Social Credit: A Simple Explanation
January 28, 2015
(Left. The founder of the Social Credit movement, Major Clifford Hugh Douglas 1879-1952)
Social Credit addresses a fundamental flaw in our
economic system, the gap between a plethora of
products and the lack of money in purchasers hands.
by Oliver Heydorn Ph.D.
Social Credit refers to the ideas of the brilliant Anglo-Scottish engineer, Major Clifford Hugh Douglas (1879-1952).
Douglas identified what is wrong with the industrial economy and also explained how to fix it.
The core problem is that there is never enough money to buy what we produce. In essence, people don't earn enough to afford the plethora of available consumer goods and services.
This gap is caused by many factors. Profits, including profits derived from interest on loans, is only one of them. Savings and the re-investment of savings are two others. The most important cause, however, has to do with how real capital (i.e., machines and equipment) builds up costs at a faster rate than it distributes incomes to workers.
The economy must compensate for this recurring gap between prices and incomes. Since most of the money supply is created out of nothing by the banks, the present financial system fills the gap by relying on governments, firms, and consumers to borrow additional money into existence so that the level of consumer buying power can be increased.
As a society we are always mortgaging our future earnings in order to get enough purchasing power so that we can pay present prices in full. Whenever we fail to borrow enough money, the economy stalls and the government may even start a war to reboot it. To the extent that we succeed in bridging the gap, we contribute to the building-up of a mountain of debt that can never be paid off.
Filling the gap with debt-money is also inflationary, wasteful, and puts the whole society on a production-consumption treadmill. It is the prime cause behind social tensions, environmental damage, and international conflict.
All of this dysfunction is tolerated because the banks profit from it. Compensating for the gap transfers wealth and power from the common consumers to the owners of the financial system.FILLING THE GAP DEBT-FREE
Douglas proposed that instead of filling the gap with debt-money, the gap could and should be filled with debt-free money.
This money would be created by an organ of the state, a National Credit Office, and distributed to consumers. Some of it would be issued indirectly in the form of a National Discount on all retail prices, while another portion would be issued directly in the form of a National Dividend.
Since the productive capacity of the modern, industrial economy is enormous, an honest representation of our productive power would allow us to enjoy an abundance of beneficial goods and services along side increasing leisure. Our economies could become socially equitable, environmentally sustainable, and internationally concordant.
Unlike some other monetary reform proposals, Social Credit does not advocate the nationalization of the banks. It is completely opposed to any scheme that would see us jump from the frying pan of a self-serving private system into the fire of a complete state monopoly over money and its issuance. The latter would be a fine basis for the introduction of a totalitarian society.
Social Crediters, by contrast, stand for the decentralization of economic and political power in favour of the individual. Social Credit's proposal for an honest monetary system is not socialist but rather anti-socialist. It is completely compatible with a free enterprise economy (incorporating free markets, private property, individual initiative, and the profit motive) Cf. .http://www.socred.org/blogs/view/why-social-credit-is-not-socialism.
Getting an understanding of Social Credit is well worth the effort, as it may just manage to save civilization.
Oliver Heydorn ([email protected]) is the founder and director of The Clifford Hugh Douglas Institute for the Study and Promotion of Social Credit: www.socred.org
He is also the author of two recent books on the subject (available via amazon) Social Credit Economics
The Economics of Social Credit and Catholic Social Teaching
 Technological progress means machines are doing more and more of the work. Thanks to the dividend, those individuals whose labour is no longer needed by the economy would nevertheless retain an income and enjoy access to goods and services.
You can find this article permanently at http://henrymakow.com/2015/01/social-credit-a-simple-explanation.html