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Other Ideologies: Social Credit

By David Hoggard

Other Ideologies 1: Social Credit

For the last hundred years or more, the central conflict of politics in the vast majority of countries has been between Socialism and Capitalism – two different theories of the State which appear to strike chords with voters’ philosophical outlooks. The question that strikes the Alternate Historian, of course, is ‘Could it have been otherwise?’

This is the first in a series of articles in which I will give an overview of the theory and history of various ideologies that have at some point provided an alternative to the traditional Left-Right split, and in so doing attempt to inform readers’ responses to the question posed above.

First off: Social Credit.

The theory of Social Credit is famously opaque. Thought up by the Scottish engineer, Major Clifford Hugh Douglas, in the 1920s, it really took off during the Great Depression, when zealous converts spread the message through rural, deprived areas in the English-speaking world. But even at the height of Social Credit’s popularity, only a minority ever claimed to understand the theory.

Fortunately, I count myself as one of them. It comes down to a fairly simple sum. If a company makes a product, the cost of production must consist of both the wages the company pays to its workers, and the cost of the equipment, the mortgage on the factory, the raw materials, and all the other overheads that need to be factored in. If you call the wages bill ‘A’ and all the other costs ‘B’, then the company has to sell the product for a price that is higher than A+B in order to make a profit. However, the worker only makes A, so he can’t afford to buy the product of his labour. If you repeat this sum for every single business in the country, you will find that there’s not enough purchasing power to buy all the things consumers need to purchase in order to keep the economy running.

There isn’t time to explain why this theory is flawed, just as there wasn’t when the Depression hit and farmers had to burn their wool because the cost of transporting it to the market would exceed the money they would make by selling it. A lot of people thought that the problem lay with the fact that people didn’t have enough purchasing power to buy the things they needed – Poverty Amidst Plenty.

One way of increasing purchasing power is for consumers to borrow money from banks, who would use fractional reserve banking to ‘create’ money equal to B and therefore achieve balance, but Social Credit supporters believed that it was immoral to charge interest on money that ought to exist already. They called for central banks to create interest-free (or ultra-low-interest) credit instead – a kind of nationalisation of the credit industry. This ‘social’ credit could be introduced to the economy by Government spending, by subsidising producers who would lower their prices to ‘Just’ levels, or – and this is the most eye-catching part of the policy – a dividend to every citizen, comparable to a Universal Basic Income. The creation of social credit wouldn’t be inflationary (or so the argument went) because the commercial banks would be prevented from creating an equal amount of ‘financial’ credit.

Needless to say, the idea of the Government giving people money for free was quite attractive to poor people (and especially farmers) during the Great Depression, and the movement became popular in Canada, Australia and New Zealand – winning seats in various Canadian legislatures and contributing to the 1935 Labour victory in New Zealand. After the first flush of success, Social Credit won seats in Quebec, British Columbia, New Zealand and the Solomon Islands in later generations. Policy-wise, parts of it were actually implemented by Labour in New Zealand when they used ultra-low-interest loans from the Reserve Bank to build thousands of state houses.

In political terms, there were three major branches of Social Credit theory: those on the Left coupled monetary reform with social and economic reforms; those on the Right believed it was the only way of defending Free Enterprise from Godless Communism; and then there were the far-right Douglasites.

You see, Major Douglas thought that the whole world would immediately see that his theory was correct, and as it gradually became clear that the financial and political elites weren’t very impressed, he concluded that they were involved in a conspiracy against him – from the late 1930s, he began to write about how the Jews were using their inventions of Capitalism, Communism and Democracy to destroy the lives of ordinary people. A number of Social Creditors were converted to the anti-Semitic conspiracy theory, including Eric Butler, the founder of the fascist Australian League of Rights which infiltrated the Nationals and One Nation.

However, those who stayed with Douglas in this period were generally not the ones who remained active in politics, because Douglas had already ordered his followers to give up on electoral politics in 1934, encouraging them instead to circulate petitions to press existing Governments to change the monetary system. These did not work, and the continuing Social Credit parties became dominated by either the non-conspiratorial Right (in Western Canada) or the Left (in New Zealand from the 1970s) who rejected late-period Douglas pronouncements. In power, the party in British Columbia and Alberta abandoned the monetary reform ideology, largely because it wasn’t achievable on the provincial level.

Could Social Credit have been more successful? The answer has to be ‘yes’: it was clearly able to win support and power in agrarian, colonial economies. Perhaps if the Australians had been better organised, if Douglas had remained reasonably sane until his death, or if Bruce Beetham had been able to sell himself as the real opposition in New Zealand, Social Credit parties might have done substantially better than they did. Beyond the Anglosphere, though, prospects were dim, and if any monetary reform proposal could have taken off, it would be that of Silvio Gesell, who promoted ‘perishable money’. Fascism tended to be the force which catered to alienated non-Socialists in Europe.

Ultimately, of course, monetary reform is much more complex than relatively simple creeds like Socialism, Conservatism and Liberalism, which is why – even when it has articulate leaders – it struggles to win over supporters outside of times of desperate need.


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