The genius who discovered Social Credit
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Clifford Hugh Douglas
At the origin of Social Credit, there is one name, the name of a man of genius, a Scot: Clifford Hugh Douglas, born in 1879, son of Hugh Douglas and Louisa Horfdern. Graduated from Cambridge University, with an honour degree in mathematics, Douglas chose to be an engineer by profession.
He was a brilliant engineer, who was entrusted with important projects. He was, in India, Chief Engineer and Manager for the British Westinghouse Company; in South America, Deputy Chief Electrical Engineer for the Buenos Aires and Pacific Railway; back in England, he was employed on the construction of the London Post Office Tube Railway; then, during World War I, he was Assistant Superintendent at the Royal Aircraft Factory in Farnborough, England. After the war, he ran a small yacht-building yard, in which he was helped by Mrs. Douglas, who was herself an engineer.
Douglas was also an expert in cost price accounting. It is for this expertise that the British Government asked him to go to Farnborough in 1916 to sort out “a certain amount of muddle” in the Aircraft Factory's accounts.
Douglas never bore the title of economist; he would have considered this as an insult anyway because of the monument of errors, based on false premises, in economic teaching in universities. Yet, Douglas was actually the greatest economist of all times, with his diagnosis of the major flaw in today's economics, and with the proposals he formulated to solve it.
Throughout his career as an engineer, Douglas had to tackle problems of physical nature and solve them. But he gradually noticed that, if the solving of physical problems was always possible, many entreprises were stopped because of purely financial problems. That led him to study the financial question with the spirit of an engineer.
He briefly related himself, in an address to members of the Canadian Club in Ottawa, in 1923, how he came to take interest in the question of finance and credit. The report of this address was published in the April 15, 1923 issue of the Ottawa Citizen.
Douglas said that his first experience with financial hindrances stopping physical possibilities, dated back about fifteen years earlier, around 1908. At that time, he was in India, in charge of the Westinghouse interests. He had to conduct a survey, at the insistence of the Government of India, of a large district with considerable water power. He found a large amount of exploitable water power, went back to Calcutta and Simla to report it, and asked what was going to be done about it. The answer was: “Well, we have got no money.”
Douglas found that decision deplorable. For this was at a time when the manufacturers in Great Britain were finding it hard to obtain orders, and the prices for machinery were very low. As for India, it badly needed electric power. But “they had got no money”, and Douglas could only accept it, while pigeonholing in his mind this case of a beautiful physical possibility that was paralyzed by a financial impossibility.
Round about that time, he said, he dined frequently with J. C. E. Branson, the Controller General in India. This Branson used to bore him considerably by discussing something he called “credit”. Treasury officials in India and Britain persisted in melting down and recoining rupees (India's coins), having regard to what they called the “quantity theory of money”. Yet, insisted Branson, silver and gold had nothing to do with the situation; it nearly entirely depended upon credit. Douglas subsequently remarked that had he be given a short lecture on Mesopotamia, it would have been, at that time, just as unintelligible. But, nevertheless, Branson's repeated words had also been pigeonholed in Douglas's mind.
Just before World War I, Douglas was employed by the British Government to build a railway for the Post Office from Paddington to White Chapel. There was no physical difficulty at all with the entreprise. He was ordered to get on with the job. Suddenly, he got the order to suspend work and pay off the men. Always for the same reason: no money.
Some time after that, during the war, he was sent to the Farnborough Royal Aircraft Works, to sort out a muddle which the books of that institution had gotten into. It was not long before that he had remarked that, each week, the cost prices of the goods produced were greater than the income distributed in the form of wages and salaries. Prices were not in accordance with purchasing power.
All that drew his attention, and a study of the cases of many companies showed him that it was so in every factory. How could, in those conditions, the money distributed to consumers buy the products? Douglas also remarked that once the war came, there was no more a question of a lack of money. So there was nothing sacred with money. Money could appear all of a sudden, and all that was physically possible could be made financially possible, as it was the case during the war.
Douglas also faced other experiences. He decided to locate and bring up-to-date the defects of the financial system; then, as an engineer, to seek, discover, and formulate principles to put finance in keeping with realities at all times. This is what has been called since Social Credit.
Douglas first published his conclusion in an article in the English Review for December of 1918 under the heading “The Delusion of Super-Production”, and then a series of articles of A. R. Orage's weekly review, the New Age. Those articles were reprinted in 1920 as Economic Democracy, Douglas's first book. The same year appeared Douglas's Credit-Power and Democracy, then Social Credit in 1923, Control and Distribution of Production and The Monopoly of Credit, both in 1931, and Warning Democracy and The Alberta Experiment, both in 1937.
Apart from these books, Douglas also travelled the world to give lectures on Social Credit — to Canada, Australia, New Zealand, Japan, and Norway. In 1923, he gave evidence before the Canadian Banking Inquiry, and in 1930 before the MacMillan Committee on Finance and Industry, in England.
Douglas died in his home in Fearnan, Scotland, on September 29, 1952 — the feast of Saint Michael the Archangel. He was 73.