Book Review

Understanding the Financial System

Social Credit rediscovered

Frances Hutchinson - Jon Carpenter Publishing, 2010

This book was of great interest to me, as I was introduced to its subject matter in my childhood in the 1930s, by my parents, who were active campaigners for Social Credit, and I attended the last few meetings, after WW2, of the Social Credit Party, with its leader, John Hargrave. I read Douglas's main books and those of some other advocates of SC, such as C Marshal Hattersley's This Age of Plenty, in my youth. The post-war corporate wiping from history of the ideas and movement for SC was illustrated to me when, in 1952, I heard on the lunchtime BBC radio news, of the landslide victory for it in British Columbia in the Canadian elections. This was accompanied by a few sentences about the aims of SC; but in that evening, in the 6 o'clock and nine o'clock news, not even the fact of the election result was mentioned!

My parents met as Esperantists, and were advocates of libertarian education, introducing me to the ideas of AS Neil, practiced at his Summerhill School. Thus I absorbed in my childhood ideas of the unity of mankind, as well as of the distinction between the real economy and the financial one, which dominates and shapes the real.

I was aware that conventional economics confuses physical and financial capital, and that the potential abundance due to the application of technology to production was turned to waste by the grossly unequal distribution of the results of the 'common cultural inheritance' and the 'increment of association'. These are the concepts CH Douglas introduced as justifying Social Credit's advocacy of 'National Dividends – or Basic Incomes – lack of which makes wage-slaves and/or debt-slaves of almost everyone.

In all of this time, I found no suggestion that SC, or the wider movement for monetary reform, was in any way anti-Semitic – in fact, some of the closest colleagues of my parents in their campaigning were Jewish!

Thus I am, perhaps, biased in favour of the theme of this book, which is exposing both the history of the widespread and rapidly growing support for SC, despite the hostility to it in the public media, in the period between the World Wars, and the distortion of history to discredit it and to minimize attention to it, since WW2, with virtually complete elimination of its ideas from the teaching of economics – and the use of accusations of anti-semitism to stop any discussion of the issue.

While I had foreknowledge of much of the book's contents, I found this considerably expanded by the detail it contains. It contains many extracts from material both for and against SC, and lengthy discussion of its origins and related ideas, from Guild Socialism, the writings of Thorstein Veblen, and Rudolph Steiner's conception of the Threefold Commonwealth – the three related spheres of society: cultural, political and economic. In all, it shows how tragic was the failure to introduce reform of the system of money creation and distribution in the 1930s.

Douglas argued that the aims of everlasting economic growth and 'full employment', despite the growing use of machinery to replace human labour, were unrealistic and unsustainable. He predicted as early as 1920 that, if the creation of money remained in the power of private banks and distribution of purchasing power through National Dividends was not instituted, with adequate money issued into existence to end 'poverty in the midst of plenty', then worldwide depression would result, and lead inevitably to WW2. National Dividends would introduce 'economic democracy' and establish the 'sovereignty of the individual'.

Douglas noted that while money was in desperately short supply in peacetime, it was created as freely as required in time of war.

He did not propose any detailed way to change the way money should be created, but argued that it should be for public benefit, not private profit. Subsequent experience amply confirms his views. 'He who pays the piper calls the tune'. The banks are the 'piper', and they 'call the tune' of all other institutions, including governments.

It was clear to me in the early 1960s, when Prime Minister Harold Macmillan proclaimed that 'we've never had it so good!', just how much better we could have 'had it', but for the distortions of the 'economy' due to the dominance of 'debt-money'; we could have had leisure, and far less waste of materials and effort.

Although the most senior economists of the day debated with Douglas, both in print and on public platforms, none found any genuine flaws in Douglas's analysis of the true relationship between the material economy and the financial system. Since the financial system was man-made, Douglas argued it could be studied and reformed to suit the wishes of the people. In his view, if given a choice, the people would prefer a secure sufficiency rather than everlasting growth and uncertainty.

This is a book which should be widely distributed and studied. It carries an extensive bibliography and lists of references for each chapter. It exposes the disastrous domination of the real, productive economy by the financial interests, and their power over the institutions of government, education, commerce, and public media. The recent near-collapse of the financial system under the growing weight of unredeemable debt – which threatens worse to come – should help to open people's eyes to the need for reform, along the lines outlined so long ago. Read the book, and then use the internet to join and spread debate on this vital issue.

Brian Leslie