The Meaning of Social Credit
By: Socred, B.A., SCMP
Many people ask, “what is Social Credit?” A full explanation would probably require several volumes of information. Most people are looking for a simple explanation to this question. The simplest explanation can be found by analyzing the two words that comprise the concept – Social and Credit.
The word Social can be defined as: of or relating to society or its organization. I believe this is the most useful definition of the word social as it pertains to Social Credit. Oftentimes, people assume that Social Credit has something to do with socialism because it contains the word social. This would mean that anything that uses the word social is socialism, and anything that is not socialism is anti-social. Of course, this assumption is absurd, and Social Credit has nothing to do with socialism. The word social in the term Social Credit merely implies that the term relates to society and its organization. It does not imply anything about the ownership of the means of production. In fact, Social Crediters advocate the private ownership of the means of production in most cases, because this method of production is often the most efficient. Social Crediters are concerned only with the most efficient means of production and do not see this as a philosophical issue but a pragmatic one. If other methods of production are more efficient in certain instances, then Social Crediters would advocate these methods, so long as people always had the freedom to contract out of any method of production or association. True economic freedom as it pertains to production is the ability to contract out of associations and does not have anything to do with the ownership of the means of production.
The second word in Social Credit – credit – derives from the Latin word “credo”, which means to believe, or have faith. As a consequence, we could say that the term Social Credit literally means faithful relations relating to society and its organization, and I believe this is the most accurate definition of the term Social Credit at an abstract level. In today’s world, most money is credit which is created by private commercial banks through loans to businesses and individuals. As C.H. Douglas (the originator of the Social Credit concept) once said, “the essential quality of money is that people have faith in it”. And Jesus said, “Verily I say unto you, If ye have faith, and doubt not, ye shall not only do this which is done to the fig tree, but also if ye shall say unto this mountain, Be thou removed, and be thou cast into the sea; it shall be done.” Today, if we had enough credit we could remove a mountain and put it in the sea. If the essential quality of money is faith in it, then this precludes any physical qualities of money as being essential to it. Throughout its history, money has been composed of cowrie shells, leather discs, precious metals, paper or an electronic ledger entry in a bank account.
Some people argue that all money should be comprised of gold. These people advocate a social organization that lacks faithful dealings between people in society. Like the golden calf worshippers of old, these people only have faith in gold; not in God or their fellow man. They believe that money’s “value” is dependent on its physical composition. But in reality, one cannot eat or drink gold. What gives money its value is people’s faith in it. If people accept money, whether the money is made of gold, paper, or electronic numbers in a bank account, in exchange for the things we truly do value (food, shelter, clothing, luxury goods etc.), then money serves its fundamental purpose. Money’s physical composition is irrelevant. Money has no value in and of itself: it is only faith that gives it value. Advocates of a gold standard, whether they are aware of it or not, advocate a faithless society (which is oftentimes why you will see “survivalists”, or those people waiting and hoping for the destruction of society, advocating this type of money). The only physical aspect of money that is of any importance is its ease of use. In today’s world, debit and credit cards likely serve this purpose most readily (cash and coin are being used less often as time progresses). Social Crediters know and understand that society can only flourish when there is faith amongst men in God and between themselves. However, there are always forces trying to destroy that faith, or the Social Credit.
In conclusion, Social Credit can be defined as faithful dealings as they relate to society, or faithful dealings between men. It is the scientific study of these dealings and how that faith can be used to maximize individual well-being. Douglas once wrote, “systems were made for men, and not men for systems, and the interest of man, which is self-development, is above all systems, whether theological, political or economic”. The primary interest of Social Crediters is man’s self-development through faithful dealings between each other. Ultimately, it is the scientific study of individual self-development in economics, politics and theology.
21 comments:
Hello.
It's been a long time.
I tried post to Google Groups, but it could not be posted.
So please let me write in it here.
The following is the sentence.
It is the reply to this topic.
https://groups.google.com/forum/#!topic/socialcredit/EQGnQtYjPmI
*****************************************************************
I am a Japanese.
I write this sentence by machine translation.
I am studying about basic income and social credit (A+B Theorem) little by little.
Basic income earth network introduce recently the book and video of Social credit.
Please refer to an article and comment.
http://binews.org/2013/03/audio-1971-wallace-klinck-lecture-on-social-credit-which-includes-a-form-of-big/
http://binews.org/2013/05/gordon-cumming-m-%E2%80%9Cmoney-in-industry-%E2%80%9D/
http://binews.org/2013/05/monahan-bryan-w-%E2%80%9Cintroduction-to-social-credit-second-revised-and-enlarged-edition%E2%80%9D/
http://binews.org/2013/06/call-for-papers-special-issue-of-the-journal-of-evolution-and-technology-technological-unemployment-and-universal-basic-income-guarantee/
http://binews.org/2012/10/opinion-funding-citizen%E2%80%99s-income-by-seigniorage-the-message-of-future-money-from-james-robertson/
* Basic Income Earth Network (BIEN)
http://www.basicincome.org/
* Next BIEN Congress
The 15th BIEN Congress, "Re-Democratizing the Economy," will take place in Montreal, Canada, June 26-29, 2014
http://www.biencanada.ca/BIEN2014_Congress.html
*****************************************************************
I posted this to News site of basic income earth network.
http://binews.org/2013/03/audio-1971-wallace-klinck-lecture-on-social-credit-which-includes-a-form-of-big/#comment-1936
Thank you. I was looking for the definition of Social Credit.
Anon says:
Socred,
In the export/import trade, how do countries finance such trade? With their own currencies? or exclusively with the dollar international reserve currency? How would such trade operate financially in a social credit dispensation?
One often reads in social credit literature about the flaw in the finance accounting system. Various descriptions as follows:
"...the flaw in the accounting system does not allow for an equation between costs and prices".
"...the flaw in accounting does not allow for a sufficiency of purchasing power to balance the receipt of wages, salaries and dividends against the prices that are set in the same period".
"...system does not recognise the time factor and the rate of generation of incomes and the rate of generation of prices in the same period".
Have you published on your blog anything about the specifics of the accounting flaw leading to this deficiency of purchasing power? I mean, when one mentions an accounting flaw in the monetary system, invariably the questions asked are: what specifically is this flaw? Is it inbuilt in the money system, or just poor accounting?
Any help on this matter would be appreciated.
Many thanks.
Hi Anon:
My apologies for the delayed response. I was on holidays for a bit.
If you're looking for how foreign trade is financed, check out the article on Wikipedia:
http://en.wikipedia.org/wiki/Balance_of_trade
All trade needs to be done in the currency of the country exporting the goods. For example, if a US company purchases goods from China, they must do so in Yen. However, there is always trade back and forth, and if a country's current account is in deficit (ie. the US purchases more from China than the Chinese purchase back from the US, then there has to be a capital account surplus between the US and China in order for the US to get the Yen they need to purchase these goods. A capital account surplus means that the Chinese are purchasing US bonds and securities.) This process would not change in a Social Credit system.
I have several articles that refer to the accounting flaw that Douglas discovered in his A+B theorem. The post entitled "Costs and Time":
http://social-credit.blogspot.ca/2010/08/costs-and-time.html
The post entitled, "Douglas's A+B Theorem"
http://social-credit.blogspot.ca/2007/10/douglass-ab-theorem.html
The post entitled, "Industry, Income and Prices":
http://social-credit.blogspot.ca/2007/05/industry-income-and-prices.html
Again, sorry for the late response, let me know if you need any clarification.
Anon says:
Socred,
Thank you for your reply as above.
Re overseas trade. One company, as rported in the news media, stated that with its imports and exports it used the dollar international reserve currency. In light of what you wrote above, Does this mean all or some international trade is conducted with the dollar reserve currency? In a social credit dispensation, would there be any necessity for a reserve currency to be used in international trade?
Are Foreign exchange rates specifically under the control of the banking system?
Now to clarify one or two things in order to focus more:
There are those within the banking sector who deny the banking system creates credit (money) out of nothing. But is it correct to state that both central and private banks create money (credit) out of thin air?
Without going into details, essentially, the flaw in the financial system has to do with incorrect accounting. Correct?
We are told by the experts that economic trade between countries is what lifted the Western World and its peoples out of poverty and gave them modern day wealth and prosperity. What, Socred, do you say?
Many thanks.
Anon says:
Socred,
My apology for the "simple" questions above, but I was trying, in a brief overview, to clarify one or two things. You would be amazed at the constant negative responses there are whenever one mentions social credit principles or concepts (without actually mentioning the phrase 'social credit'). And the difficulty people have in understanding the difference between "financial credit" and what Douglas described as "real credit".
Nevertheless one or two further questions, If I may: National Dividends. In an industrialised society, no production of goods and services, then no national dividend?
The amounts paid out in a national dividend all depend on the money value of yearly production? There is no need for an industrialised country to produce to the hilt so long as the populace has the purchasing power to meet their needs - a correct statement?
And finally, how does the mantra for "economic growth" fit in with the Douglas analysis? Just another classic example of the truth of the A + B theorem?
In the meantime, the system continues as before. Although it is only my opinion, I think the Christian Church should be promoting Social Credit concepts and analysis. However the silence from the pulpits...
I wish you well in your endeavours, Socred. All the best.
Hi Anon:
Again, sorry for the late reply.
"One company, as reported in the news media, stated that with its imports and exports it used the dollar international reserve currency. In light of what you wrote above, Does this mean all or some international trade is conducted with the dollar reserve currency?"
(response) No, although the US dollar has become the "international reserve currency".
"In a social credit dispensation, would there be any necessity for a reserve currency to be used in international trade?"
(response)No, it would actually make no difference. In a Social Credit world, financing for international trade would take place as it does now, but the necessity for foreign trade in order to provide employment, and thus income, would disappear.
"Are Foreign exchange rates specifically under the control of the banking system?"
(response) I don't think so, but currency speculation certainly plays a bigger role in the relative value of currencies than economic theory would like to admit.
"Now to clarify one or two things in order to focus more:
There are those within the banking sector who deny the banking system creates credit (money) out of nothing. But is it correct to state that both central and private banks create money (credit) out of thin air?"
(response) I don't think it's technically correct to say that banks create money "out of nothing". It depends what you mean by "out of nothing". Do banks create money that never existed before? - absolutely. But banks only create money that people demand, so in that sense they are not creating money "out of nothing" - they are reacting to the demand for money.
"Without going into details, essentially, the flaw in the financial system has to do with incorrect accounting. Correct?"
(response) Correct. It has to do with the fact that consumers are correctly charged for capital depreciation, but not properly credited for capital appreciation. Since, in any industrialized society, capital appreciation is always greater than capital depreciation, we can distribute credit directly to consumers in the amount that capital appreciation > capital depreciation.
"We are told by the experts that economic trade between countries is what lifted the Western World and its peoples out of poverty and gave them modern day wealth and prosperity. What, Socred, do you say?"
(response) I would say that is a partial truth, but certainly not the whole truth. I would argue that capital and technology, and the resultant increase in the productivity of labour since the industrial revolution, has increased the wealth of civilizations far more than the increase in foreign trade over the same period of time.
"My apology for the "simple" questions above"
(reply) Those questions weren't 'simple'; they were well thought out. My apologies for the delayed response. I have been very busy lately.
"but I was trying, in a brief overview, to clarify one or two things. You would be amazed at the constant negative responses there are whenever one mentions social credit principles or concepts (without actually mentioning the phrase 'social credit'). "
(response) I know this all too well. I believe it is due to the ingrained puritan beliefs in the United States and much of the protestant world, combined with the ingrained, erroneous belief, that supply=demand and the implicit belief that the economy is always in equilibrium.
"And the difficulty people have in understanding the difference between "financial credit" and what Douglas described as "real credit"."
(response)Once you introduce money into the discussion, people just get confused, because they are confused as to how money is created, and its function - including many, if not most economists and bankers. This is truly sad, because money plays such an important part in our lives that I have to consider this a 'conspiracy' to keep us ignorant on this subject, because it's actually fairly simple to understand with the most basic understanding of double entry accounting.
"Nevertheless one or two further questions, If I may: National Dividends. In an industrialised society, no production of goods and services, then no national dividend?"
(response) No national dividend. The dividend and price rebate are contingent on the fact that prices increase faster than incomes, and prices increase faster than incomes because capital appreciation is greater than capital depreciation.
"The amounts paid out in a national dividend all depend on the money value of yearly production?"
(response) The amounts paid out in a national dividend depends on yearly capital appreciation versus yearly capital depreciation. Nations do not have a proper balance sheet. Our capital, including our "human capital" is not properly accounted for.
"There is no need for an industrialised country to produce to the hilt so long as the populace has the purchasing power to meet their needs - a correct statement?"
(response) It depends if people want the country to "produce to the hilt". However, if income is only derived from employment, then the only choice a nation has it to "produce to the hilt". The choice between employment and leisure does not properly exist because all income is derived from employment. As capital and technology replace labour in production, less and less income should be derived from work. What Social Crediters demand is the wage of the machines.
"And finally, how does the mantra for "economic growth" fit in with the Douglas analysis? Just another classic example of the truth of the A + B theorem?"
(response)Economic growth, and the resultant exponential increase in debt, are definitely a corollary of the A+B theorem. The only way that purchasing power can equal the price of consumer goods is if more and more production is created that is not meant for consumption. In plain English, this means that it is necessary for more and more capital goods, useless government services (including the unnecessary build up of the military) to be produced in order to distribute the income necessary to purchase the existing consumer goods on the market now.
As Douglas wrote:
"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.[24]
And Keynes recognized this same phenomenon over a decade later:
"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"
"In the meantime, the system continues as before. Although it is only my opinion, I think the Christian Church should be promoting Social Credit concepts and analysis. However the silence from the pulpits..."
(response) I wish the Pope would recognize the importance of Social Credit. If we could reach out to the Church, I think we would have a powerful ally. Have you visited the pilgrims site in Quebec?
"I wish you well in your endeavours, Socred. All the best."
(response) All the best to you too! - I would like to hear your opinion more in these comments, because you've obviously studied this subject in some depth.
Anon says,
Socred,
I must thank you for your reply to my questions and comments above. My apology for such a late response; however there has been much on my plate of late, including health problems courtesy of a virus.
Re the Christian Church and social credit: I hope my comment did not come across as any criticism of Christianity; it is just that the modern Church leadership often points to socio-economic problems, but there is little further analysis. Intellectually, one finds it all a little frustrating.
If you wish I would like to ask a couple of questions:
What is your understanding of the difference between ballot-box democracy and the democracy expoused by C H Douglas? Is the difference to do with merely voting for a political party or individual compared to voters having control over policy?
There is a constant demand for human labour in the English-speaking countries. Is this because labour is cheaper than mechanical automation?
Many thanks.
Anon says,
Sorry, forgot to add: You wrote, Socred, the Church would be a powerful ally re social credit. Absolutely!
You also asked if I had visited the pilgrims website in Quebec. Not exactly. I have come across some of their writings on the internet, and, in the past, some specific pilgrim publications.
Many thanks.
Hi anon:
Yes, I have quite a bit of frustration with organized religion, especially given the fact that the Catholic Church sent theologians to study Social Credit and the Pilgrims in Quebec, and found that there is no socialism in Social Credit.
I'm going to be honest in that I haven't done a whole lot of study on Douglas's theories on politics. My understanding is that true democracy is economic democracy ($1=1vote), and as far as politics is concerned, I believe Douglas wanted to end the party system, and elect true representatives to our Parliament or Legislature. Without ties to a particular party, politicians would be more apt to actually represent their constituents instead of their particular political party.
Anon says:
Socred,
Thank you for your reply above. Sorry for my delayed response, but there has been so much on my plate of late.
One thing I would like to know, have you written anything about Douglas and his material on the fallacy of a 'balanced budget'? I believe this was in reference to a national budget as opposed to a personal budget.
Another clarification if I may: An industrialised country need not focus on attracting foreign investment. Correct?
On page 78 of Social Credit, Douglas wrote: "A system of Society which depends for its structure on the theory of material rewards and punishments, seems to involve...a general condition of scarcity and discontent".
The counter-argument one receives is that in this day and age we have high levels of material goods and services, much higher levels of prosperity than 80 years ago and subsequently most people are quite content with their lot etc. In other words their is no scarcity and little discontent.
How would you respond to such a counter-argument in light of what Douglas wrote above?
I had better sign off with this comment. It was said many decades back that a politician once sarcastically described Douglas as 'a religious rather than a scientific reformer'.
In many ways I think here is the nub of the reason why Social Credit has gained little traction in the intellectual sphere and in the public conscience. What one is really dealing with is something very spiritual; a different philosophy of life. In other words one keeps coming back not so much to the subjects of constitutional theory, economics or political economy; but to the subject of Theology.
Fair comment, Socred?
Cheers.
Hi Anon:
No worries, I’ve been very busy as of late, so my responses have been tardy as well, especially my last one which I feel quite bad about responding so late.
I have written some information about this in my article entitled “Debt and Living Beyond our Means”. I have not written an entire article about this. I had a professor in my supply chain studies who was an accountant who used to explain to his economics students that a balanced budget in accounting was the economic equivalent of equilibrium. I like this statement because I have always said that the main difference between Social Credit economics and orthodox economics is that Douglas, through his A+B theorem, demonstrated that the economy never moves towards equilibrium (and the reason for this is that labour is constantly being displaced in production with advances in technology); whereas, orthodox economists, with their analysis based upon a barter economy and their supply and demand curves, believe that the economy always moves towards equilibrium. Social Crediters believe that the economy can never come into equilibrium, or that it is impossible for all budgets in an economy to balance, unless consumer’s purchasing power is increased in such a way that said money is not derived from work or debt.
There is absolutely no need for a country to seek money from another nation. A nation can easily be self-financing. Money is not a scarce commodity. It is simply a means of acCOUNTING, and most money is simply a number in a bank account. To say that money is scarce is as absurd as saying numbers are scarce.
The argument that there is more prosperity at present than 80 years ago only goes to demonstrate the Douglas analysis that scarcity is no longer a problem. In fact, with any sane organization of the economic system along Social Credit lines, the economic system could easily produce more goods and services than it does now while people enjoyed far more leisure than they do now.
I don’t think that Social Credit is concerned with theology in the ordinary sense of the word; however, I would argue that Social Credit is the practical application of Christian philosophy. With that said, we have to be careful to distinguish certain Christian philosophies, or theologies, from others. Douglas said that Christian philosophy is probably most accurately represented in its catholicity. In other words, Catholic theology, and perhaps those protestant theologies that are closely connected with Catholic theology, best represent Christian philosophy. This philosophy is quite different to the puritan (or evangelical) philosophy which was described by a Social Credit follower as “being of the devil”. Unfortunately, this ”Christian” philosophy which dominates in the US right now. That does not mean that individuals who are “evangelical” are evil, but the philosophy which pervades some of their thought (for example, the theory of rewards and punishments, and how this can be imposed upon others through the economic system) is evil. This is why these people are attracted to Libertarianism and the current day golden calf worshipers.
I would say that it is fair to say that the philosophical aspect of Social Credit, which is Catholic Christianity (not necessarily Catholicism itself – if that distinction is apparent), is the primary focus of Social Credit and supersedes any discussions about economics, politics and sociology – the latter being the focus in Social Credit only to the extent that they are used to promote practical Christianity – or the application of Christianity in these affairs.
Anon says:
Socred,
Greetings. With my previous comment re theology, I should have made it clearer that by theology I was referring to Christianity and the Bible.
Righto...Two questions, If I may.
In the realm of business and economic comment society is constantly told "we" must "work harder"; that is, work longer hours and put in more effort if we wish to have "prosperity" - along with food, clothing, and shelter.
Intellectually, how would a social crediter respond to such mantras as "work harder" and "more work must be created to pay our way" etc.
In the Industrialised world we see central banks creating vast amounts of financial credit; huge expenditure on infrastructure and repairs from natural disasters; plus another property bubble. People are saying "look at the improving economy. The financial system does work." With so much money sloshing around, as of 2013, where does all this leave social credit, Socred?
Many thanks for your time and patience, Socred. Very much appreciated.
Hi Anon:
Yes, I would agree that the Christian philosophy in regards to its applications supercedes, or transcends, any theories that Douglas had with regards to economics, sociology or political science. In fact, they are the foundation of it.
I regards to working harder in order to have prosperity, this is absolute nonsense. The whole purpose of science and technology is to ensure that we can do things with less work. Otherwise, if work is the objective, then we should destroy every labour saving device ever invented. The delivery of goods and services when and where they are needed is the purpose of an economic system. Work is merely a by-product of an economic system, and the less work that is used to produce a unit output, the better off we are. We require less and less work to produce a unit output as technology advances.
Social Credit is more than a scheme for monetary reform (as you allude to in your post and the comments on Christianity). If Social Credit is only promoted as a monetary reform scheme, then it will follow the curve of prosperity - being popular when times are bad, and forgotten when times are good. The fact that the economy continuously operates in boom and bust cycles is proof that the current financial system does not work. The financial system acts as a drag on the productive system, and we could be far better off with the implementation of a Social Credit system.
Take care.
Anon says:
Thank you for your reply, Socred.
In my last comment (third paragraph), perhaps I should have written, "...what would a social crediter say in an intellectual debate re mantras such as 'work harder'...".
In a social credit system, how would the money be created for the national dividend etc. and to furnish new credits for new production?
My apology for another simplistic question, but 'where is the money to come from?' keeps being trotted out by those who are not in favour of the social credit analysis.
Many thanks, Socred. All the best.
Hi Anon:
Work is merely a by-product of an economic system. The purpose of an economic system is to provide goods and services when, and where, they are required. The purpose of an economic system is not to provide work. Some work is necessary to create the goods and services that we need, but as technology advances, the amount of work necessary to create these goods and services is less and less. That is why productivity of labour keeps increasing.
In a social credit system, money would be created as it is now, except a National Credit Authority would direct banks to credit people's accounts via a dividend and price rebate.
If people ask you "where is the money to come from" ask them "where does money come from now", and that is their answer. Banks create money through loans, and the purchase of assets, or the payment of expenses. The accounting mechanism by which money is created would not be changed.
Jim/Socred,
Hi, This is Steve Hummel from the old Social Credit group. Highly informative discussion as usual, and by the way I used your blog as an educational reference as much as I did the Social Credit group when I was learning about Social Credit. Wally recently emailed me and said there may be another group forming which I highly anticipate. Do you have any further word about it?
As you know from my posts on the old group my perspective was to take the philosophical perspective of Social Credit and "think" with it. From that I've come to realize the importance of taking what I call the BOTH/AND perspective. By that I mean that the more comprehensive and integrative the analysis the closer to a fuller understanding and a fuller answer one can get BOTH temporally AND internally, economically and philosophically, ethically and profitably, graciously and legally etc. Your Douglas quote from the Wikipedia article comes to mind:
"Douglas divided philosophy into two schools of thought that he labeled the "classical school" and the "modern school"....Douglas was critical of both schools of thought, but believed that "the truth lies in appreciation of the fact that neither conception is useful without the other"
When puritans use that perspective to critique Social Credit they are simply falling back on one side of the duality...of which Social Credit, being the actual integration of both sides of the duality,....continuously considers.
It is the understanding and experiencing of this BOTHNESS that the world so severely lacks, and that leads to mere economic "wisdom" instead of BOTH Wisdom AND economics.
The truly curious thing to me is that the concept and experience of Grace (which is the conscious experience of BOTH abundance AND freedom, amongst other things) is what the policies of the monetary and economic systems require to be whole, truly functional, ethical and amazingly, to be completely scientific in the best sense of the word which is integrative of BOTH the objective AND intuitive aspects of the human mind.
Glad to have clicked on the comments section of your post instead of merely reading the also clear and precise analysis. If you don't have my email address here is the one I check most often. I really value and continue to require yours and Wally's input. Please do not hesitate to communicate.
Hi Steve:
Good to hear from you. I agree that Puritans tend to fall argue from the classical perspective, and that is why they often ignore scientific evidence which does not support their theory. Libertarians do the same thing. Like I often say to them, "if the facts don't fit your theory, change the facts", which is the inversion of the scientific method.
I will keep in contact for sure, and I'm glad the blog is of use to you.
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