C.H. Douglas, 'The Greatest Boon to Economics Who Ever Lived'; National Dividend = Basic Income; 'Full Employment' Is an Undesirable Delusion

Source: Digital Journal

Who the Dickens was Major Douglas?

By Alexander Baron
Jan 20, 2012
1 comment

Next month sees the 200th anniversary of the birth of Charles Dickens. This year is also the 60th anniversary of the death of an even greater Englishman. But who was Major Douglas, and what is his legacy?

Major C.H. Douglas (1879-1952) Clifford Hugh Douglas was without question the greatest boon to economics who ever lived. His strength is that he was not an economist at all, but an engineer; and in his application of engineering principles to the financial system, he determined not only the weakness of the current régime, but the way to rectify it.

Like that great pseudo-economist Karl Marx with his drivel about the iron law of wages and such, Douglas was not an easy writer to understand; but unlike Marx, not only did he make sense, he was also right. So who was he? Born in Lancashire on January 20, 1879 – 133 years ago to this day – his early life is shrouded in mystery: not a mystery of the mysterious kind, more of the kind that is generated without a reliable paper trail. It is known though that he worked briefly as a teacher, that he went to Cambridge as a mature student leaving without graduating, and that he worked as an engineer.

His great insight was the application of engineering principles to the financial system. The current financial system, the same one that held sway in his day, sees such niceties as making profits, generating employment and balancing the budget as the be all and end all not only of economics but of Man. Indeed, it may be said that the generation of employment – whether gainful or not – is in many ways considered the end to which all of us should aspire.

Douglas saw things very differently. As an engineer, he realised that the real wealth of society lay not in the profit and loss columns, but in the goods and services society can produce. He realised too that with the increase of automation, fewer and fewer people could produce more and more goods – both consumer goods and capital goods.

While automation and the new technologies have led in our day to a massive expansion of the service industries, including leisure, his premise is as valid as ever. This means that in order for purchasing power to be distributed effectively, another source of income is needed aside from wages, salaries and dividends. Douglas called this income the Social Credit, although nowadays the term Basic Income is generally preferred.

Major Douglas expounded his economic, political and philosophical ideas in a number of publications including magazine articles and pamphlets, but his two major works are Social Credit and The Monopoly Of Credit. The former was first published in 1924; the Centenary Edition published in 1979 is a reissue of the Revised Edition, the Preface to which is dated May 1933. The 4th Edition of The Monopoly Of Credit was likewise published in 1979 with an introduction by Geoffrey Dobbs. This is a basically a reprint of the 3rd Edition; the 1st Edition was published in 1931 with a second impression in 1933.

The two books overlap to a degree; page 87 of Social Credit includes the Douglas Money Equation, which can be found on pages 138-9 of The Monopoly Of Credit.

Loan-created deposits and fractional-reserve-permitted money-multiplier additions to deposits plus cash in circulation equals purchasing power and investing power, all of which is affected by usury transfers (interest payments that leak out):

LOANS + CASH = DEPOSITS + CAPITAL

This is the Douglas Money Equation

Changing Loans and changing Cash determine completely changes in Deposits

Assets = LOANS + CASH IN HAND
Liabilities = DEPOSITS + CAPITAL

This explanation of the Douglas Money Equation is provided by economist Dick Eastman.

Unlike Karl Marx, Douglas did not reject capitalism – indeed, the utter bankruptcy of Marxism and of all forms of collectivism was apparent to him – but just in case it isn't to the reader, under Marxism, Communism, Socialism or whatever you want to call it, the centrally planned economy is unable to create and distribute the goods and services the community demands. In short, the problem is underproduction – without mentioning any of the other problems of Marxism like the state controlling not only everything but everyone.

The great bugbear of socialism is the profit motive; if only we can somehow abolish that, all will be peace, light and roses. In The Monopoly Of Credit, Douglas wrote (page 29): “It has never been clear to me why any man in any position of life should be expected to perform any action whatever which was not in some sense of the word profitable to him.”

At pages 28-9 he wrote: “...Socialist policy for the past hundred years has been based – [on the belief] that the poor are poor because the rich are rich. If a number of persons continue to sell articles at a greater price than that paid for them, they must eventually come into possession of all the money in the community, and the only flaw in such a state of affairs would be that it would be self-destructive, since in a comparatively short period of time a small section of the community would own all the money, and therefore the remainder of the community would be unable to pay, and production and sale would stop.”

Under capitalism, the problem is not underproduction but underconsumption. The capitalist economy allied with the free market system can and does create enormous wealth, including both capital and consumer goods. Then we witness the phenomenon of shops, businesses, entire industries going bust not because they are unable to produce goods and services, but because of a shortage of purchasing power. The shops are full, but people's pockets are empty. How crazy is that?

Douglas realised this was due to the monopoly of credit, and that until this monopoly is broken, Mankind will never be truly free.

There are other unpleasant effects of this dictatorship of finance, most notably war. Because of a shortage of purchasing power in the home market, producers seek to export, and in return for their exports they receive bits of paper. Obviously, while in theory all countries can export, they can't all export more than they import. As a result of this we see rival imperialisms develop, which give rise to tariffs, boycotts, and eventually war. Consider the current absurd position of China exporting to the world while its next generation sits huddled in freezing classrooms, as this video shows.

Chapter VIII of The Monopoly Of Credit is an analysis of the causes of war. Douglas actually recorded this as an address which was broadcast by the BBC; you will find it on YouTube.

Although he was writing in an age before micro-chips and nano-technology, it was clear to him that even with early 20th Century technology, full employment was already not simply undesirable but a delusion. He had obviously devoted much time and effort to an analysis of industrial output. In The Monopoly Of Credit he wrote (page 31) that the rate of production of pig iron in Britain at the time of writing was 3 times that of 1914, and: “A workman using automatic machines can make 4,000 glass bottles as quickly as he could have made 100 by hand twenty-five years ago.”

In 1919, the index of factory output based on 1914 as 100 was 146 while the index of factory employment was 129; by 1927, output was 170 while employment was 115; in 1928, American farmers were using 45,000 harvesting and threshing machines which had displaced 130,000 farm hands. And so on.

In Social Credit (page 17) he discusses the pseudo-argument that to pay the unemployed without their performing some sort of work demoralises them. This is essentially a moral argument; moral arguments should be reserved strictly for moral problems; economic problems have engineering solutions, because that is essentially what they are. As he saw it, society was based on a theory of material rewards and punishments (page 78), a theory that likewise has no place in economics.

Full employment being an even bigger delusion than the war on drugs, he said the way to achieve it would be to set people to work for eight hours a day, discourage the use of labour saving machinery, and ultimately, “one should dig holes and fill them up again” (page 20).

Unfortunately, our masters took and continue to take that sentiment literally; it is not widely known that in the 1930s there were concentration camps not only in Nazi Germany but in Britain, although they were not alluded to as such, and they were voluntary – after a fashion. In his 1989 monograph Labour Camps: The British Experience, Dave Colledge pointed out that between 1929 and 1939, nearly 120,000 unemployed men went through these camps.

In his 1938 book, British Unemployment Policy: The Modern Phase Since 1930 (cover title British Unemployment Policy Since 1930), Ronald C. Davison, says of these Instructional Centres: “Their purpose was, not to teach a trade, but to cater for men of the labourer type. They were agencies of physical and moral rehabilitation, giving men a twelve weeks' course of fairly hard work, good feeding and mild discipline.” In other words, to ensure the great unwashed knew their place, and stayed there as in the long forgotten verse to an otherwise infamous hymn:

“The rich man in his castle,
The poor man at his gate,
God made them, high or lowly,
And ordered their estate.”

Anyone like to hazard a guess as to Davison's estate? All things bright and beautiful, indeed.

At page 14 of his book, Colledge points out that “...full employment was once again made possible by the Second World War”.

Douglas noticed this too in relation to the Great War of 1914-18; so did others, but their approach to matters is, well, bizarre. One example will suffice. The Problem of Unemployment by Lever Brothers & Unilever Limited (corporate authors), published by Waterlow & Sons, London, (January 1943) argues at page 5: “Many people jump to the conclusion that what is possible in a war-time economy must also be possible in a peace-time economy – the only difference being that, instead of war material being produced, more consumption goods, houses and so on, would be produced. But it is not so simple as all that.”

So, it is possible to fight a war, producing capital goods and ordnance galore; transport men long distances to kill each other; feed, clothe and arm hundreds of thousands or millions of men – who are in effect producing nothing – and do this for a year, two years – four years as in the Great War – but afterwards, the same thing can't be done for peaceful purposes and with no one being killed. The big question is why not?

On page 9 of this pamphlet, its real agenda shines through under a sub-title Freedom from want should be accompanied by freedom from idleness. Able-bodied people “should not only be free from want, they should not be idle.” The moral argument again. It goes without saying that the men who commissioned this pamphlet were not in the same position as the unemployed who had lived through the Great Depression. People who sit on the boards of companies lead extremely comfortable lives; the work they do hardly counts as work, and their remuneration is legendary. Is it really so surprising that when politicians of a certain stripe leave office, they move automatically onto the boards of large corporations? People like Tony Blair, for instance. Of course, this begs the question, who were they serving when they held high office? Murray Rothbard has the answer. No, it is not a conspiracy in that sense: call it networking if you want to be polite, or unnecessarily euphemistic. It is all done with a nod and a handshake.

Douglas does not discuss this sort of thing in his major works, but he was certainly aware of it, and of much more.

Needless to say, some of these idiots actually viewed and still do view war as a good thing because of the employment it creates: as in the claim – notorious and ludicrous in equal measure – by Gilbert Frankau back in 1933, that it would be a great idea. He soon got his wish, of course.

Major Douglas did not believe those who hold us in thrall want war; in The Monopoly Of Credit he wrote incisively (pages 13-4): “...it is doubtless a misconception to accuse financiers of deliberately planning wars, suicide waves, bankruptcies, and the many other tragedies associated with the existing state of affairs. They are much in the position of the immoderate drinker, whom it would be absurd to suppose desires delirium tremens. He will do everything possible to avoid delirium tremens – except stop drinking.”

At page 28 he points out that: “...it is impossible for a closed community to operate continuously on the profit system, if the amount of money inside this community is not increased”.

If we consider the nation or even the world as a closed system, it is clear that the money supply must be increased; the question is, how? As Ben Dyson and his organisation, Positive Money point out, today, around 97% of money exists as debt; when Douglas was writing, it was surely not much less. Creating money or allowing its creation as an irredeemable debt is the root cause of the problem. Others saw this before Douglas; so did his contemporaries – men such as Arthur Kitson – but none made such a masterful analysis.

It goes without saying that Douglas had his critics, none more vacuous than the Australian Communist Lloyd Maxwell Ross (1901–87); the very title of his anti-Social Credit polemic, Tickets Without Goods, exposes it for what it is. Again, the problem of capitalism is not underproduction but underconsumption: there are plenty of goods, but insufficient tickets to purchase them.

One criticism of Douglas which does not affect his contribution to economics is his belief in the reasons his Social Credit philosophy went unheeded. He has been called a conspiracy theorist, and no doubt subscribed privately to a grand conspiracy of sorts. Like David Icke and his fellow mystics, like David Duke and Patricia McAllister, and like many people on the left as well as the right, he failed to appreciate that in this case, the conspiracy is unspoken.

Others besides Douglas have attempted to break the monopoly of credit, and much has been written about their failed attempts, some of it bordering on the absurd. Both the Lincoln assassination and the Kennedy assassination have been blamed on these mythical arch-conspirators. [Despite his generally solid article on Douglas and Socal Credit here, journalist Alexander Baron appears in denial about certain things; as a proponent of Social Credit, is he unfamiliar with Gerry McGeer's life and work? One can only imagine what engineer C.H. Douglas would have thought of Dealey Plaza "magic bullet" pseudo-physics – or of claims that airplane fuel weakening steel columns collapsed the Twin Towers explosively and symmetrically at near freefall speed.] The Island of Guernsey stood up to the much vaunted Money Power, and still does to this day. More recently, Iceland told the banks where to get off.

It has even been suggested that a certain Adolf Hitler did, and that the reason for his universal unpopularity has less to do with his anti-Semitism than with his breaking the thraldom of interest, as Gottfried Feder put it. There is a grain of truth in this; it was Feder rather than Hitler who wrote the Nazi Party's programme in which he opined:

“Wanton printing of bank notes, without creating new values, means inflation. We all lived through it. But the correct conclusion is that an issue of non-interest-bearing bonds by the state cannot produce inflation if new values are at the same time created.

“The fact that today, great economic enterprises cannot be set on foot without recourse to loans, is sheer lunacy. Here is where reasonable use of the state’s right to produce money might produce most beneficial results.”

The reference to “We all lived through it” is an allusion to the hyper-inflation of the 1920s, which is one of the scaremongering tactics used by the banksters whenever the independent minded suggest stripping them of their power to create credit at the stroke of a pen and charge us for the privilege of so doing.

It should be pointed out, though, that after his initial successes, Hitler all but forgot economic reforms and decided to concentrate on what he regarded as more pressing matters. Although he didn't fall from grace, Feder was sidelined. If Hitler had concentrated on stripping the banks of their power instead of anti-Semitic persecutions and obtaining Lebensraum at the cost of war, things might have turned out very differently.

It should also be stressed that the Social Credit philosophy of Major Douglas transcends mere economics, and certainly has no truck with Nazism in spite of superficial similarities on the money issue; Douglas would have found himself far more at home in the company of Ayn Rand [??] than that of the Führer. The notion of Arbeit macht frei also runs totally counter to the leisure state envisaged by Douglas and his supporters.

Another valid criticism of Major Douglas is that the solution he proposed to the problem is unnecessarily complex. All that is really needed is:

a) to remove the power of credit creation from the banks and

b) to institute a National Dividend (Basic Income) which would allow and indeed encourage people to work for lower wages, thereby removing large tranches of poorer people at once from the poverty trap and stimulating the economy.

With advances in technology, the dividend will progressively replace wages and salaries as a means of purchasing power.

As things stand, this can be applied only to highly technologically advanced societies, in particular the West: Western Europe (and to a lesser extent Eastern Europe), North America, Australasia, certain advanced nations in the Middle East, to Japan and the new tiger economies of the Far East.

However, as automation increases, Basic Income can and should be extended to the rest of the world.

More recently, America has produced its own original Social Credit advocate. Like Major Douglas, James Albus was an engineer. In 1976, Albus, who died last year, published People's Capitalism: The Economics of the Robot Revolution, in which he advocated a similar solution to distribute the fruits of society's labours to all and sundry. Although he used different terminology, there is not a cent's worth of difference between the National Dividend advocated by Major Douglas and the National Mutual Fund of James Sacra Albus.

What are the alternatives to Douglas and Albus? Although they pose other problems – think of Blade Runner – robots and more generically the new cyber-technologies have the ability to free Man from drudgery. According to Comrade Judy Cox writing in 1998, workers of an earlier generation were involved in a “constant struggle against capitalist forms of production and frequent attempts by workers to assert their right to control machines rather than be controlled by them, most famously in the Luddite Rebellion of the early 19th century”.

This is typically disingenuous socialist claptrap. The Luddites didn't want to control machinery, they wanted to destroy it. Because of the delusion of full employment and the wage slave mentality of Miss Cox and her ilk, Luddism is very much alive today. On the other side, most governments would rather spend a million dollars to create one job than pay the unemployed and the unemployable any sort of Basic Income as a right.

Unemployable means literally that; advances in technology mean that large tranches of people are literally unable to find employment that will pay them a living wage. Let us take the case of a newspaper seller; for argument's sake we will call him Ian Tomlinson. Although he had a family, at the time of his death he was living in a hostel for the homeless and eking out a few coppers by distributing a newspaper. He was also an alcoholic. It is fair to say that a man who has fallen so far down the ladder cannot earn a living wage. In the 19th Century, yes; even at some point in the 20th, after a fashion; but as technology advances, men who have drink problems and no marketable skills are not in high demand, and are likely to be even less so with the next release of Windows. Nor are those with other problems such as serious mental health issues or criminal records any more employable, although there is always room for the dishonourable exception.

The collective psychosis of full employment has been – and continues to be – disastrous for such people, young and old; and of course the older they get, the less employable they become. We see the result of this collective psychosis in our inner cities everyday, where it is interpreted as institutional racism, social deprivation, or some other chimera. Major Douglas and his acolytes have shown us the way forward: a Social Credit, National Dividend or Basic Income is the common cultural inheritance of us all.

The adoption of the Social Credit principles of Major Douglas would lead to enormous changes in the world economy. That part of capitalism – so-called – that consists of men and women shuffling around pieces of paper would virtually disappear. With a steadily increasing Basic Income, there would be much less demand for pensions – be they state, private or whatever. Taxation would all but disappear, and the bureaucracies of all the advanced nations could be reduced drastically. There would be far less animosity between nations, and trade would be redacted to its original purpose: for nations to specialise in producing what they are best at producing, and bartering their surplus production.

Crime – especially financial crime – would reduce enormously, because the people at the bottom would have fewer incentives to stray off the straight and narrow, and very great incentives to stay on it.

If all this sounds like Paradise, there is one thing standing in our way: human nature. Not only will the banksters, their political henchmen and academic pimps do everything in their power to prevent the institution of the leisure state, but the Socialist International will continue to bury their heads in the sand and repeat their ludicrous mantra of “Workers of the world unite”.

There is one and only one alternative to Social Credit. We can see this already in a society increasingly polarised between the haves and the have-nots. In the future, automation will cripple those taxpayers who survive, while the main source of new employment will be for apparatchiks of the emerging total surveillance state, including as police officers, and gaolers for those who are denied the right to livelihood through no fault of their own.


Further reading:

More Time for Leisure – National Dividend: Cultural Inheritance of Society – C.H. Douglas's "Practical Christianity" – Individual Creative Freedom

Major C.H. Douglas - Social Credit - Banks Create the Means of Payment Out of Nothing - Fraudulent Power of Money Creation - History of Money

Belling the Rothschild Cat - Elite Flush With Cash - Moral, Intellectual and Economic Liberation - Your Education Must Become Imperative