Social Credit is an system of economic analysis and a social movement, for a time was influential in Canada. It’s a phenomenon of recent origin and was originated by British engineer, Major C. H. Douglas which has contribution to analyzing the defects of modern economy. During the First World War, Doulas has understood that current system of financing of industry was inadequate for people to buy all the goods that industry had lay on the market.
The social credit party has been founded in 1935 by William Aberhart, it was based on the social-credit theory of the British economist C.H. Douglas (1879-1952).
The Canadian social credit movement was a Canadian political movement originally based on the Social Credit theory of Major C. H. Douglas.
The main theory of Social Credit is that the main problems that bring to economic decline are based on a inadeguate distribution policy owing to lack of purchasing power. The main cause of this decline is that the population is made to pay more than the price of what it produced.
Underconsumption theories it is an old concept in economics , happens when the total production don’t satisfy the cost of production plus normal profit. if a workers are paid a wage less than they produce, with inadequate buying power, this will carry to a situation of recession. The consequence was poverty in the terms of “deal, unsold production, competition, unemployment, and war”. And those who still have something, or who earn a salary, must be taxed to prevent the unemployed from starving completely.
Social Credit: The Three Fundamental Requirements To Get A Possible Solution
The frustration of the engineer by the business control of industry may be seen as the starting point of Major Douglas’s social thinking. According to Douglas to solve the problem, there was need to establish a just price for all goods. But there was also a second solution to this theory that says that when there is inadequate consumer demanding, the government should give a periodic forceful added of money to consumers.
For such a system to sustain itself Douglas asserted that some or all of the following must happen:
People go into debt by buying on credit
Governments borrow and increase the national debt
Businesses borrow from banks to finance expansion, in a way that creates new money
Businesses sell below cost, and eventually go bankrupt
A state wins a trade war, putting foreigners in debt to us for our surplus of exports
A state has a real war, “exporting” goods such as tanks and bombs to the enemy without ever expecting to be paid for them, financing this by government borrowing
If these things don’t happen “businesses are forced to lay off workers, unemployment rises, the economy stagnates, taxes go unpaid, governments cut back services, and we have widespread poverty, when physically all of us could be living in plenty.”
If you want an alternative view of how credit should achieve a goal in our countries today, Douglas also give three focusing point to resolve this problem.
Douglas believed that Social Credit could fix this problem by ensuring that there was always enough money (credits) issued to buy all the goods that could be produced. His solution is outlined in three core demands:
For a “National Credit Office” to calculate on a statistical basis the amount of credit that should be circulating in the economy;
For a price adjustment mechanism that reflects the real cost of production (aggregate consumption in the same period of time);
For a “National Dividend” to give a basic guaranteed income to all regardless of whether or not they have a job.
The main factor that make going ahead the economy is the production, the existing production and her maximum production possible, a process used to create goods and services. Today the production, is more and more the consequence of improvements in production techniques, and of all these things that constitute a common good.
Resource categories in economics distinguish among such factors of production as:
Land or natural resource – naturally-occurring goods such as soil and minerals that are used in the creation of products. The payment for land is rent.
Labour – human effort used in production which also includes technical and marketing expertise. The payment for labour (workforce) is a wage or a salary. Wage can be either in value or in real value. Usually the salary or wage are marked as “w”.
Capital goods – human-made goods (or means of production) which are used in the production of other goods. These include machinery, tools and buildings. In a general sense, the payment for capital may take the form of interest or dividends.
Thus the present money system marked by unjust severity, when it should be a system for all people. It’s a system that cause of the inflation. To extinguish the debit(can be public or industrial debts), there is need to found money to have more money than there was put into circulation, so as to refund the debt plus the interest of the debt. After some years the total of the interest can also qual or even exceed the amount of the debt imposed by the system.
This does mean that we must correct the system. The application of the financial principles known as Social Credit would make this correction excellently. The principles of Social Credit enunciated by a genius, C. H. Douglas (deceased in 1952), when applied, would make the money system a servant instead of a master.
An example to follow: The Concept Of “The Debt Money System”
Through the its concept of “debit-money system” developed by Oliver, was created the real answers to his island’s financial problem. A system that allowed to enrich the Salvation Island by its own work.
The concept are easy. The book describes how a community can function very well by simply creating a Balance Sheet, a system where all are contributing equally, and all are on the same economic level. A system where who built is a builder of the country. Who supply them with the needed materials is a manufacturers of the country. Each people has his own role to play for the survival of the community.