Sunday, November 6, 2011

Reminder: Social Credit!

I was at Occupy Toronto today and thought it might be a good venue for someone to "evangelize" a bit for Social Credit there. Of course, in Canada there really was a Social Credit party once, it moved farther and farther away from ever actually implementing social credit monetary policy (while nevertheless remaining associated with anti-semitism), and though it even maintained a majority government in Alberta for decades apparently, finally sort of fizzled out. This historical "baggage" might have to be addressed (or avoided by not using the word "Social Credit") so as to not be seen as pushing something "discredited" (sort of a pun I guess).

I encourage everyone to brush up on the theory of social credit by reading my post that I linked to above, or the 10 simple lessons at the website of the Pilgrims of St. Michael who promote the ideas of social credit as the best concrete comprehensive fulfillment of Catholic Social Teaching (only the first 6 lessons are really important for understanding the system itself). Certainly the recent call by the Vatican (lambasted by the evil neocons) for a World Central Bank resonates with me through social credit, as the only way to really get rid of inequality in the world is for the distribution of new credit (to represent new production) in the form of the social be global. Implementing social credit domestically in one country could be a start, but without all mankind being equally entitled to the same dividend, problems will remain.

Given that my last post on this was so long, I'm using this one to basically try to narrow down my "talking points" on Social Credit. I think they'd come down to: money is just a symbol, what is physically possible in this age of abundance should be made financially possible, A cannot purchase A+B, creating money as debt is the modern incarnation of usury, the purpose of the production system is to maximize the efficiency of production while any connection to distribution is accidental, therefore the idea of income being bootstrapped to employment is outmoded, and we all have a right to credit as co-heirs of mankind's advancement and the natural resources God sends us which in one sense belong to no one individually.

First, the most important thing to remember is what money is: a signifier only. It is unnatural for the means of exchange to become essentially a commodity in itself (even if sometimes the sale is couched under more abstract concepts like "risk" or "time"). This is a thread I am noticing in terms of the nature of sin, especially in the modern world, and Catholicism's approach to morality: the concept of the signifier emptied of substance, of the fetishized signifier. Certainly, in unchastity, the masturbatory/contraceptive sexual pleasure has this dynamic, and so too it seems to be operative in the moral problems with how people treat money.

Money is not wealth; wealth is goods and services, money only has any meaning or value inasmuch as it signifies these, is only ultimately desirable because of these (though that certainly doesn't mean that you can only desire money with the explicit intent of buying a specific good in mind; that's not necessary anymore than every marital act explicitly intending a either case the important thing is that the will is ordered towards the transcendent good, even if only in potentia, rather than making the money or pleasure the end-in-itself).

This reflection on the nature of money raises two issues which should be touched upon in turn: the question of goods and services, and the question of where money comes from. In other words, we need to consider production and then distribution as the two important facets in economic life.

When it comes to production, it must be emphasized that we live in an age of abundance. Though there is some naysaying regarding a looming scarcity of energy (oil specifically), or of arable land for food production, or of certain species of timber or fish threatened by over-logging or over-fishing, the truth is that our production capacity is higher than ever, and has not suddenly decreased for any reason. This only stands to reason: capital generally increases. The population has been increasing, so there is no shortage of labor. Factories and machines, once built, don't just go away. Technological progress is cumulative, and so every year we are more and more advanced, and more and more efficient at producing.

The recent crisis was entirely "financial." There was no sudden crisis of production capacity. Labor did not suddenly die off in some plague. Machines and factories did not burn to the ground. Food was not destroyed in horrible locust attacks. Pollution (while a real problem) did not suddenly make all sorts of farmland unusable. We did not suddenly run out of metal or stone or wood or plastic. Nor was there suddenly a tipping point where a bunch of people were born all at once and suddenly we outstripped our production capacity. If anything, abundance is the problem; a lot less than 100% of the population is now able to produce everything needed (and even, within reason, wanted) by the entire population. This shouldn't be a problem, in fact it is absurd to view this as anything less than a triumph of human ingenuity, and yet because of how we have bootstrapped distribution to participation in production (the problem of "unemployment") it is a problem.

When machines replace workers...this shouldn't be seen as problematic! It should be seen as liberating. If a machine is more efficient at doing the job of a worker, can produce more, that's great! There is no reason to limit production for reasons of distribution or finance. Production capacity should work at maximum at all times, and the financial/distribution system should be tailored to this situation. The current problem is, as I mentioned above, that distribution has been bootstrapped to employment, to participation in production. So, suddenly, if a machine replaces a worker, he sees it as a bad thing; he no longer has a job, and the money that would formerly have gone to his wages now goes to the owner of the machine (some fat-cat capitalist, who owns the capital.)

Of course, the final extreme outcome we can imagine of this situation proves it's absurdity: finally, "the 1%" eventually replace all labor with machines, and then just keep the produce of those machines for themselves, and leave the rest of us as "surplus population." Perhaps we imagine the government taxing "the 1%" at exorbitant rates in order to re-distribute goods to the rest of us (making us dependent on the State in a servile fashion). Or perhaps we really know some massive revolution would happen to distribute capital to everyone in the fashion of land re-distribution schemes in Latin America and such.

However, there should never be a need to re-distribute wealth; it should be distributed correctly in the first place! Any distribution system that is dependent on constant "correction" or "adjustment" in the form of "re-distribution"...obviously has serious problems. It clearly needs to be changed to distribute correctly the first time around, rather than needing to re-distrubute through some sort of coercive force (be it of the State through taxation, or a less orderly revolution).

In reality, we are faced with a "problem" that shouldn't be a problem at all: technology is making it so that (even though our population has reached 7 billion and will continue growing to at least several billion more before peaking) we simply do not need "full employment" to produce everything. Technology is meant to free man from labor, and it's doing just that...and this is seen as a problem. Because we have tied distribution to participation in production, to "employment," or else to owning the capital, the means of production, and thus taking in the income when the goods are sold. But this is clearly becoming outmoded.

This brings us around to the second issue I said that the reflection on the nature of money raises, which is how money is created. Under our current system, money is created as debt. Banks are authorized to lend money into existence (they do not lend from deposits as people imagine, even if certain reserve requirements may create a vague link between how much new money a bank can loan into existence and how much they have on deposit.) Money in our current system is created privately, money is just credit after all.

This, however, is the source of the inequality. The truth is, even if we redistributed all the capital in some great revolution tomorrow, I would bet that within a generation or two, the inequality would be right back at the levels it's at. There is a natural inequality among human beings in terms of their financial cleverness (moral/ethical or not) and you can be sure that redistributed capital would not stay redistributed evenly for long.

Communism tries to solve this problem by nationalizing the capital. The State owns everything, the collective owns everything. Everyone owns the means of production, and so everyone gets a share of the production. Sounds good on paper. But of course, we've seen how such a State monopoly on capital actually works in communism: a lack of competition and actual investment by people in their work (for lack of incentive) leads to a massive inefficient bureaucracy and generally low quality.

In reality, ownership of the means of production is not where the problem lies. That inequality would even itself out naturally soon enough. The real problem lies in the ownership of the means of production of the means of distribution. In other words, the power of money-creation. Private bankers authorized to loan money into existence as credit in a way private individuals can't.

And then, of course, they charge interest on this money. This is the usury the Church was vocal for so long in condemning (and still does, though certain voices have bullied the hierarchy into retreating into a sort of embarrassed silence on this question.) It is one thing to invest in a venture and to share in the risk, to get your share of the profit when it succeeds and to take the loss when you fail. It is quite another to expect repayment beyond the initial loan regardless of whether the venture succeeds or not, to share in none of the risk and yet maintain a title to more than you put in. Now, there can be legitimate reasons even for this, there is after all "opportunity cost"; if you choose to loan to me, you lose the ability to invest in anyone else during that time (a situation much less true in the Middle Ages, hence why basically any lending was usury back then). A fair market rate of interest could be determined from this principle, based on how much investments on average are returning, and taking an interest-rate on non-investment loans equal to this. However, this assumes lending from money you already have.

In the current system, this is not what banks do. They are not lending from money that exists, they are creating credit. They are thus expecting interest to be paid on something that wouldn't even exist unless the loan had been taken in the first place. There is literally no real risk in default for the bank (as what was not paid out was created out of thin air in the first place), and no opportunity cost (as they couldn't have used the money until it was created in the form of the debt anyway). To expect repayment beyond the principal, then, is to set up a sort of rat race (as this video describes). Since banks only create the principal in our money supply, where does the interest come from? Either people default, or the banks continually get back the money they create. Either way, its a confidence scheme that involves bankers potentially getting an ever greater proportion of the money.

This might not be a problem if this was truly equally distributed to those holding savings accounts as interest (and if everyone in the country had a savings account). In reality, however, the interest given in savings accounts is only a token amount compared to what the financial sector as a whole amasses through its scheme. Most of the profit is actually put into the abstract "casino" of financial markets, whose operations are too complicated for common folk to even begin to understand and which stack numbers on illusions on paper on dreams. The result is "the 1%" getting more and more money through their ability to create money (and the fact that they've hidden it through an elaborate system of credit that confuses most people).

Social Credit's solution, then, is simple. Some now are saying that the problem is that the Federal Reserve system has a monopoly on the credit (in the US) and that if the "money market" were a free market, everything would work out. Social Credit, however, proposes that the creation of credit should, in fact, be nationalized. "What is physically possible should be made financially possible" is a motto. Social Credit's basic proposal is to have a national credit office essentially just keep the money supply balanced proportionately to total real wealth. And since real wealth is always increasing, the money supply should keep increasing (at a proportionate rate that thus avoids any inflation or deflation). This new money, to represent the new production, would then be distributed equally to all members of the populace as a social dividend and a general rebate on all goods. Everything else would remain the same. The competition of the free market would remain in place. Workers would still get wages, producers would still get paid for the goods they sold, etc.

The money supply always must increase to represent the new wealth. Companies only make goods with profit in mind. But the prices will always be higher than purchasing power! Just consider: if a company pays $90 dollars (in wagers, or in buying capital or raw materials, all of which eventually winds up as someone's income) to produce a product, but then the equilibrium price for that product is $100 dollars...where does the extra ten dollars come from in the economy?? If the economy as a whole spends $9 million to produce $12 million worth of goods (and the goal is always to turn a smaller investment into a bigger profit through the addition of human effort)...there will only be $9 million of purchasing power out there, but $12 million in prices. Currently, this "gap" is made up by credit. The new money is loaned into existence on credit cards or mortgages, etc. This is not "living beyond our means," the very fact that the goods exist prove that they are, in fact, "within our means." The problem is that the loans are expected to be repaid, and repaid at interest at that.

Social Credit proposes that the government should simply create the new money to fill the purchasing power gap, to represent the new wealth, debt-free...and then distribute it to the citizens. It's so simple.

Some nowadays are calling for a return to the gold standard, but that's silly. There is no need to tie money to any one commodity. It should represent the available wealth as a whole. Gold may or may not be a good indicator of how much economic growth has taken place. It's much more direct to just base the increase in money supply on total GDP, and this could be just as transparent and inflation-resistant (as it is not hard to independently calculate GDP with reasonable accuracy to prevent the government from simply "printing money" in a manner that leads to inflation; in fact, obviously, the comedic tragedy of hyper-inflation only results because of debt).

This is the basic message of social credit: increase the money supply debt-free in proportion to the increase in wealth each year. Close the purchasing power gap by simply creating this money without interest, and distribute it equally to the population, or else spend some of it on the public works/services rather than taxing. As we have a right to this credit as the "co-heirs" to the enormous capital which is our technological advancement as a race thus far, as well as the Time, and sunlight, and natural resources that God sends each year and which are the property of no individual.

Workers would still get wages (though hopefully labor would be needed less and less, wages gradually being replaced more and more by the dividend as machines took over). The owners of capital would still get the profit on the products they produced and sold (though hopefully this system and banning usury would make it so that capital became more and more evenly distributed). And so the free market and competition would all remain in place, and some would have more than others based on their natural talents or ingenuity or effort applied, but everyone would be guaranteed a living.


Luke Togni said...

And interesting proposal. I too have found it silly that there the resources and goods are present but money stands in the way.

One point. I'm not sure if being liberated from work, especially physical work is actually liberating. The mechanization of the world has more and more alienated people from the natural world and tradition, and each other. Similar things have been said about machines before, but lets face it, we are addicted.

Luke Togni said...

*addicted to our machines (rather than being freed for other things).

A Sinner said...

I think deliberately "crippling" our potential just to force people to remain dependent on their labor is very misguided. Ludditism is perverse.

I would NOT necessarily claim that liberation from "work" is necessarily liberating. Rather, I would claim that liberation from DEPENDENCY ON work is liberating. Any other attitude is servile.

But of course, people can still work on their own without the demeaning dependency of being a wage slave. In fact, I have to assume many MORE people would tend to little personal farms or orchards or vineyards just as a hobby...if they didn't have to work some 9-to-5 in a farce of a menial job.

I think with more and more people's time being truly their own, as opposed to belonging to some capitalist big-boss, they would tend to become LESS enslaved to idleness and consumerist escapism and would use their leisure in a manner with humanistic value.

I wrote recently in a post about how those time that are truly mine now, in which I'm not procrastinating from other things, feels so different from time that is either escapist or which I have to "purchase" with my blood and sweat from the system.

When Life can be understand as a Gift from God rather than something we "earn" under the notions of the Anglo-Protestant work-ethic, and when the very economic system reflects this reality...all sorts of things would begin to change in terms of both your attitude and how you use that time.

Luke Togni said...


I agree that the 9-5 wage slavery is abominable. Partially because it is mostly unproductive bureaucracy. We live in a ridiculous paper economy. It has to end, in some way or another.

Ultimately what you are suggesting is handing over the bulk of human labour to machines. Where do we draw the line of what is prudent? To what extent will machine become integrated further into our lives and into our bodies? And how long would be before we forget how the machines work and what they really do?

A Sinner said...

Yes, yes, we're all afraid of The Matrix...

However, I'm not even necessarily saying we have to go any further than we've gone today. There is enough TODAY to provide a decent living for everyone (assuming distribution were fair).

As you say, we live in a "paper economy." Many people could be freed from labor right now, and we wouldn't "miss" them at all, because they aren't really producing anything.

Rather than freeing some people and making others still work 9-5, perhaps we could do something like gradually scaling back work hours as Wage gets more and more replaced by the Social Dividend. Perhaps everyone should start working only 4 hour days (but still have the same income). Really, that would probably be enough to produce JUST as much, in terms of goods and services, as we currently have.

There is no reason to lament factory workers replaced by machines or to keep cashiers on staff now that there is self-checkout. There will always be a need for SOME people to be around in case of problems, but we could vastly scale-back already. This shouldn't mean losing income, however, as income shouldn't be completely bootstrapped to labor. The new credit/money representing the new production should be created debt-free and distributed equally to everyone, rather than being loaned into existence by the usurers who then expect interest on top of it (concentrating more and more capital in their hands).

Disputationist said...

Can you explain how this would be implemented in practice? What are the concrete steps? Who would decide the "value" of total production? How would foreign trade work?

A Sinner said...

In practice? Fractional reserve banking would no longer be allowed. Banks could no longer convert credit into money through loaning it into existence as a debt. Rather (as the Social Credit proposals describe), a National Credit Office would, each year, take an estimate of the GDP less depreciation (these statistics ALREADY exist each year, and it wouldn't have to be obsessively exact) and the credit representing this production would be issued as new money, and distributed to the citizens as an equal dividend (as well as a price-refund/discount on the seller's end of things, as described by the literature on the Michael Journal website). Likewise, instead of taxes, public works could "fund themselves" (ie, if the labor and resources and political will exists, the government could just issue the credit/money to represent the new value of the roads or bridges they wanted to build.)