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DOUGLAS CREDIT.
AN EXPLANATION
By Mr. W. K. McConnell, M.A.
"It is becoming increasingly
difficult, to discuss the Douglas
Soclial '. Credit ,theory libecause,
like Maixism, it is .tailing " on
many diffeirnt .forms," said Mr.
WV. KI McConnell, M.A., speaking
on ;tlle si eci hefore the' Gonl
burniRotary C lub last-night. :
Its sinpoters interpret jit'; differ
ently and ;lzt iiis theiys areaide d *by
the obt i s e th e wri tings .'of
Dougla iii se I.Doug laslias an
amang ca pacity for clo hing' lis
ideas ain vrbiage thal. eaves the
inaning largely ,to tliiagi'nation
In hils Ovilence lieord various'cii
missions cmit' io d
expect to find something tA gib le' hit
Douglas invariably' proves ain ad roit
side-stepper when awkwaid .iquestions
are' asked..
THE BASIS .
"However, it can be 'said:' that the
biasis of Iouglasism is the contintioin
tlhat by 'the. very natiire .of tl e exist-.
ing financial system. there i1 'always
-not mer ely sometimes, lhut always-
insufficient purchasing, power dis
tributed:A in' the'",cpuirse' ofprioduction
to purchase what hais: ieen piroduced
flow it is that in .noimal times,. all.
that. is produced is actually''sold, in'
fact orders .tend .to outpace-' prpduc
tion. Douglas ansl his followers al
ways have difficulty in: explaininig.
Hlow it is also. if tlie Douglas conten
lion is' true, that- thierei has iot been
throllughout the past century, and.
more. an ever-increasing piling ,up: of
unsold goods' is anotheri question
whicli cannot he satisfactorily an-:
swered.
A AND B PAYMENTS. . :
"Now how do the DIouglasites agrrive
at Ilis weird idea aibouit a chronic
slhortage of purchasing, power9 They
divide all the costs of production into
A payments and B, payments.' The
amounts distributed byf a producer in
thle form of wages; salaries aid. divid
ends they call A paymentiisfi. All the
other payments (cost of raw mniateri
als, rent, bank- charges', depreciation,
etc.) they call B paynments. They,
then assert that the A payments are
available as puirchasing powerb, liut
tlie Bn payments are not So we get
this position. Costs af production
equals A payments plus B dpayments,
wlhile the purchasing povwer available
consists of the A payments only.
iHence, they ask, jhow can A *
purchase A plus B. jThat is the
famous A plus B theorem.
'.Why are the B payments not aval'
able as puichasing power as welld
the *A paymnents." Take the "pay
nmeit for raw ma teln'l The Doug
Ilsites say that tliese payments laive
eeon speiit longi b fore tlhe fin lsie'd
article coinieini thie niairket T he 'e
pily is that in soiime cases this tis trule
while in otheir cases ii's not.'' But
suappose the' foimer spentthe
mone orie i eceivedl ' hiswi
wllic:.i is1 now appeiir
market as bred. S ly t normal
conditions are that h"ls o sel
another .cro 1) ut 'of which proceeds
lie is' bliy ing the Ined and Ioter
things. now coining on the '1 maet.
This dove-ti'ling of tihe tyldes of pin
duction, tih Douglasites appea. to
eitlher ulinale oi iuii willing to itidel
stand.. .
"EXTINCTION OF CREDIT"-:
"Now take their, next argument.
They asseirt thl as soon as a-i'roduc
er hlil codipleted one act of produc
tion his overdraft at thebank
he .paild off, and thus, io;mucih puir
chasing iwe' goes out'iot existence.
lis coistait"etiiitiio of creit
(so tlhey call it) is lli tin ther
thieory uipoin a11lich litey lay the great
est, stress. One linatiit ily asls liow lis
it thiit, if this extinction of ciedit is
evera going oi, blk loans or, if you
like, liank credit is almost invaili
Illy on thi incrense sil nd n de
creasing. ven drintl depres
sion the total of ba'il divianges hais
increased. To-day there is over l`4£40
millibns: .of bank:, ciedit availablo itn
Australia, inore thln. there was' just
prior' to .thie' nset of tlhe lepression.
TWO ANSWERS ' ':'
"Thiere anie two' answers ' to 'this
Douglansite contention;. Firstly, it is
surprising how ianiiy businiessestare
conducted without' bank 'lans: at all
Hence, thliere is ni oveiiiraft tolie ex
tinguishled Seuuciidly, liusiness mnei
dlo niotn 0ormally c'inplete one cycle
of pioduction'. rind'*thley pay off l'theli
overdraftsi. . Prodiictioli awitl'' them
iiiust be a continuous process unless
tliey close their plaints doivin. Hving
completed one 'cycle ; of" production
they commience annotlier Indeed tthiy
conimence the '.ieconid' before 'they
lhave compileted thiel irst Heince 'tlhey
imaintain tliheii overdrafts 'as loing' is
they 'want themidwlhiiclm~mayn lie'a uid
very oftein 'lefor ayersj '' s - '
B PAYMENTS,-;'
"In thise. aamein) ay, it can ho shown
that every Item that the Douglasites
nclude in their; category of B pay
imeniits is available as purchasing
power to thle sanme degree and in the
same sense as'l the A payments. There
10 nio ipoint whatever in such a classi
fication. Thle A and B thleorem
is problably thle greatest fallacy ever
offerled as an explanation of our
finaicial difficulties. Professional
economists are foundl propounding and
supportinig iill sorts of theories, but
no professional economist in the
world everl said unequivocally that
Doumla's A and B theorem was
sound .'On the: otliher hand it has
been condemned by .eveiry ell knpn
economilist .who has eover discussed it
'at -ll Similarly it has ' been con
ldeniled by every public enquiry to:
wlichl it liis been subniitt-a;
"'By' implication the A unilIB theoi
em"hias been condelaimned 1y,) Douglas
himnself. During; his recent todi odf
Auistialia hle did not mention oit in , `a
single public utterance. . Thouisanii
e'ifot ito the Sydney, Stadiutni -some
'being charged as higi as .'R1 a iseat
to 'hiarithe.niaster explaina his tlieory,
biiit they did iiot hear, a- single sent
ence about it; Two or three years
ago Doiigls hiimaself drewv uii
scheme for the - ipactical pliplicatioii
ot'f his theoriy'to Scotiand. "'You can
readi tlis s-schieme .for yourself at the
bacr'i of tlhe secondild' *edition of .hiss
book, !'Socil ' Cedit- 'Tlie A plus)
B "theoremis' 1 Iieithir. menintri ed ''norm
applied.: The 'Seeieme ir'; Scotland'
does not biear tie' remotest'-reseniiblj
ance to the funiidaniential p'riciiple ofl
the Douiglas theory.'n ' ' i:;
: .DOUGLAS'S ATTITVUDE.
1 ."In short, Douglas appears to have
abandoned his theory alitogether, and
now donfliies lisielil animost-i wholly
to just the'saime. sort. of attack . dn
the banking 'issteiis df iii'ddeii'coun
triess as' we liheaddr' i'on thl Socilists!
every' dayi, and wiiere hiearini f-'ronii
.them long'befoie' Dloi'glnsivasi ' ever
heard of.
"' Douglansism h liads:,chlieved some
popiilasrity In *Australia and New Zea!
Sland, but seems to be dead, or ratiher
tairdyv toi haiiebeeiin born, in any other'
country. Ifn Britain,' thei country of
its origin, it' seems td have- cutvery
little ice. A pamnnphlet has just been
ipublished in Britain criticising the
Douglas theory.' 'At the back it gives
a list of the' critical publications
against Douglasism.' In this Hist. Aus'
tralian critics outnumber British crit
ice by three to one. This cannot be
because there are no writers in Brit
aini capable of criticising it; nobody
in right senses could think that. It
must be, surely, that in Britain Doug
laisism is of so little consequence that,
nobody of any standing would ]bother
to do so. Here, of course, Douglas
and his theory are- known best. II
Douglas had remained in Australia- a
little longer and had gone on talking
the way lie did, lie' would have'liilled
the -Douglas Social Credit movement
far more quickly than' any of .lhis
critics have been able to do."'t;.,
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