In the 1920s and 1930s, Clifford Hugh Douglas, the Scottish engineer who conceived the financial proposals called Economic Democracy, or Social Credit, toured the English-speaking world to give lectures on his economic solution, and attracted crowds of thousands of enthusiastic listeners. According to many, one of his best addresses was given in Christchurch, New Zealand, on February 13, 1934, and was published later as a booklet titled "The Use of Money". Here are large excerpts from this address, still relevant today.
by Clifford Hugh Douglas
I should like to begin the explanation and the address that I am privileged to make to you, by stating what I have no doubt, to many of you, is a truism, and that is that we are familiar with two kinds of laws. There is natural law of the nature of the conditions which compel a stone to fall when it is dropped from a height, and which, if it falls, let us say, in a vacuum, always falls at the same rate of acceleration under the compulsion of gravity. That is a natural law, and, so far as we know, those laws are compelling laws. We cannot change the laws of that description, and all we can do is adjust ourselves to those laws.
But there is also a second type of law, a law which is what we may call conventional law. Of course, our legal laws — the laws of our government — are conventional laws. We have agreed to rule ourselves by those conventions. On a smaller scale, of course, we have the same sort of thing in connection with playing a game. We agree that, in a game we call cricket, if the ball is struck by the batsman and is caught by a fielder before it touches the ground the batsman is out.
We are not obliged to have conventions of that sort. We could change them if we found that we could improve cricket by some other convention. Those two laws have to be very carefully separated in one's mind in considering such matters as we are now discussing.
It has been very frequently stated during the past fifteen years or so that there is no escape from inexorable economic laws. As a matter of fact, there are no inexorable economic laws with which I am familiar; they are practically all conventions.
What we call an economic law is what happens if you agree to pursue certain ends in industrial, economic, and social organisations governed by certain conventions. That is about all that so-called economic laws amount to.
Now, the first requisite in any understanding of this position on the basis of what I have just been saying is to recognise that what we refer to as conventional laws are matters of policy. You do not make a conventional law without having some sort of an idea in your mind as to what it is you are trying to do - what end you are endeavouring to serve.
If you make a law that all motor-cars shall drive on the left-hand side of the road, you have in your mind that in that way you will avoid collisions, and you have a policy in your mind in making such a law that you want to avoid collisions of motor-cars.
We have at the present time a thing that we call an economic system, and I do not believe that we are at all clear, in many cases, as to what it is we are trying to achieve by means of that economic system, and by means of the conventions with which we surround it.
For instance, we say at the present time that one of the troubles which assails the present economic system is what we call the problem of unemployment. When we say that the problem of unemployment is one of the major features of the crisis at the present time we are, at any rate unconsciously, if not consciously, suggesting that one of the objectives of a policy, of an economic system, is to provide employment. Now that is not an axiom: that is not a thing that you can take as being true without examining it.
It may possibly be true — I do not myself think there is a grain of truth in it whatever — it is conceivable that you might want to run an economic system for the purpose of providing employment. If you wanted to run an economic system for the purpose that you would have to do to rectify the present position of providing employment, quite obviously the first thing - the only sensible thing to do - would be, as far as possible, to put the clock back about two hundred or three hundred years.
You would destroy as far as possible all your labour-saving machines; you would cease to use the power which you have developed from water and otherwise, and you would revert to handicraft, and in doing the handicraft you would avoid, as far as possible, the use of any tools which would facilitate that handicraft. You would do everything as laboriously as possible, and you would undoubtedly solve the unemployment problem. Everyone would undoubtedly have to work very hard indeed to get a living.
That simple idea, as a matter of fact, was the first idea that struck the Russians when they made the Revolution of 1917. The first thing they did was to remove, or in some cases imprison, their scientists and their organisers. They said they did not want them: they said they wanted the population to work, and they got them to work quite easily.
You see, it is quite possible to demand from the economic system a lot of different things. For instance, in regard to this question of employment and unemployment; there has been, I think, an almost absurd confusion on the part of such people as, let us say, the well-known and very able delver into these matters, Karl Marx, who complained that the present system provided a parasitic class who battened on the producers of the wealth of the world.
And at the same time, of course, complained that the economic system was breaking down, and quite correctly from his point of view, that the capitalistic system was breaking down because it could not provide employment.
Now, either unemployment is a privilege - in which case quite obviously you want to try and get as many unemployed as possible - or else it is something requiring pity, in which case any parasitic class is an object of pity and not of contempt or of criticism. You cannot have it both ways.
You must make up your mind whether you want to provide leisure, by an economic system, accompanied by goods and services producing what we call a high standard of living with an increasing amount of leisure, or, conversely, you must admit that what you want to do is to provide employment, in which case your policy is exactly opposite.
The policy which is attached, and the matters which can be attached to a policy to relieve the unemployment problem permanently, must in the very nature of things be a policy which will decrease the unit production of wealth by the individual, and a policy which is intended to produce and deliver goods and services with the minimum amount of trouble to anyone must, quite mathematically, increase the unit production of wealth, and so create what you can, if you like, call an increasing unemployment problem.
Those are the only two alternatives in regard to that, and you must first of all, before being in a position to form any opinion at all upon proposals in regard to the present crisis, make up your mind as to what it is you want.
Now, the second necessity of an understanding of this situation is a sound analysis of the difficulties which stand in the way of getting to where we decide we want to go.
That is to say, if we decide - and I am assuming that having put the matter to you in the way I did you will practically all have decided that we do not want to produce for the sake of producing, but that we do want to deliver goods and services - that what we want from the economic system is goods and services to provide a high standard of living
And then you will be able if you like to provide jobs for yourselves, you will I think - unless I grossly under rate the intelligence of the gentleman who made that remark - agree that if he was provided with what he would refer to as an income of £500 a year, he would be able to find some use for his leisure.
Now, if you do agree with me, for the sake of hypothesis we will say, that the only object of an economic system is to deliver goods and services to the population concerned, with the minimum amount of trouble and friction to anybody, then the next thing to do is to analyse whether that is possible, to what extent it is possible, and what, if anything, interferes with carrying out your plans.
Now, at this point you have to make—not a mental effort—but an effort of self de-mesmerisation. I want you to de-mesmerise yourselves from the idea that money is the same thing as wealth and goods and services.
You say that you cannot get goods and services without having money. That does not mean to say that those two things are the same; they are not. I want you to separate them in your minds and to look with a clear and unbiased eye at the purely physical side of the production system today.
Can you imagine yourself, if you had sufficient money, going to any shop for any article that you can conceive of and not getting it? Is there any requirement of common use in the world today of which you could tell me that there is a definite physical shortage? If you can, I shall be interested.
I can tell you, conversely, of a long string of articles which are actually greatly surplus to the actual requirements of the world at the present time. For instance, to take a very simple instance, more coffee was wilfully destroyed in Brazil during the past year than would have provided the whole coffee-drinking population of the world with all the coffee they wanted.
The same thing is true of practically every staple article of which you can think. There is too much rubber: there is more rubber than we can at the moment use. They are making elaborate preparations in the United States to pay quite a large bonus for NOT growing wheat. The same thing is happening in the Southern States of America in regard to cotton.
In almost every direction in which you can turn you will find evidence of overflowing - either actual or potential - and easily realisable physical wealth to such an extent that it is quite impossible for anybody who knows anything about the subject at all to avoid the conclusion that physical plenty and complete freedom from economic trouble associated with bed, board, and clothes, is literally waiting at the door of everyone of us if we realised it. That is the physical fact.
So that it is not to the physical side of the production process that we have to turn when we want to find out why it is and what are the difficulties which prevent us from realising the objective that I suggested we wanted to realise, and that is sufficient goods and services for everybody with a minimum of trouble to everybody. It is not on the physical side that we shall find the difficulty.
Now then, let us assume - and I believe it is quite impossible to deny - that it is not physical poverty which is afflicting us: it is the lack of purchasing power which is preventing us from getting the physical riches which are waiting to get into our hands.
What is this thing that I am talking about as purchasing power? Well, of course, in one sense any of you could answer that. What you want for purchasing power is money in your pocket, and that, of course, does not get us very far - an answer like that.
What is the nature of purchasing power, and what is the nature of this thing-money? There is a very good definition of money which I will give you first of all. Quite an orthodox definition which will not be denied by anybody who knows anything about the subject, and that is that "money is anything, no matter of what it is made, nor why people want it, which no one will refuse in exchange for his goods if he is a willing seller."
You will see that that definition immediately rules out anything specific of which money has to be made. Money is not, for instance, gold or silver, or any of those things. Those things may be money, but money is in no sense confined to any particular metal.
Now, thinking that over, it ought at once to occur to anybody that if, under certain circumstances, anything will do for money that there ought to be no shortage of money. If money had to be made of gold, and if there was only so much gold in the world as presumably there is — I believe there is only a block of gold about forty feet cubed which is all the existing gold in the world today that has been mined during the past two thousand years — and we cannot do without purchasing power, we should be in a difficult position, obviously.
But when we say that money is anything, no matter of what it is made nor why people want it, that no one will refuse for his goods, then we are getting into quite a different region. Money is something that acts as what we call "effective demand." Something which people will exchange, will take in exchange, for the goods that they want to dispose of.
Now let me draw your attention to what you might call the simplest form of effective demand with which you are probably acquainted, and that is a railway ticket.
A railway ticket is an effective demand for a journey: for the journey which is described on the ticket. That is exactly what a railway ticket is. How does a railway ticket differ from a one-pound note? A railway ticket is an effective demand for one particular thing, and that is a railway journey. A one-pound note is a ticket which is an effective demand for anything which has the figure of £1 marked on it in the form of price.
They are both tickets. There is no difference in nature whatsoever between a ticket which is good for transportation and a ticket which is good for anything else, except that one of them has a universal purchasing power and the other only has a limited purchasing power.
When you buy a ticket, when you go to the booking office of a railway, you exchange one type of ticket for a more limited type of ticket, and that is all you do in effect.
Now, supposing that you imagined that the whole of this productive system which we have been examining and finding to be so rich, supposing that you imagined it to be all of one kind, and that kind nothing but transportation: that all the wealth of the world, instead of being so diverse in the form of motor-cars, food, houses, and so forth, supposing it were to coalesce into one thing like transportation. Supposing you found that there was any amount of transportation; that there were plenty of railways and plenty of locomotives; plenty of rolling stock and plenty of people to operate the railways; plenty of fuel and so forth; but for some reason a different organisation from the railway had obtained control of the issue of all the tickets which were required to travel on the railway, and if you were quite sure that there was a great deal of distress in the world and if everything appeared to be going wrong, and you were quite clear that it was for lack of transportation facilities and yet you knew that there were plenty of transportation facilities, you would naturally say, without very much waste of time: "What has happened to the ticket system? How is it that we cannot get the tickets on the railway ?"
Now exactly that thing has happened to the present economic system. The whole of the productive system has become completely separated from the ticket system that we call the financial or money system.
The financial system is nothing but a ticket system. The ticket system must be made to reflect the actual truth of the productive system and not attempt to control it. Finance must be made to follow industry and business and not control them, and the actual means by which real wealth is produced must be recognised as being largely descended to us from the labours and the genius and the work of very large numbers of inventors, and so forth, who are now dead, and these inventions are the legacy of civilisation and therefore the product of their legacy is something to which we all have a right, and because that is the chief form of production, it is the factor in production which we all of us have a right to share.
Only in that way can this absurd anomaly - this unbelievable anomaly between poverty and tremendous, either actual or potential, plenty - be solved, and if that anomaly, that paradox between poverty and distress on the one hand and potential plenty on the other, is not quickly solved, then the civilisation to which we have devoted such wonderful care, and brought on to the very edge of a golden age, will go down with those of Greece and Rome.
Clifford Hugh Douglas
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