Social Credit Theory of C. H. Douglas

[Nakura Chambers]

I've done some preliminary reading of C.H. Douglas' social credit economic theory, but to be honest, I still don't entirely understand it. Could someone here please explain the social credit theory for me? And after that is done, perhaps we can have a discussion on the social credit theory.

[Gamdwelf]

I've done some preliminary reading of C.H. Douglas' social credit economic theory, but to be honest, I still don't entirely understand it. Could someone here please explain the social credit theory for me? And after that is done, perhaps we can have a discussion on the social credit theory.

As an economist, I've never heard of it, why don't you try to explain it to us, maybe it will help you understand it too.

---------- Post added 2013-06-13 at 04:58 PM ----------

Ok after looking what Social credit theory itself is, Its kind of wak. Douglas himself had many great observations and assertions about how a modern economy works but his A+B Theorem doesn't really hold up.

[UmbrellaBoy]

The A+B theorem has been critiqued by many people, but it is actually entirely self-evident. As long as debt exists (and it clearly does) then the A+B theorem is true, because if the production system was correctly distributing enough purchasing power, no one would need to ever go into debt to buy anything. Instead, the fact remains, quite obvious and evident, that the system distributes a certain amount of money in its costs (ultimately wages or salaries or profits to someone) but that the total smorgasboard of products produced is not bought simply with those distributed funds, but rather a good portion of it is purchased AT DEBT, mean a gap between A and B.

You might say "Well, but enough purchasing power is in fact distributed, it's just that some people choose to save instead of spend." Fine. That's exactly a problem social credit addresses; "A" perhaps should not be conceived so much as "money" (which people can save) as true purchasing power (which savings don't really count as UNTIL they're spent). And the fact remains that society has to go, collectively, into debt each year to buy up all the products it created in the previous year. I see no way to dispute this.

If we can produce a certain amount of goods as a society, and there is demand for those goods, and yet the production does not in fact adequately distribute purchasing power FOR those goods to the people who want them, then even if that is because of some people choosing to save, the A+B purchasing-power-shortage problem remains valid. Social Credit's whole premise is "to make financially possible what is physically possible." If we CAN make certain goods, we are not "living beyond our means" because the existence of the goods proves that we do, in fact, have the means! And as long as there are people who want the goods, why shouldn't we help supply meet demand? That is to say: it is always an absurdity when goods sit on the shelf that people want, merely for lack of purchasing power. This is a clear flaw, somehow, in the workings of the financial system.

A+B theorem basically means nothing more than this: labor adds value. There would be no point in making and selling a product if this were not true. In a given year, society collectively spends 3 million dollars on costs (wages, capital, raw materials, etc) that eventually wind up in someone's pocket...in order to produce, say, 5 million dollars worth of goods (when valued by supply-and-demand). This should be painfully obvious; there would be NO POINT in making a product if your PRICE was not going to exceed your COSTS. But that's where the A+B gap comes in: the costs also, thus, represent the maximum purchasing power distributed to buy up those goods. Yes, some of those purchases are, in turn, new costs for further production the next year, but the fact remains that in order to buy-up all the products we produce as a society each year, we go into debt in order to create the purchasing power to do so. We do not, collectively, buy everything we make purely from that years wages and profits (or previous savings).

The austerity sort would say this means we are "living beyond our means" and that the only real way to have a sustainable economy is to not allow much debt, and only buy from our wages or profits in a given year, or prior savings. Of course, this would leave many desired products simply sitting on the shelf. "Then don't produce those!" they'd say. Of course, this would lead to even fewer wages being distributed, leading to a downward spiral. This is bullshit. If we CAN produce them, and there is demand to do so, why shouldn't we merely for a lack of purchasing power. We can create the purchasing power.

And, in fact, do so currently. As a debt. But why not create the purchasing power interest free? The problem with our current debt-money system is that to create enough purchasing power to buy all our production in a given year, we increase the money supply at interest. Bankers create money as a debt, out of thin air, but then expect to get back MORE than the principle. This is a con that leads to them accumulating more and more of the wealth in society, as they don't really DO anything, but expect you to pay them merely because they have a monopoly on monetizing credit.

But that's why social credit is called "social credit." It believes that credit (being a product of the social network of which we are all equally a part) is a social good, not a private good. For some individuals to have a monopoly on monetizing credit (backed up by the State, usually) is usury. It is treating a social good as a private good. Credit is a social good.

Social credit seeks to remedy this. There are two related mechanisms. The first is the social dividend. It is a basic income distributed to all citizens each year under the presumption that we are all equal heirs to the social capital that civilization has acquired. This is by no means socialism or communism, as real capital can still very much be owned privately. But the idea is basically that society as a whole is a like an enormous company that we are all share-holders in, and that the "profit" made each year (currently pawned out of us by bankers lending at interest) should be distributed to us all as a dividend. Note: this is NOT tax-and-redistribute. There is no redistribution of privately earned money in social credit: what you earn is what you keep. Rather, this is NEW money created debt free to represent the NEW value created in the previous year, and distributed to everyone in an equal share, no matter way.

Also note: this basic income is based on how much society produces in a given year. It is a dividend, not a set amount. A common objection to social credit it is that if everyone got a basic income, people would stop working and production would stop, like in communism with no motivation. However, the dividend's value is based on society's total production. Therefore, if total production dropped, the value of the dividend would drop. For some people, this would no longer be enough to suit their needs/desires, and they would be driven back into the labor market and so production would increase and an equilibrium would be reached.

The second, related, mechanism of social credit is a price-rebate. This is actually the main mechanism. The dividend serves, basically, to ensure a basic income for all, but it is basically like adding the same amount to both sides of the equation. The real way the gap between the "production cost" and the "supply-and-demand price" is closed is with the price rebate. There are a variety of ways it could work in practice as long as the accounting wound up the same in the end: basically, the consumer pays only the "cost" of the goods, but the seller gets the full PRICE of the goods, with the gap being made up by newly created money. So, in other words, if the economy spends 3 million dollars in a year generating 4 million worth of prices, then sellers would sell their goods for the full 4 million, but the consumers would only pay 3 million for them and the extra 1 million gap would be made up for as a rebate by the national credit office. This could be done, for example, by having customers pay the "discounted rate" and then having the sellers send in their receipts for their rebate, or even by a national debit-card system whereby customers knew that for every 3 dollars they contributed, they could get 4 dollars worth of stuff. This closes the gap in a way that the dividend doesn't necessarily address (because people can SAVE the dividend, so it is hard to predict whether it will "close the gap" in advance, whereas the rebate is done AT THE POINT OF PURCHASE and so it only applies to actual transactions; goods that are not bought, and money that is saved, is not really valuable "yet," only potentially so, but it's potential might never be realized and therefore you can't count on it in your calculations).

[Darnash]

Explanation

Wow... that's actually a fascinating theory. Never thought about economics from that view. Will definitely have to read more into this.

[Skroe]

Read about it in college for an elective years ago. It's very obscure and like most obscure economic theories, likely entirely unworkable in reality. It would sync fairly well with your fascist political beliefs though, Nakura. It is directly up it's alley.

[UmbrellaBoy]

Social Credit is actually NOT an 'economic' theory, it is a proposal for a monetary system.

The economy under social credit remains a free market economy with all the usual features: prices set by supply-and-demand, private property, private ownership of privately-ownable capital, wages and salaries paid, etc etc

The main way social credit would differ from our current capitalist system is in the idea that credit is a social good, not a private good, and therefore no private monopoly (the bankers) should have a monopoly on monetizing credit or be able to charge a fee for doing so. Interest under our current system is usury, because bankers do not lend from deposits, so there is no real risk. They don't DO anything, really, except use their authority to make some magic on paper to convert a debt into money. But then they expect a fee for that. Well, when you charge something for nothing, it's a great con, and causes an imbalance that leads to more and more money being funneled towards you and your allies in the "financial industry."

So Social Credit's main guff with the current system is simply financial, it is not really an "economic" complaint. The economy (ownership, production, etc) doesn't change under social credit and runs entirely according to mainstream free market theory and logic. What is reformed under social credit is only finance, which is merely an accounting system (and currently an entirely corrupt one). Social Credit, specifically, doesn't believe that credit is a private good, it is a social good by nature. Money, the means of exchange, is not to be treated as a commodity in-itself.

In fact, Social Credit reveals that our current "free market" is not free at all, but rather is in a "false vacuum" that leads to less-than-optimal economic decision-making because of the way society's "computations" are having information occluded.

Specifically, I will point this out about the implications of social credit. A basic income (as social credit offers in the form of the social dividend) takes away a major obfuscating force in the modern market: false scarcity. The fact remains that many people take jobs NOT because they have truly made a rational decision that the wage is truly just or worth-it for the work they are going to be expected to endure, but rather make their employment decisions "under duress." In other words, they have to take SOME job with SOME income in order to survive, to not starve, and so people are willing to work to for MUCH lower wages than they would if they were not under said duress.

If everyone received a basic income, many people would still work. After all, there are all those hours in the day, and why not "supplement" your dividend with even more? However, the calculations regarding wages would presumably come out entirely differently. For example, if I have no other options, I will accept $7 an hour to do grueling manual labor, because I need something to survive (this duress of false-scarcity is what is meant by wage slavery). However, if I already had even just $20,000, say, then suddenly my decisions would be very different. I might still well want to work to supplement my income and take up time in my day...but I'm sure as hell not going to bother to do grueling manual labor for only $7 an hour. I'd do it only for much more.

So this is another consequence of Social Credit: the truly just wage can never be a wage imposed in a negotiation in which one of the parties is under duress (specifically, the duress of false scarcity). The truly rational and efficient calculation of utility in a market can only really be made when people negotiate from a position of wanting but not "needing."

So the current economic market is in a "false vacuum" that doesn't reflect the true natural equilibrium that true freedom would allow.

Social credit would eliminate the need for a minimum wage, of course, as its basic purpose (trying to make sure people at least have enough to scrape by on) would already be served by the dividend. Therefore, some wages would drop under social credit, and this would be fine since the income would merely be supplemental rather than necessary. However, many wages would actually RISE naturally (even without an artificially imposed minimum) because when labor is not negotiating from a position of necessity and forced-scarcity, but rather as an equal (ie, as someone who wants to work but doesn't "need" to) then they can afford to push things up more. There are some awful jobs that no one would do for such low wages except that they are under duress (needing SOMETHING, anything) in the current system. But this is not true freedom. It is a form of duress. True freedom (and a truly free market) would involve people negotiating and calculating their utility in transactions without the duress of false-scarcity or necessity. This duress is an obfuscating force that means that the market is currently not truly free and is at a false equilibrium.

[Orloth]

Thank you, UmbrellaBoy. I think I need to look into this more. It seems to be an elegant solution to a puzzle I've been working on for years.

If I read this right, either solution would solve our current economic problems overnight and (assuming it is well managed) prevent such problems from occurring again. It probably has it's own pitfalls, but we can only really discover those by trying it out. Too bad our current Congress wouldn't look at it twice.

[Gheld]

*SNIP*

VLBWR (Very Long, But Worth Reading!)

I agree mr. lurker who made an account just to explain social credit!

But yeah, social credit definitely seems to be the only line of thought that addresses the real elephant in the room with economics, which is true. A profit motivated society could never actually at any given time buy all of the goods and services that it produces. Which seems ass backwards. Well I mean it could, if say, Bill Gates suddenly wanted to order 100 million copies of Windows 8, but in any reasonable scenario it just simply would not happen.


EDIT:As you explain it though, I could easily picture a lot of people not supporting it, simply because it takes away the "godlike" status that some people seem to enjoy in our society.

[oplawlz]

There are some fairly extreme psychological ramifications involved, both macro and micro, with people having immediate access to everything that they want.

[Gheld]

There are some fairly extreme psychological ramifications involved, both macro and micro, with people having immediate access to everything that they want.

They don't though. Let's take Canada as an example.

In 2012 the GDP was 1800 billion us dollars.
Let's just pull a number out of our ass, the average markup on all goods and services is 30%.

So 540 billion us dollars worth of social credit, and let's just assume that 80% of the population is 18 and older and there's 36 million people. (So 28.8 million to divide the social credit amongst)

Which gives every adult $18,750 worth of social credit. If $18,750 a year gives you immediate access to everything that you want, then you are the second coming of Buddha my friend.

- - - Updated - - -

Wouldn't that just result in rampant inflation ultimately defeating the entire purpose? You'd get your $20,000, but it'd be enough to buy a couple jugs of milk.

No because the social credit replaces the monetary creation by bank lending.

[Skroe]

Thank you, UmbrellaBoy. I think I need to look into this more. It seems to be an elegant solution to a puzzle I've been working on for years.

If I read this right, either solution would solve our current economic problems overnight and (assuming it is well managed) prevent such problems from occurring again. It probably has it's own pitfalls, but we can only really discover those by trying it out. Too bad our current Congress wouldn't look at it twice.

We have economic problems? And here I thought we grew at 4% last quarter. Please don't say you mean the d-word.

[Gheld]

The main problem with Social Credit is that the only party left screwed over by it is the bankers. And Currently the party with the most money to lobby for it's own interests is the bankers.

[Stir]

It's not perfect, I can see some things I think are a bit wonky (from reading what Umbrellaboy has to say on the matter), but I honestly think that a socialized financial system without banks would be far superior to a privatized system with banks, and would actually be beneficial to capitalism as well.

[UmbrellaBoy]

Is the "d-word," Skroesec, "distribution"??

If so, you are quite correct. Social Credit recognizes that a free market does a GREAT job of producing. However, by bootstrapping distribution (arbitrarily, actually) to some sort of actual participation in production (ie, tying an income to wages), you wind up creating a huge problem in the end.

Specifically, I will quote from one really good social credit summary:

The second flaw in the present system is that the production system does not distribute purchasing power to everyone. It distributes it only to those who are employed in production. And the more the production comes from the machine, the less it comes from human labour. Production even increases, whereas required employment decreases. So there is a conflict between progress, which eliminates the need for human labour, and the system, which distributes purchasing power only to the employed.

To speak of full employment, that is of universal employment, is to make a contradiction with the pursuit of progress in the techniques and processes of production. New and more perfect machines are not introduced to tie man to employment, nor are new sources of energy tapped for this end, but rather they are brought into production for the purpose of liberating man from work.

But, alas, we seem to have lost sight of ends. We are confusing means and ends, we mistake the former for the latter. This is a perversion, which infects our whole economic life and which makes it impossible for men to enjoy the logical rewards of progress to the full.

Industry does not exist to give employment, but to furnish products, goods. If it succeeds in furnishing such goods, then it has accomplished its purpose, met its end. And the more completely it meets this end with the minimum of time and the minimum employment of human hands, the more perfect it is.

Mr. Jones, for example, buys his wife an automatic washing machine. Now the weekly wash will take only a quarter of the day instead of a full day. When Mrs. Jones puts the clothing in the washing machine along with the soap, when she turns on the taps bringing in the proper mixture of hot and cold water, she has nothing more to do except to turn on the machine. The machine washes the clothes, rinses them, and then stops automatically when the clothes are ready to come out.

Is Mrs. Jones going to bemoan the fact that she now has more time to do what she pleases? Or is Mr. Jones going to search for another type of work to replace that from which his wife has been freed? Certainly not. Neither one is that stupid.

But we do find such stupidity running rampant in our social and economic life, for the system makes progress penalize the individual, instead of bringing him relief, in that it persists in tying purchasing power, the distribution of money, to employment and employment alone — employment in production. Money comes only as a recompense for effort and labour in production.

It is true that production distributes money to those who are employed in the work of producing. But this is as a means, and not as an end. The purpose of production is not to supply money, but to furnish goods and services. And if production is able to replace twenty salaried individuals by the introduction of one machine, it has not in any way thwarted its true purpose. And if it could furnish all the production necessary for humans, and not distribute one cent of money, it would still be meeting the end for which it exists: to furnish goods and services.

In freeing men from labour, industry should certainly receive the same gratitude which Mr. Jones received from his wife when he liberated her from hours of work by purchasing an automatic washing machine for her.

But how can a man say "thank you" when he has been liberated from work by a machine, when he finds to his consternation that he has no money? (See the cartoon on the previous page, where workers are laid off and replaced by a robot.) This is precisely where our economic system has become defective, in that it has not adapted its financial mechanism to its productive mechanism.

In the measure that industry or production passes out of human hands, so too should purchasing power, in the form of money, be channeled to consumers through some other means than just recompense for employment. In other words, the financial system should harmonize with production, not only with respect to volume, but also with respect to the manner in which it is distributed. If production is abundant, then money should be abundant. If production is liberated from human labour, then money should be liberated and separated from employment.

Money is an integral part of the financial system, and not a part of the production system, strictly speaking. When the production system finally reaches a point where it can distribute goods without the aid of salaried individuals, then too the financial system should reach the point where purchasing power can be distributed by some other means than salaries.

If such is not the case, it is because, unlike the production system, the financial system has not adapted itself to progress. And it is precisely this difference which has given rise to grave problems, when in fact progress should make all problems of such a nature disappear.

Replacing men by machines in production should lead to the enrichment of men, to their deliverance from purely material worries and cares, permitting them to give themselves over to human pursuits other than those which are related solely to the economic function. If, on the contrary, such a substitution leads to privation, it is because we have refused to adapt the financial system to this progress.

In 1850, manufacturing as we know it today was barely started, with man doing 20% of the work, animals 50%, and machines accounting for only 30%. By 1900, man was doing only 15%, animals 30%, and machines 55%. By 1950, man was doing only 6%, and machines the rest — 94%. (The animals have been freed!)

And we have seen nothing yet, since we are only entering the computer age, which allows places like the Nissan Zama plant in Japan to produce 1,300 cars a day with the help of only 67 humans — that is more than 13 cars a day per man. There are even some factories that are entirely automated, without any human employee, like the Fiat motor factory in Italy, which is under the control of some twenty robots who do all the work.

In 1964, a report was presented to the President of the United States, signed by 32 signatories, including Mr. Gunnar Myrdal, Swedish-born economist, and Dr. Linus Pauling, winner of the Nobel Prize, entitled "Social Chaos in Automation". This report said in brief that "the U.S., and eventually the rest of the world, would soon be involved in a ‘revolution’ which promised unlimited output… by systems of machines which will require little co-operation from human beings. Consequently, action must be taken to ensure incomes for all men, whether or not they engage in what is commonly reckoned as work."

In his book The End of Work, U.S. author Jeremy Rifkin quotes a recent Swiss study which said that "in thirty years from now, less than 2% of the present workforce will be enough to produce the totality of the goods that people need." Three out of every four workers — from retail clerks to surgeons — will eventually be replaced by computer-guided machines.

If the rule that limits the distribution of income to those who are employed is not changed, society is heading for chaos. It would be plain ludicrous to tax 2% of workers to support 98% of unemployed people. We definitely need a source of income that is not tied to employment. The case is clearly made for the Social Credit dividend.

If we must blindly persist in keeping everyone, men and women alike, employed in production, even though the production to meet basic needs is made with less and less human labour already, then new jobs, which are completely useless, must be created. And in order to justify these useless jobs, new artificial needs must be created, through an avalanche of advertisements, so that people will buy products they do not really need. This is what is called "consumerism".

Likewise, products will be manufactured to last as short a time as possible, with the intent of selling more of them and making more money, which brings about an unnecessary waste of natural resources, and also the destruction of the environment. Also, we persist in maintaining jobs that require no creative efforts whatever, jobs that require only mechanical efforts, jobs that could well be done by machines, jobs where the employee has no chance of developing his personality. But, however mind-destroying this job is, it is the condition for the worker to obtain money, the licence to live.

Thus, for all wage-earners, the meaning of their jobs comes down to this: they go to work to get the cash to buy the food to get the strength to go to work to get the cash to buy the food to get the strength to go to work... and so on, until retiring age, if they do not die before. Here is a meaningless life, where nothing differentiates man from an animal.

It is an absurdity that, for example, factory workers being replaced by robots is ever seen as a tragedy or at best a "mixed blessing" because it means that the factory is "taking away jobs." It is especially absurd when government policy seems designed to LIMIT total possible production, to force or incentivize the economy to producing something in a less efficient way, merely in order to preserve or save or create jobs.

As the summary I quoted says, the point of the production system is to produce!!! To produce as much as efficiently as possible that people desire and need. The primary purpose of the production system is NOT to distribute income. It is NOT to "create jobs." It is to produce!

Yet we are living in a system that reduces to absurdity, as demonstrated if you extrapolate things far enough: some day robots will be able to do 99% of the work. This should be profoundly liberating for humanity (we sit back, technology makes what we need/want for us) but under the current system it would be a disaster because it leaves 99% of the people "unemployed," and since access to income, to distribution, has been tied arbitrarily to "employment"...99% of people would be out of luck and the 1% would own everything and have everyone else entirely at their mercy, begging for a pittance. This is total submission and slavery, essentially.

Social credit is such that workers would collectively celebrate being replaced by robots, because it would mean the same or greater total production (eventually distributed to all as the dividend) but without having to labor. Indeed the effect might be equivalent to the idea of the worker himself inventing and buying a robot to replace him on the job (he'd still accrue the production that robot made, ala the old quote that "The problem with capitalism isn't too many capitalists, it's too few.") This is true progress, and this is true efficiency and maximization of production potential. Under social credit, the capitalism whereby a small capitalist class controls the capital and the rest are labor fades away quickly in favor of a distributist society where "everyone is a capitalist," because we are all share-holders in the enormous social capital and get our dividend from its production each year (yet without eliminating at all any of the profits that accrue to private capital, the wages that accrue to labor, etc etc). No one owns time, no one owns the rain, no one owns the social-network itself (which is the real source of all value), no one owns the collective technological progress of mankind. We are all coheirs to this, therefore we are all shareholders and deserve our dividend when the ever increasing credit of mankind is monetized each year (or each month, or each whatever-period-of-time).

[Gheld]

But banks don't just create new money and hand it out to everyone for free every year.

No they don't. Otherwise inflation would be driven by supply and demand rather than discretionary lending and usury.

The money supply has to increase because of usury. (credit has to be extended in order for people to purchase the goods and services produced at profit) The credit itself becomes an at profit service. Thus it becomes a compounded inefficiency in the monetary system.

Because bank lending has a discretionary component it is capable of expanding the monetary base beyond what is needed to cover goods and services. The social credit dividend is based on a specific formula tied to the value of goods and services produced. It can't exceed what is needed to cover goods and services.
^ I mean obviously, in practise though there is the danger of a politician increasing the social credit dividend in contempt of the actual formula in order to try and buy public support. But we're talking ideals here. Even in a 100% ideal application of the current monetary system there would be inflation. It's hardwired into the system.

It's not a crackpot economic theory that somebody made out of bordem. C. H. Douglas was an engineer that decided to apply engineering principals to economics in order to propose a solution to inefficiencies he saw in the system.

Am I saying we could just put the gloves down and completely uproot everything we do and convert our society into a Utopia overnight by going Social Credit? Absolutely not.

But some of these ideas are worth pursuing methinks.

[UmbrellaBoy]

Bovinity...how exactly does credit at interest cause inflation any less than credit monetized debt free?

Indeed, I'd argue that inflation is actually caused mainly by debt and interest. Bankers lend 200 dollars into existence, but expect 250 back. Where does the extra 50 come from (it's more complicated than this because money can re-circulate, but this is just an example)?? Well, because next year the banks loan 250 into existence, but expect 300 back. There is inflation because new loans are always "chasing" to "catch up with" the interest from the old loans. THIS is the source of inflation, not the new money itself.

Social Credit is not just "pumping money into the system." First, under social credit the dividend is tied to total production. New money is only created to close the gap in purchasing power (which would be closed at-debt anyway). It's not just created willy-nilly. And there might well still be private loans (at interest) under social credit, it's just that these loans would actually be made from deposits (so savings accounts would be more like CDs) rather than as a monetization of the debt itself. Yes, sometimes in our life (like when buying a house) we need MORE credit than simply our share (as the economy does not produce a house-per-person every year). In such a case, borrowing and investing would still make perfect sense. It's just that it would involve no money-creation (and thus no usury properly so called). Only society as a whole should be able to monetize credit.

Social credit addresses inflationary fears through the compensated price mechanism I described. So let's say society spent 1 million producing all it's goods (cost). But the supply-and-demand valuation shows that in the process they have generated 2 million (prices). Value is added by production, of course (that's the whole point). How do you close the gap? Well, in part it's the dividend. But it can't be JUST the dividend, or you're right there might be inflation. If we just distributed the "extra" million to everyone, then sellers might just raise the prices again to 4 million and we'd be stuck in the same place we were before.

One way social credit deals with this, of course, is that there simply IS NO private source of monetizing credit in a social credit society, so if the retailers rose their prices to 4 million in the face of the 2 million...there'd be no way to close the gap and they simply wouldn't sell the other half of their products, so they'd be forced by supply-and-demand to lower their price back down to a level that meets purchasing power again.

Of course, if you outlawed private money creation, social credit could also work simply by deflation. Every year the fixed money supply would be worth more and more because it would be representing a greater and greater "pot" of total goods. However, social credit proposes new money for two reasons: one, because deflation seems a bit unstable and inefficient. Rather then letting a dollar become worth more and more over time in the face of more and more production...isn't it best to inject just enough new money to keep the value of the dollar pretty much stable so that prices remain consistent over time? The constant change might be confusing (even if it was change in the direction of prices constantly dropping) and take up a lot of unnecessary "recalculating effort" for the system that would just be inefficient. Second, if you don't give a dividend and just rely on deflation to close the purchasing power gap, it becomes unclear where people who DON'T already have something would get it. If I already have a dollar at the start of the process, then as that dollar deflates it is great for me. But what about those people who don't have any initial sum to watch deflate in the first place? This is why increasing the money supply to keep a stable currency value is better than just fixing the money supply and letting purchasing power increase by deflation.

[Deleted]

The banks are good at distributing newly created money protecting their "investment".

Its more efficent to outsource the distribution process while it makes sure the System will bust when they just sit on their cash forever I don't think that fairness is the way to go in the money crafting process.

Tax the Banks instead let them keep some pocketchange and let the state do the redistribution.

[UmbrellaBoy]

Redistribution is silly. The only time re-distribution is necessary...implies that you didn't get the distribution right IN THE FIRST PLACE.

It is silly to imagine that for the sake of production we need to let money distribute incorrectly and then "correct" it by redistributing by force. That's merely treating a symptom.

Douglas was an engineer, as Gheld points out, and it makes much more sense to design a system of finance that reflects the new realities of production and distributes money correctly in the first place, not require some sort of constant "redo."

[Dezerte]

Never actually heard about it, but it does sound interesting. I think I need to read up on this a little more before I make any decision though.

[UmbrellaBoy]

Well, it certainly does solve that.

First, the reason that money gets "concentrated" in the hands of the financial class and their capitalist allies is because of usury. They monetize credit at a debt. They are essentially taking something (interest) for nothing, and so more and more money concentrates in their hands. Social Credit eliminates that.

As for "means of production," social credit would tend towards a more equitable distribution. There is no need for a communism wherein the means of production are all socially owned, that leads merely to a tragedy of the commons. However, in social credit, the SOCIAL capital is something everyone is a shareholder in, and people get a dividend from that.

Additionally, social credit assumes investment. When people have more equitable access to credit/money without crushing debt, they will invest either individually or collectively (as I said, banks and savings accounts would still exist, just more like CDs). As such, over time, we should imagine that social credit leads to people becoming more and more actual shareholders not just in the social capital, but also in private capital, as they use their money to buy stock and such. Social credit winds up allowing everyone to be an investor, thus achieving a great distributism in the ownership of the means of production. NOT through some sort of socialization or nationalization, but through actually widely-dispersed private ownership and investment.

Social credit is not about creating new money to hand out, again. It is about making purchasing power MEET production debt-free (because why should society have to go into debt-bondage to private money-lenders in order to buy-up its own total produce in a given year??)

As for Douglas being an engineer, I'm definitely not saying that proves his solution would work or was perfect. What it does serve to demonstrate is that the logic behind social credit is that of (attempting to be) an engineering solution. Which is to say, it doesn't just involve "brute forcing" an outcome, but tries to elegantly create a system that leads to harmony by its own inner logic. The "tax and redistribute" solution is not an act of engineering...it's just brute forcing. Likewise, communism's "distribute, but then force everyone to work so that there is, in fact, something to redistribute" is not any sort of coherent design either...it's just brute force. Social credit is not about prioritizing either production or distribution and then making a brute-force readjustment at the end to address the other. Rather, it is an attempt (ala engineering) to reconcile the logic of production and the logic of distribution in one seamless integrated system rather than treating them as essentially in conflict and needing to be in some sort of uneasy bootstrapping by brute force.