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William Krehm to Keith Wilde (01/07)

Dear Keith: I found your interchange with William B. Ryan on Douglas and Social Credit most interesting. I will barge in only to clarify COMER’s attitude not only towards Douglas, but towards almost any social reformer of the past. We should listen to them carefully, but as citizens of their own age working on their own set of problems. What this might provide us with will certainly not be a carefully organized guide to those of our own, but alert us to the lessons from humanity’s past successes and failures. History and its lessons, however, have been systematically interred. Wasn’t the "end of history" announced by one retired Washington bureaucrat when more and more of it, definitely of the wrong sort, began being turned out in record quantity?

The first striking thing about Douglas is that writing immediately after WW I – undoubtedly in part due to the influence of the Guild Socialists and his collaboration with O.R. Orage – was able to step outside of the magic circle of the great technological revolutions of his day. That was something that the great Karl Marx and Vladimir Lenin were unable to do. For who cannot see the influence of the great railway building age into which Marx was born in his view of social development with its stations laid out in orderly procession – primitive communism, feudalism, industrial capitalism, to the grand terminal of Socialism – barring the occasional derailment, i.e., counter-revolution. Lenin carried the process further to Communism, where "every cook became a statesman and hence professional statesmen were no longer needed." And from that alluring vision Russia got the terror of Stalin and the Moscow trials.

Instead of becoming dazzled witless by the wonders of new technology, Douglas sat under the Tree of Wisdom and asked: "Does man have to build a machine gun before he can buy a cabbage." At the time when Lenin coined the slogan: "Communism = Socialism plus Electrification."

And just about the time of the Russian revolution and Civil war, Douglas was developing the need for alternate life styles helped along by a social dividend to all members of society.

To "justify" such alternate life styles economically he developed the notion of a "social heritage" that emphasized the contribution to modern productivity of forgotten prophets, slaves, martyrs, inventors, scientists, plain drudges.

Such alternate life styles would help make possible for those who wished to drop out of the rat race to cultivate handicrafts, the arts, write poetry, do voluntary work protecting the environment and those in society who need special care. And without being branded as "petty bourgeois"; even "lumpenproletarians"! Going through the "Satanic Mills" of heavy industry, in the left Marxian view, was essential to prepare the workers to become hardened fighters on the barricades of 1848. But the technology of killing decades ago made those barricades as outdated as the dodo.

We can find in Douglas as we can in Henry George many of the clues to get out of society’s current nightmare. I might mention the brilliant generalization of Henry George currently achieved by J.W. Smith in seeking out and eliminating the permanent privatization for gain of scientific insights, i.e., the perception of something that was always there. Inventors and scientists are to be rewarded significantly for useful discoveries, but these should remain in the public domain. Otherwise – like the private ownership of land, the rent collected on their patenting or permanent privatization converts the collateral effects of the communities’ development as a source of rent, which gets compounded with all the other patented and monopoly incomes devised and appropriated by rent-seekers, to the point where the demands of this private rent-compounding become a dominant factor in price rise, social inequality, and budgetary deficits.

Douglas, as a highly independent thinker, even devised his own nomenclature which has not made it easier to penetrate his message. Thus his A & B Theorem baffled me for years. I identified it with "accrual accountancy" that our governments were ignoring. But accrual accountancy deals with the depreciation of a capital good over its useful life – which can well be a half century in the case of a building. What concerned Douglas and brought him to devise his A and B Theorem was the period during which it was being built, rather than used up. He was wrestling with the need for liquidity while a capital good was being built – a period that could span several pay days, and the problem arose where the financing could be done before the proceeds from the sale of, say, the equipment being produced, were completed. His own experience in supervising such a financing problem set his mind thinking on the subject, and he had a mind that worried a problem until it got to its roots.

Obviously the one he was dealing with raised the danger of exploitation by the financial sector, and the solution was not to write a mortgage, but for the workers and entrepreneurs to arrange from their wages some modest financing to protect them from exploitation by the financial sector. The answer was co-op banking based on the income of workers and small entrepreneurs. It was an advance warning about the nightmares of uncontrolled financial monopolies.

Multiply the discussions that you and countless others are conducting on the Internet, and protect resources against the rent-seekers. It could make a decisive contribution to society’s salvation.

Bill Krehm

- from Economic Reforrm, July 2006