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The Social Dividend

The Chronic Shortage of Purchasing Power

25. Why do you say we are “missing purchasing Money that was distributed in past production
power”? cannot be used to pay for both past production and to
One must not search long to find individuals who finance production in the making. It can only be used
complain about a lack of purchasing power; of not be- to liquidate one of the two.
ing able to pay for what they and their families need 28. With such limits in purchasing power how do
even when goods are plentiful. products manage to ever be sold?
As products that people want are not sold we Labour unions and other interest groups lobby for
must conclude that there is a deficient amount of total the construction of public projects, weapons manufac-
purchasing power. turing and other strategies that will not add consumer
In the end, it is only by indebting those who make goods to the market but will provide purchasing power
purchases that goods are finally sold. Public institu- to workers.
tions also borrow and accumulate debt to finance pub- 29. Would asking for wage increases be a good way
lic works. All of this proves that purchasing power is to increase purchasing power?
collectively insufficient. Any increase in wages will be reflected in an in-
26. Do you have more examples that prove the short- crease in prices. The temporary benefits gained by
age of purchasing power? raising salaries is short-lived. As long as wages alone
Everyday, the media addresses the problems of make up purchasing power, it will be impossible to
the unemployed. There are crucial public projects that correct the price-income gap.
should be undertaken but are not. Unemployment per- 30. What if owners reduced their profits?
sists or becomes worse. It is customary for workers to keep an eye on
The answer to unemployment is for products to owners’ profits. Consider that even if there was no
be sold. Goods already on store shelves must be sold profit margin total purchasing power would still not
in order for there to be a demand for more. This in turn equal total prices. The reasons cited earlier — delays,
stimulates employment as more products are manu- investments, etc. — would continue to create the con-
factured. Even a school child knows how products can ditions in which there is a collective lack of purchasing
be sold: “There must be more purchasing power!” power.
27. Are there not economists who say that produc- Furthermore, in today’s system prices cannot be
tion finances consumption? lowered to the level of purchasing power without
There are economists who maintain that produc- negatively affecting the producers who have costs to
tion automatically finances consumption. Prices, they cover other than wages.
say, include money that was spent and money that What is needed is additional money obtained apart
was spent will eventually reach the consumers’ hands. from salaries. The source would not be owners. This
This “eventually” does not seem to worry them, even would ensure that the additional money would not be
though money might have been distributed 10 years factored into prices.
ago to build a factory while the construction costs are 31. What if we created more jobs?
included in the prices of today’s products and could
be part of the price structure of products for 15 or 20 We have unemployment for the precise reason
years to come. that there is a glut of goods. Why would producers
make more goods? The goal of industry is not to cre-
Capital expenditure costs can be written off over ate work but to make products.
several years or even decades while prices are affixed
to products as they are offered for sale. 32. How then can the problem of insufficient pur-
chasing power be corrected and increased?
(Ed. Note: A new factory is mortgaged just as is a
house. The mortgage will be paid over several years The solution must be found outside of the conven-
or decades by making monthly payments. Each pay- tional system. We need an answer which will increase
ment will be factored into the prices of the goods that purchasing power without increasing prices.
are offered for sale that month.) The price-income gap demonstrates that the cur-
rent system only distributes purchasing power to
Would an engineer measure a stream’s power by
only considering the amount of water it carries without those who are employed.
also calculating the time the water takes to flow from The only way to correct the lack of purchasing
point A to point B? Engineer, Clifford Hugh Douglas, power in an economy of free-flowing products is to
brought this omission to the attention of economists. introduce into the system the distribution of a source
He taught economists that water flowing downstream of money that is not factored into prices and that is not
will not activate a turbine situated upstream. tied to employment. u

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