and a mad scramble by all nations to sell more abroad than they imported back, or, in other words, to export their unemployment.
Third: There has been a steadily mounting debt (government and private) created by the financial system and owing by the people, as the consumer or his government borrowed more and more financial credit to purchase and consume the product of our productive machine.
Aspects two and three, we pointed out, constitute powerful inductive proof of the truth of C. H. Douglas' contention that industry, in the process of production, during any given period of time does not distribute sufficient, purchasing power to buy the whole of that production.
Starting with the outbreak of war in 1939, a period of relative 'prosperity' set in. At times it has seemed that there was more money than goods. Let us examine this period.
During the 'thirties' when anyone suggested the building of a road or school, or adequate purchasing power for those thrown out of employment, all the powers-that-be chorused: Where will the money come from? And we could not do the things which were physically possible, so we were told, because there was no money. One would have been reasonable, therefore, in assuming that we could not take part in a war 'because we had no money'!
But lack of money did not deter any nation for a moment from plunging into war. Where were they to get the money to fight a war which they could not get to build in peace?
At the outbreak of war, our federal government issued bonds, backed by the real wealth of Canada, and gave them to the private banks in exchange for financial credit to prosecute the war. In other words, the banks monetized our real wealth; the banks issued the financial credit (figures, cheques, accounts, etc.) against, and reflecting, the nation's real credit.
This financial credit — checking account against which the government could write cheques, was brand new, additional purchasing power. It was pumped into circulation through war contracts, payments to the armed forces, and in other war expenditures.
This new money paid to our military personnel and their dependents became purchasing power in their pockets. But they were engaged in war and destruction, and thus no corresponding goods were coming on the market to equate these payments of purchasing power.
Also, payments for war contracts, munitions, weapons, and the instruments of war, became purchasing power as they were paid out in wages, salaries and profits. But this production was marked for war and destruction, and not to come on the market as consumer goods.
Then, of course, there were those who even during war were engaged in the production of consumer goods which did come on the market. This group, too, received purchasing power in the course of their chores of production.
But we note that purchasing power was being paid out to three groups: military personnel and their dependants, those engaged in the production of munitions and other war goods, and those engaged in the production of consumer goods. But only the production of one of these groups, the last-named, ever came on the market.
With purchasing power being pumped out to three groups of producers, but with the fruits of two of the three groups being destroyed and only the product of the one coming on the market, is it any wonder that during the war, purchasing power caught up and somewhat exceeded the supply of consumer goods!
In other words, with a million of our people and their dependents being paid to destroy goods, and with much of our civilian population being paid to produce the goods which were to be destroyed, for the first time in a decade there was sufficient purchasing-power to enable our people to buy and use all consumer goods that came on the market. That, in itself, is almost confirmation of Douglas' contention that, under the present financial rules, our industrial system is not self-liquidating.
In the years following the war, the cashing of war bonds and the withdrawal of war savings further increased the money supply for the present, without any corresponding increase in production.
Following the war, Canada and the United States began aiding in the rebuilding of Europe. Through UNRRA, the Marshall Plan, and in other ways, we have sent abroad hundreds of millions of dollars worth of our production, in the process of producing which money had been put into circulation.
Since the end of the war in 1945, we have withnessed the greatest expansion of industry and plant in our history. Huge sums have been paid out in wages, salaries, and profits, in this expansion, without any corresponding production coming on the market at the time.
This capital expansion has been an immense factor in keeping up the distribution of enough purchasing power to enable us to buy and consume the product of the plants already in production.
Thus we see that during and following the war, a combination of —
creating new financial credit (money) and putting it into the pockets of those who were producing nothing which would come on the market;
cashing war bonds and war savings;
distributing purchasing-power in the production of great quantities of goods which were to be given away abroad rather than come on the home market; and
an unparalleled capital expansion program which pumps out purchasing power without producing, at the time, any corresponding goods —
has contributed to the financing of consumption as production poured forth from our powermachine.
But war and destruction, and related factors, can hardly be entertained as a civilized means of easing, even temporarily, the weaknesses in our economy. And we must keep in mind that during war, while we seem to enjoy 'prosperity', it is actually at the price of mounting debt, which in turn will mean more oppressive taxation.
And even abnormal capital expansion is only a short-term palliative. Sooner or later this new plant ceases to pour out only wages and salaries (as in its construction), and pours out goods which must include in their price not only current wages and salaries, but all former costs.
Just as so-called 'unsaleable surpluses' were beginning to appear about 1949-50, and 'unemployment increase', the Korean war started, and we launched into another rearmament drive. This, at the price of more debt and taxation, 'saved' the system for yet a few more years. · As NEWSWEEK magazine (May 30/55) admitted:
"Most government economists agree that an 'outbreak of peace', if it materializes, will strain national prosperity.".
Isn't that statement in itself, admitting that under our present financial system we must depend upon unrest, war and destruction, for 'prosperity', a damning indictment of our present financial policy!
Under our present debt-finance system, genuine peace and prosperity just do not go together. Therefore, our people can never enjoy the conditions they desire until our financial policy is amended or changed.
In coming issues we shall examine the history and working of money and finance.
Ye shall know the Truth, and the Truth shall make you free.
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