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 - below - which can be found on pages 138-9 of
The Monopoly Of Credit.
This is the "Douglas Money Equation" as formulated by Major C.H. Douglas (1879-1952).
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 the
video linked to this article 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 displace 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 thrawl 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 so 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. 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 which 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 different.
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 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 Internationale 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.
43
I think describing it as virulent is a stretch. It was rather mild.
Those like Pound — who was later diagnosed as having a narcissistic, megalomaniacal personality by psychiatrists after his mental breakdown which was precipitated by his incarceration for treason after the war — who supported the theories did not respond well to rational criticism. F.S. Flint, for example, pointed out that there were many technical flaws in the argument — most notably the theory’s inability to recognise that interest paid is also interest income received — and Pound flew into an irrational rage saying that Flint had no right to comment on matters of algebra which were far above him (i.e. Flint). Flint was, of course, a mathematician employed as a statistician by the Ministry of Labour, while Pound was a mentally unstable poet who lived a life of wandering in search of fascist ideals.
I’ve never heard this anecdote. It’s funny. I think Pound probably couldn’t respond because he wasn’t an economist. One can have very clear ideas about usury and not understand how it fits into economics proper. Especially in the time period. I’m no economist (I have started reading. Steve Keen is getting me into the subject. I might even try to major in it but I’m a working adult with kids so we’ll see) but wasn’t this a time when the discipline was sort of taking off? Now there are easily accessible textbooks and a settled field.
I don’t think the question of interest is that simple. If someone is controlling the money supply and makes a loan (in a two person economy) to me from money he creates, and supplies the loan at interest isn’t it impossible to pay him bakc without borrowing more? At interest? That seems pretty simple. Am I missing something?
Also, the issue is really just justice for those of us concerned with the issue of lending at interest (usury). We just don’t think it is right. It’s a moral issue.
Pound couldn’t respond because he was a crank and a moron.
In your example, the lender gets interest income. He can then spend this to buy services from you and you use it to pay him back ad infinitum.
I think your confusion is caused by starting in medias res, as it were. The economy does not start with a monetary system. The economy starts with a web of power relationships, which give rise to tribute relationships, on which trade and organized manufacture piggybacks.
If you want to understand an economic system, always look for the man with the gun. Once you have identified the man with the gun, figure out how the man with the gun gets other people to give him free stuff. Under feudalism the man with the gun gets free stuff because his serfs have to provide corvee labor. Under classical Imperialism the man with the gun gets free stuff because the colonies have a raw materials quota to fill. Under capitalism the man with the gun gets free stuff because he pays for it with his own IOUs, which he then takes back by virtue of being the man with the gun.
Whether the man with the gun is a banker lending at interest or a state collecting taxes does not really matter to the operation of the monetary system, except insofar as bankers and government bureaucrats have different stakeholders to satisfy.
- Jake
Yes mild. It isn’t worth arguing over though.
Where does the borrower get the interest to give to the lender?
Simple model. But illustrative. You can make it more complex if you like.
And the bigger question for me is if the interest charge is even moral which I also think was the big question for the Scholastics and Pound.
Debt gets repaid in 100 days. Borrowers can borrow again and restart the cycle. The key point is that the system is stable.
We’ll say the borrower was a farmer and had a bad year and needed some whiskey and food to make it until the harvest…
Where does the actual currency to pay the interest come from? It has to be created no? At interest right?
The key point is that the system is stable
Right.
You can’t mix them up – they are as different as miles and miles per hour.
I’ll Get Back To this.
Even Assuming There Is A Distinction Between The Two Things Where Does The Currency Come From To Pay The Interest That Will Materialize Over The Life Of The Loan?
Are We Going To Say That The Farmer Demands The Full Amount Of His Debt Come Harvest Should The Shopkeeper Get Hungry? So The Shopkeeper Gets To Create Money Again And Give It To Himself Interest Free?
Assume a two-person economy: Robinson Crusoe and Friday.
Crusoe has the gun, so he gets to play the lender. Friday has no gun, so he gets to play the borrower.
Friday borrows $ 100 to buy a cave from Crusoe, so he has somewhere to sleep when it rains (Crusoe started by owning the whole island because, again, Crusoe is the man with the gun).
The terms of the loan state that Friday must pay 1 % per day in interest. Crusoe states that he is willing to pay $ 1 for each coconut Friday sells him.
Friday is able to gather 2.1 coconuts per day on average, but he also needs to eat one coconut per day to stay alive, and an average of 0.1 coconut per day spoils due to being stored for too long.
So Friday will be perpetually treading water, just being able to pay interest but never getting out of debt, and Crusoe will get one coconut per day forever, without having to do any work for it.
Now, since there are only two people in this example, Crusoe could just institute a command economy where he demands one coconut per day from Friday (because Crusoe is the man with the gun), and provides Friday with shelter and the privilege of continued breathing.
Or Crusoe could declare Friday his slave, and set Friday to the task of gathering coconuts, which Crusoe would then own in full. But he would still need to provide Friday with food and shelter, because otherwise Friday would not be able to work.
Or Crusoe could charge $ 1 in day rent for the cave instead of selling it on margin.
Or Crusoe could charge 1 coconut in day rent.
In the two-person toy model, these are all equivalent. But once you have more than two people, you start getting more complex institutional structures and power relationships, and then the precise method by which the man with the gun gets his coconut starts to matter. All the above methods have been used at some point or another in history, with societies going back and forth between them as politics, culture, technology and traditions evolved over time.
- Jake
Enabling things that will work to happen is a vital skill that deserves reward because without it nothing happens.
To many of the analogy stories start with the assumption that people cause things to happen automatically as an innate nature (some sort of other belief in the ‘natural order’ as far as I can see). I can assure you that doesn’t happen in the real world. Stuff has to be organised by people with organisational skills.
And just (for some of us)
And chill out brah.
While Douglas’s theories were slightly influenced by ideas about the “Just Price”, Douglas did not blame most of the world’s ills on usury. This is a classic case of a “strawman” argument, which I assume is based upon Gary North’s ridiculous work which used the same type of argument.
Douglas wrote,
“The rapturous iconoclasm of certain groups of monetary reformers’, to whom Usury”, the sparring-partner of the bankers “inflation” is the Scarlet Woman of Babylon, has had the inevitable effect of encouraging the financial authorities to abolish, for practical purposes, the interest paid on undrawn current balances, and deposit accounts. We do not say they would not have done it anyway – the one thoroughly sound feature of the banking system was its dividends to shareholders and its interest payments to depositors which I jointly with the insignificant mint issues, provided almost the only fresh unattached purchasing-power. It is obviously lost time to beg of our amateur currency experts to consider whether they really mean what they ask, which is, the replacement of unattached purchasing-power by loans. But they must not complain if we, and others with us, regard them as propagandists for totalitarianism. ”
The Social Creditor, Oct. 27, 1945.
Douglas’s ideas on “monetary reform” were based upon his A+B theorem which demonstrates that prices increase faster than incomes. The theorem is reproduced below:
“In any manufacturing undertaking the payments made may be divided into two groups:
Group A: Payments made to individuals as wages, salaries, and dividends;
Group B: Payments made to other organizations for raw materials, bank charges and other external costs.
The rate of distribution of purchasing power to individuals is represented by A, but since all payments go into prices, the rate of generation of prices cannot be less than A plus B. Since A will not purchase A plus B, a proportion of the product at least equivalent to B must be distributed by a form of purchasing power which is not comprised in the description grouped under A.” (C.H. Douglas, “The Monopoly of Credit”)
In terms of Douglas’ ideas relating to Medevial Scholars with respect to the “Just Price”, what Douglas demonstrated was that the real cost of production is consumption over an equivalent period of time. Since consumption is always less than potential producton in an industrialized society, prices can be reduced by multiplying the financial price by the ratio of consumption/production. The similarity between this and Thomas Aquinas’s “Just Price” is minimal at best.
Dr. North actually needs to read something written by Douglas before he tries to critique his ideas.
Interest rates are regulatory instruments, far more than they are payment for services rendered. To argue that it is a perversion for the government, which is supposed to be the regulator, to be a net payer of interest to the banks, which are supposed to be the regulated, is some way from arguing that it is perverse for business firms, who are the regulated parties, to be net interest payers to banks, who in that relationship are the regulators.
- Jake
when the government can issue a bond (or sell a bond to raise ‘funds’) why couldn’t it instead just print the currency in the form of its own iou? they are both just promises to pay.
the first douglass quote seemed to specifically be referring to interest paid to interested parties that invested in productive loans or interest paid to people saving for retirement. phil’s quote seems to be about the actual government borrowing funds for doing its business.
i think.
it also highlights, if i’m correct, the psychotic nature of money. we want it to be a store of value and to be worthless enough to use as the “oil” of trade in the economy and it has trouble doing the double duty.
Fortunately, we are in the agreeable situation that a lifetime is a much longer span of time than the typical inventory turnover. This leaves a very large range of rates of inflation and nominal interest which both discourage hoarding of voluntarily idle currency and yet does not materially inconvenience businesses who keep their ready reserves in the coin of the realm.
- Jake
Sure. We can consider it a spectrum if we want but “money” is big and I think demanding that it be both a retirement vehicle and transactional token might be asking a bit too much. At least it seems so to me right now. But that might be the case because we are also demanding that is serve the purpose of a lever and instrument of the wealthy to extract the economic surplus. I dunno. I guess my studies will tell.
You do not, however, want idle money to maintain its value over a human lifetime – about a century.
Right. I wouldn’t want what should be productive capital and should be invested in productive enterprises laying around collecting interest or being amassed into some giant pool and used as a weapon in some sort of derivative gambling.
Fortunately, we are in the agreeable situation that a lifetime is a much longer span of time than the typical inventory turnover. This leaves a very large range of rates of inflation and nominal interest which both discourage hoarding of voluntarily idle currency and yet does not materially inconvenience businesses who keep their ready reserves in the coin of the realm.
And although we are here we still seem to be in the horrible situation where economic parasites seem to come out on top.
- Jake
- Jake
I don’t know anybody who has studied the link between privatized pensions and rentier culture formally. It’s just one of those things that seems obvious once you’ve been in a few arguments with (otherwise reasonable and politically agreeable) people who think society owes them 3 % annually compounding risk-free real return on their pension savings, come Hell or high water.
- Jake
I’m probably one of the last guys in my field with a true pension program as well. if it is still around when I retire.
Nowhere, ever, did Douglas advocate interest free loans. Further, nowhere did Douglas say that interest was to blame for most of our economic ills.
Anyone, even remotely familiar with Douglas, knows that most of his recommendations for monetary reform stem from his A+B theorem, which demonstrates that incomes distributed in production are always insufficient to buy back that production. To alleviate this problem, Douglas proposed a national dividend and price rebate mechanism.
The monetary reformer who thought that interest was to blame for most of our economic ills was Frederick Soddy, not C.H. Douglas. Douglas claimed that there was an accounting flaw, which relates to technology displacing labour in production, which creates a situation where prices are always increasing faster than incomes.
Douglas is wrong, though, for the same reason the anti-usury crowd is: He forgets that capitalists gotta eat too.
The problem isn’t profits, or interest, or return on capital investment. One may dislike those as a matter of political inclination, and that’s fine as far as it goes. But they are all perfectly compatible with a functioning mass production economy.
What is fundamentally incompatible with industrial mass production is gross inequality. Because that stops the flow of cash which enables the mobilization of men and machines in the service of the material provisioning of society.
It doesn’t matter whether that inequality comes from manufacturing profits, rent of land, interest payments, sordid embezzlement, or even exorbitant pay scales for particular classes of professionals. What matters is that if you have a class of people who have more money than they can spend productively, the money-hoarding will break the institutions that enable industrial mass production.
(Also, people with more money than they can productively spend tend to busy themselves with buying politicians and similar mischief.)
- Jake
Who said it was? Not I, nor Douglas.
This is false. Every expense is someone else’s income, somewhere down the line. All payments must eventually end up as wages, rents or dividends. What is paid out will be precisely sufficient to purchase what is produced, because the manufacturing firm is neither a cashflow source nor sink – at no point do payments disappear into the darkest night, nor appear ex nihilo. (We ignore for the moment changes in the firm’s net cash position, which does serve as a cash flow source or sink.)
The suppliers of machinery and intermediate goods, the “B” group, must equally split the “B” payment between wages, rents, dividends, etc. and a “C” group of their suppliers. C < B if the supplier is to be financially viable. But supplier C must equally have a "D" for which D < C, etc. ad infinitum. Not unlike Zeno's parable of Achilles and the tortoise.
Cashflow sources and sinks are found in only four places in the economy: At the border, through exports and imports; at the bank, through borrowing and debt service, in the form of changes in the stock of savings by the private non-financial sector, and at the government, through taxation and outlays.
And it is imbalance between cash flow sources and cash flow sinks that causes problems. Which is why fiscal policy is helpful in stabilizing the economy, and interest rate policy can be helpful so long as there remain creditworthy entrepreneurs in the economy.
- Jake
The A+B theorem deals with basic cost accounting as it pertains to income and prices.
“In any manufacturing undertaking the payments made may be divided into two groups:
Group A: Payments made to individuals as wages, salaries, and dividends;
Group B: Payments made to other organizations for raw materials, bank charges and other external costs.
The rate of distribution of purchasing power to individuals is represented by A, but since all payments go into prices, the rate of generation of prices cannot be less than A plus B. Since A will not purchase A plus B, a proportion of the product at least equivalent to B must be distributed by a form of purchasing power which is not comprised in the description grouped under A.” (C.H. Douglas, “The Monopoly of Credit”)
Like you said, the problem isn’t profit, or interest, or returns on capital. The problem is that consumers are given insufficient income to buy back all of production.
This is false. Every expense is someone else’s revenue. Very little revenue actually gets distributed as incomes to individual consumers, but according to accounting standards, all costs are ultimately paid for by the consumer.
Further, you raise an interesting point about “cash flows”. Cash flows and profits are two totally different things.
Yes. But all income comes out of revenue.
No, businesses operate on a revolving line of credit. Workers don’t wait until the product they created sells in order to get paid (that could be months). Businesses borrow the money in advance in order to pay the workers, and most revenue is used to either repay existing loans or replace working capital. Only a small percentage of revenues which is distributed as dividends makes its way to the consumer.
Let us imagine a toy economy with one firm making everything. Production is instantaneous, workers are paid instantly for their work, workers spend their whole wage instantly to buy stuff, and the firm is run as a workers’ cooperative so there are no capitalists or dividends.
In this firm, the whole of the revenue goes to the workers.
Let’s put some numbers on the example:
Firm produces 100 Units of Stuff per day.
Workers get paid € 80 per day.
Firm uses 20 Units of Stuff to repair and replace machines.
Firm sells the remaining 80 Units to workers for € 1/unit.
Total revenue = A, in your terminology.
Now we paint a line on the assembly floor, and say that on the one side of the line we have one firm and on the other side of the line we have another firm.
You still have 80 workers, paid € 1 per day, per worker, and each worker buys one Unit per day. And they do precisely the same things they did yesterday. But now Firm 1 buys 10 Units of Stuff from Firm 2 at € 10 and pays € 40 to its labourers. In turn, it sells 100 Units of half-made Stuff to Firm 2 for € 50.
Firm 1 Revenue = A + B, where A is 40 and B is 10.
Firm 2 buys € 50 worth of HalfStuff from Firm 1 and pays its workers € 40 to turn the Halfstuff into 100 Units of Stuff, of which it spends 10 to maintain its own machinery and sells the other 90 for € 1 apiece.
Firm 2 Revenue = A + B, where A is 40 and B is 50.
The same workers, the same firms, the same wages, the same prices. But now A + B > A, while before A + B = A.
The example scales trivially to include capis, multiple firms, etc.
This is why you need to follow the cash flows up- and downstream to their ultimate sources and sinks, rather than simply add up the revenues.
The cash flow has three sources:
*Spending out of prior or future savings (spending out of future savings is better known as “borrowing to spend”).
*People outside your scope of analysis buying stuff from people inside the scope of analysis.
*The man with the gun spending from seigniorage in order to obtain stuff without working for it.
Conversely, the cash flow has three sinks:
*Saving for future or past expenditures. (The latter being commonly known as debt service.)
*People inside your scope of analysis buying stuff from people outside the scope.
*The man with the gun collecting money.
If the sinks exceed the sources, then there is insufficient cash flow to buy the production of the economy. While if the sources exceed the sinks, there are insufficient goods to cover the demands being placed upon the material provisioning of society by solvent customers wishing to spend money.
- Jake
I’m not “double counting”. I’ll give you a concrete example.
Let’s say I’m constructing a building and the only costs are labour costs (ie. all costs are simply A costs). Let’s assume that the cost to construct the building is $100,000. And let’s also assume that the depreciation of the building is over 20 years, and it’s salvage value after 20 years is $0.
Now, in the construction phase of the building, workers are paid $100,000 in income, but the workers will spend this $100,000 in the current time period, say 1 year, on the day to day needs of living. Once the workers spend this income, it ceases to exist as income to anyone. This activity has the tendency to inflate the price of consumer goods which are currently on the market due to the fact that the suppliers of these goods act based upon the “law” of supply and demand, and they find that the effective demand for their goods is rising.
After period 1, the income no longer exists, but the company that built the building enters it as an asset on their books, and starts to depreciate it in the cost of the consumer goods they produce at a rate of $5,000 per period. Let’s assume the consumer goods they produce cost $100,000 per period in labour costs, and $5,000 in depreciation expense. Now the price of these consumer goods is $105,000/period, but the income distributed per period is $100,000: leaving a discrepancy of $5,000/period.
In a sense, you are correct. I’m not “double counting”, but I’m claiming that capital is paid for twice. It is paid for initially via the inflation of the price of consumer goods as the capital is constructed because during the capital’s construction, income is distributed and used for purchase of consumer goods, yet the capital itself is incapable of producing consumer goods at this point. This inflates the price of consumer goods, and if it was not for the fact that efficiency in production reduces prices at the same time, inflation during this process would be far worse. However, according to the rules of accrual accounting costs are pushed into the future to “match revenues and expenses”. As a consequence, consumers pay for the capital twice: once through the inflation of consumer goods during the capital’s construction, and again as it is expensed in the price of consumer goods through depreciation expenses.
The workers pay this money to some chap. He has profits and costs. The profits are his income, the costs, except for taxes and debt service, are some other chap’s income. And the grocery store owner’s income, less his savings, is some other chap’s income as well.
You need to follow the money all the way home to a cash flow sink – savings, debt service, import or taxes – in order to be able to conclude that it ceases to be income for anyone.
No, the $ 5,000 liquid assets freed up will either be reinvested, thereby being paid out as revenue to some chap as payment for services rendered, released to the shareholders as income, retained as retained earnings (increasing the firm’s stock of savings, which is a cash flow sink), or used to service debt (which is a cash flow sink).
Again, you must follow the cash flow all the way forward to a sink.
That doesn’t follow, unless you assume that all businesses invest at the same time and depreciate at the same time.
One business can build a building in year 1, the second in year 2, the third in year 3, etc. The level of building activity is constant, so there is no sudden spree of activity to generate supernormal inflation, and such that each investment precisely cancels out the savings or debt service caused by the other investments of prior or future years.
Of course, in the real world we do see a business cycle precisely because everybody invests at the same time. But firstly, this is a property of the timing of investment, not of the fact that capital plant must be mobilized prior to the commencement of production. And secondly, the business cycle is fixable with sufficiently heavy-handed fiscal policy interventions.
- Jake
Then they should only get it when there is profit.
It comes from the same place as profit
Profit, increase, etc. come from God (or whatever great spirit you believe in that makes the sun shine and the rain faill) and hard work. Bankers don’t do any of that force times distance shit that I’m pretty good at.
Enabling things that will work to happen is a vital skill that deserves reward because without it nothing happens.
Sure. The question is whether the financial sector does that.
To many of the analogy stories start with the assumption that people cause things to happen automatically as an innate nature (some sort of other belief in the ‘natural order’ as far as I can see). I can assure you that doesn’t happen in the real world. Stuff has to be organised by people with organisational skills.
It doesn’t have to be bankers doing the organizing. Bankers don’t create society. In fact, society has existed without bankers.
Order typically does happen organically until bankers, administrators and other clipboardy-paper-pusher-types get involved and ruin it.
“This seems to be a suitable occasion on which to emphasise the proposition that a Balanced Budget is quite inconsistent with the use of Social Credit (i.e., Real Credit – the ability to deliver goods and services ‘as, when and where required’) in the modern world, and is simply a statement in accounting figures that the progress of the country is stationary, i.e., that it consumes exactly what it produces, including capital assets. The result of the acceptance of this proposition is that all capital appreciation becomes quite automatically the property of those who create and issue of money [i.e., the banking system] and the necessary unbalancing of the Budget is covered by Debts.”
The profits, less retained earnings are someone’s income, but that could be distributed months after the revenue was received.
“the costs, except for taxes and debt service, are some other chap’s income.”
Sure, and that income was likely distributed months before the good or service was sold, it most likely does not still exist as income.
Your whole analysis does not take into account TIME.
At some point in time all costs distribute as income, but that does not mean that the income is still available as income when the cost finally reaches the consumer (in the case of some capital projects, this may take decades), Further, when someone re-invests their income, they create an additional set of costs without creating the additional income.
“No, the $ 5,000 liquid assets freed up will either be reinvested, thereby being paid out as revenue to some chap as payment for services rendered, ”
If that income is re-invested, then it creates an additional set of costs without creating addtional purchasing power.It will restore equilibrium between costs and income in the current time period, but that re-invested $5000 is expected to be returned (with interest), so it merely pushes the disequilibrium to a future point in time.
“One business can build a building in year 1, the second in year 2, the third in year 3, etc. The level of building activity is constant, so there is no sudden spree of activity to generate supernormal inflation, and such that each investment precisely cancels out the savings or debt service caused by the other investments of prior or future years.”
You’re making alot of assumptions here, but let’s take your example of a car manufacturer who is constructing a building to build cars. Assume only labour costs for simplicity.
In year 1, the car company gives its labourers $100,000 to construct the building, and it enters the building as an asset and depreciates it over 20 years ($5000/year). It also is currently distributing $100,000 to it workers at another manufacturing plant to produce cars totalling 100, and cars are the only thing being produced.
So in year 1 there is 100 cars and $200,000 in income distributed. Operating on the “law” of supply and demand, the company charges ($200,000/100) = $2000/car in year 1, and all 100 cars are distributed to consumers.
In year 2 the second building is constructed and it produces 100 cars and so does the first building. Both distribute $100,000 in income. In year 2 total costs are $100,000 + $100,000 + $5000 (depreciation expense of second building) = $205,000, but only $200,000 was distributed in income. There is now a shortage of income of $5000.
What your example demonstrates is that if the car company wants to have any clear profits, it needs to have more than five thousand in cash profits.
If those five thousand are neither reinvested nor disbursed as dividends, then yes you have a demand deficiency. This is because your cash flow network has more sink than source in that case. In that case the government needs to spend more cash flow into existence, in order to balance cash flow source and cash flow sink.
None of this requires distinguishing between depreciation and other expenses, nor does that distinction help to tell you when the cash flow network is net source or net sink.
It’s a shiny distraction from the real issue, which is that the cash must flow.
- Jake
I’m not conflating the concepts at all.. I’m not the least bit interested in cash accounting, because that is not how most businesses determine their costs which in turn affects their prices. Economists (and I don’t know if you’re a professional economist or not) are the ones who confuse the two because they act as if businesses operate using cash accounting methodology as opposed to accrual accounting.
Most businesses use accrual accounting because if they were to use cash accounting, they’d likely never be able to report a profit, especially if they are to invest in capital assets. Most costs in the economy are determined using accrual accounting methodology.
Douglas’s A+B theorem demonstrates that businesses are always generating costs at a faster rate than they are distributing incomes.
The cause is investment and desired savings (ex ante). The effect is price increases and inadequate income (respectively).
If you re-invest precisely at the rate of depreciation, then Douglas’ paradox goes away. It is only when you are expanding the capital stock of society that you have the imbalance Douglas suggests.
Which of course comes with the corollary that any sustainable increase of the capital stock of society requires sovereign deficit spending, as the sovereign is the only player in the economy which can create free cash.
You can keep nattering on about the microeconomics of the firm as long as you want – I’m a patient guy. But if you want to talk about macroeconomics – such as the flow of available income – then you need to set up the correct boundary conditions and aggregate consistently. Otherwise you’re playing the same game of just-so stories as the neoclassical microfounded general equilibrium models.
- Jake
Bingo! But the capital stock in aggregate is expanding. Capital appreciation > capital depreciation, so the imbalance does exist.
“You can keep nattering on about the microeconomics of the firm as long as you want – I’m a patient guy. But if you want to talk about macroeconomics – such as the flow of available income – then you need to set up the correct boundary conditions and aggregate consistently.”
Douglas’ A+B theorem does what Keynes’ theories do not – they demonstrate a microeconomic foundation for the insufficiency of aggregate demand observed by Keynes and Douglas. I believe your implicit assumption in the above statement about macroeconomis is that incomes=prices.
If all firms are generating costs at a greater rate than they are generating incomes, then the economy as a whole is generating costs at a greater rate than it distributes incomes. In other words, prices > incomes: they do not equate.
(X.1) Yt = Ct + It
where Yt is total output/income in period t, Ct is total consumption in period t, and It is total investment in period t.
We are assuming a closed economy with no government spending or taxation to be faithful to the original work.
Income can be either consumed or saved and St = sYt, where s is the marginal propensity to save (which is 1 – the marginal propensity to consume).”
http://bilbo.economicoutlook.net/blog/?p=26724
“The foregoing is sufficient answer to the quotation from Mr. J. M. Keynes, which begins: “Let X be equal to the cost of production of all producers. Then X will also be equal to the incomes of the public.” This is the well-known logical fallacy known as the petitio principii, which consists in assuming the truth of the fact which you have set out to prove and then proving the assumption from the logical conclusion. The cost of production is not equal to the incomes of the public, and therefore the rest of the argument merely indicates what would happen if it were equal.” (C.H. Douglas, “The New and The Old Economics, pge. 16)
http://douglassocialcredit.com/resources/resources/new_and_old_economics_c_h_d.pdf
Keynes’ aggregate income formulas implicitly assume that prices equal incomes. Therefore, any analysis using these formulas will demonstrate what should occur assuming these two things are in equilibrium.
Douglas’ A+B theorem demonstrates that they are not in equilibrium.
Also, prices do not equal income in macroeconomic theory.
Anyway, use your own language if you want. But people will dismiss you as a crank just as they would me if I started hassling chemists after rewriting the table of elements or mathematicians after having rewritten the decimal system. That is the definition of being a crank.
http://en.wikipedia.org/wiki/Crank_%28person%29
If you’re comparing the theories of economics to those of physics or chemistry, you’re living in a dream world. Ph.D’s in the subject are writing books about the fallacies of economic reasoning:
As we say in accounting, accounts are a matter of opinion, cash is a matter of fact.
The economy, and the pressures on the macro-economy, function on cash transactions.
Beyond that it is a matter of opinion which of those cash transactions are called ‘investment’ and which are called ‘consumption’.
But firstly the economic model must function in cash terms – and be stock flow consistent on that basis.
Accrual accounting pushes expenses into the future as certain expenses are capitalized. Consumers are forced to pay for all the costs of production including capitalized expenses. Hence, depreciation expenses are added to the cost of goods sold and form a part of prices.
What I am saying is that you and Douglas deploy classic crank arguments which, as Wiki says, are based on trying to redefine the terms of the field to “prove” your points. You are perfectly entitled to do this if you please but very few people will take you seriously and economists will consider you a crank.
I find the fact that you have now resorted to name calling rather amusing, and I really could care less what you think of me personally, because I don’t know you from Adam.
I’m sorry that you think I’m trying to insult you. I’m really not. What I’m saying is that this is the hallmark of a crank argument. And if you make it people will see you as a crank. If you find this offensive that is your prerogative. But this is a simple fact: argue in this manner and economists will (rightly) think you a crank.
At one time the conception of a geocentric universe was the “norm”. I’d rather be called names and be right, than have the acceptance of my peers and be wrong.
Maybe I’m a moron though and I can’t see the ‘grand truth’ of what you’re saying (I doubt this but I’m willing to entertain it). In that case, if I were you I would go straight to the statistics bureaus and make your case there. The guys that work at these bureaus are very open to changing their accounting rules if they think there is good reason. The folks in the US are by far the most forward-looking (and influential) so maybe you should contact them. (Details here).
Please do open your mind to the possibility that it is you and not the rest of the world that is in error here though. Try not to chalk up the negative responses that you may receive as part of some conspiracy of lies.
As a bit of background, I was educated in orthodox economics at university and fell upon Douglas’ ideas as a bit of an accident. I had heard of Social Credit because I live in Alberta, but had no idea what it was actually about, and actually had many of the negative preconceived notions that you probably have. I chanced upon someone who actually was friends with one of the technical experts (L.D. Byrne) that came to Alberta upon Douglas’ request. It was upon hearing him speak that I realized that these guys aren’t “cranks” but actually quite knowledgeable in the field of economics. They just speak a different language because many of the preconceived notions that I held true can easily be demonstrated to be false (understanding the fallacy of the quantity theory of money was my greatest hurdle to understanding Social Credit).
Douglas testified before many government committees, including the MacMillan Committee to which J.M. Keynes attended and actually questioned Douglas.
http://www.scribd.com/doc/19207513/CH-Douglas-Evidence-MacMillan-Committee-1930-
Based upon policies. Which are chosen – by people. They are choices based upon what you want to see and what you believe is important.
They are not laws of nature.
Yes, Douglas does dispose of the quanity theory of money, but there are many more myths in economic orthodoxy that Douglas dispels as well. Another would be the sanctity of “full employment” as technology and capital replace labour in production. That myth seems to still hold for orthodoxy and the heterodox like MMT.
The following is from Keynes’ “The General Theory of Employment, Interest and Income”:
“Thus the problem of providing that new capital-investment shall always outrun capital-disinvestment sufficiently to fill the gap between net income and consumption, presents a problem which is increasingly difficult as capital increases. New capital-investment can only take place in excess of current capital-disinvestment if future expenditure on consumption is expected to increase. Each time we secure to-day’s equilibrium by increased investment we are aggravating the difficulty of securing equilibrium to-morrow. ”
And the following war written by Douglas almost a decade earlier:
“In the first place, these capital goods have to be sold to someone. They form a reservoir of forced exports. They must, as intermediate products, enter somehow into the price of subsequent ultimate products and they produce a position of most unstable equilibrium, since the life of capital goods is in general longer than that of consumable goods, or ultimate products, and yet in order to meet the requirements for money to buy the consumable goods, the rate of production of capital goods must be continuously increased.”
I’ll leave it for others to determine which is more “readable”, but they are saying the exact same thing.
As for Gesell, the following was written by Douglas:
“Now this book of Mr. Maynard Keynes to which I have referred, represents apparently a sudden conversion on the part of the author to the monetary theories of Silvio Gesell, the originator of the idea of “disappearing money,” that is, money that loses its value month by month unless spent (as if money did not disappear fast enough already).
The idea is that if you have got a lOs. note today you have to put a penny stamp on it a fortnight hence to keep it worth lOs., and another penny stamp in a further fortnight’s time so that it shall still remain at the value of lOs. Gesell’s theory was that the trouble with the world was that people saved money so that what you had to do was to make them spend it faster.
Disappearing money is the heaviest form of continuous taxation ever devised.
The theory behind this idea of Gesell’s was that what is required is to stimulate trade – that you have to get people frantically buying goods – a perfectly sound idea so long as the objective of life is merely trading.
When a lOs. note becomes worth only 9s. 11d. tomorrow, a man will go and buy something and so stimulate trade. In fact you have exactly the same state of affairs as existed at the time of the stupendous German inflation of the mark.
When a waiter received payment in millions of marks he hardly waited to throw down his napkin before dashing out to buy something, because the value was disappearing so rapidly that what he bought one minute would require a billion marks ten minutes hence. “
“(Douglas) manifested a tendency to blame most of the world’s economic ills on ‘usury’” (parenthesis added)
This claim is completely false. Douglas did not blame most of the world’s economic ills on usury. Douglas did not see banks charging interest on loans as an issue whatesoever.
(b) Many of Douglas’ followers were anti-usury fascists. Which is not to say that Douglas was one, he probably wasn’t. But the connection is not altogether arbitrary.
(a) And I responded demonstrating that the quote you took was out of context.
(b) There may have been some followers of Douglas who claimed that interest was the cause of all our economic ills and who also may have supported fascism (Ezra Pound comes to mind), but that’s not what your article states. It doesn’t claim that some misled followers of Douglas were led astray this way, it claims that :
““(Douglas) manifested a tendency to blame most of the world’s economic ills on ‘usury’” (parenthesis added)
This statement is completely false, and a blatent misrepresentation of Douglas’ ideas. Douglas’ monetary reform ideas were based upon his A+B theorem, and have nothing to do with “usury being the cause of most of the world’s economic ills.”
This is shoddy research, and the article is a straw man. It’s similar to Dr. Gary North’s work in that respect. If you’re going to write an article criticizing Douglas’ ideas, I would hope that you would do a modicum of research to at least accurately portray those ideas.
It’s a socialist ideal again – like being a ‘global citizen’ and having ‘world government’, and frankly everybody being blue-eyed and blonde. It’s the sort of thing that persists in concepts like the EU, and fixed exchange rates. Make everything centralised and the same and we will be free – as long as the Very Clever People are in charge.
Unfortunately reality is messy because it has these things called human beings in it, and as biological entities they have a tendency not to follow the patterns ascribed to them
Humans live in tribes and need to see quid pro quo if they are to share resources with others. And no amount of declaring that behaviour ‘irrational’ will change the underlying biology. It is how we have evolved and the economic system has to deal with that reality.
We need countries and jobs. Superstates and handouts won’t work and can’t work.
Plus, just handing the surplus over to bankers and economic parasites is far worse than a little bit of welfare.
Although race and nation are real and biologically rooted and a properly ordered economy would take notice.
But make no mistake, there is a plan even in a non command economy. The question is in fact a question about how clever the planners are, who they are, what class they represent, how noble and just they are, etc.
There is a different way, but it is a middle way that respects the reality of the way human beings work. We need something to do with our time that we like doing and others consider useful. The income comes from doing that.
And yes we need to stop the casino games in the banking centres, because they serve no purpose – other than to tie up huge quantities of brain power on pointless activities.
We have to take back our democracies.
I wanted to elaborate on this a little further. In terms of capital production, the consumer goods that the capital creates, and the cost of said capital in those goods, may take decades to fully reach the consumer. People use their income to purchase consumer goods and services at, or near, the time of the construction of capital. They don’t wait decades to spend their money as the cost of said capital finally makes its way to the consumer.
Ultimately, the consumer ends up paying for the capital twice. Once as it inflates the price of consumer goods, at, or near, the time of the capital’s construction, and again as the capital is depreciated over time via depreciation expenses.
This “timing” issue is completely ignored by economists. They simply add up the income distributed in the capital’s construction, and add up the depreciation expense and say they equate, so that income = costs. They forget that it may take decades to depreciate capital, but the people who constructed the capital can’t wait decades to spend their income.