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Published online by Cambridge University Press: 07 November 2014
The economic theory implied by the terms “New Economics,” “Douglasism,” and “Social Credit” rests on the plea that the present economic system is inherently defective; that capitalism has a “mechanical” flaw which assures in any given period a flow of purchasing power almost always less than the flow of prices. As a consequence there is a surplus of goods; a surplus, that is, only in relation to consumers' capacity to purchase and not in their capacity to consume. Major Douglas asserts that the deficiency of purchasing power is not periodic or accidental, but is chronic and ever present. He attributes the cause of the deficiency to the following factors: first, current banking practice which permits private banks to create and destroy credit at will; second, the process of saving and investment; and third, the difference of “circuit velocity between cost liquidation and price creation” which results in charges being carried over into prices from a previous cost-accountancy cycle. It has been pointed out repeatedly that each of these assumptions is of questionable validity.
In logical sequence to the hypothesis that capitalism produces a surplus of goods which consumers cannot purchase, Social Credit proposals for reform are designed to inject purchasing power into the consumption stream: in a word, to make consumption equal production. This can be achieved, it is stated, by introducing a “just-price” mechanism and by augmenting personal incomes through the issuance of “national dividends.” The “just” or “assisted price” is conceived as an arithmetic ratio (total national consumption over total national production) which is to be the means of deciding, from time to time, in what proportion the retail price level will be reduced.
This paper was presented at the annual meeting of the Canadian Political Science Association in Quebec, on June 5, 1952.
1 Douglas, C. H., Credit, Power and Democracy (London, 1921)Google Scholar, Economic Democracy (London, 1934)Google Scholar, Social Credit (London, 1935)Google Scholar; Colbourne, M., Economic Nationalism (London, 1933)Google Scholar; Mairet, P., The Douglas Manual (New York, 1934)Google Scholar; Tutte, W. A., Doughs Social Credit for Canada (Vancouver, 1934).Google Scholar
2 Gaitskell, H. T. N., “Four Monetary Heretics” in Cole, G. D. H. (ed.), What Everybody Wants to Know about Money (London, 1933)Google Scholar; Hiskett, W. R., Social Credits or Socialism (London, 1935)Google Scholar; MacGibbon, D. A., “Inflation and Inflationism,” Canadian Journal of Economics and Political Science, 08, 1935, 325–36CrossRefGoogle Scholar; Hiskett, W. R. and Franklin, J. A., Searchlight on Social Credit (London, 1939).Google Scholar
3 See especially Social Credit, 180–93 and Appendix, “Draft Social Credit Scheme for Scotland,” 205–12.
4 Evidence presented by Douglas to the Agricultural Committee of the Legislative Assembly of Alberta (Edmonton, 1934), 95.
5 For an analysis of Douglasite political theory see Macpherson, C. B., “The Political Theory of Social Credit,” Canadian Journal of Economics and Political Science, 08, 1949, 378–93.CrossRefGoogle Scholar
6 Douglas, , Social Credit, 206.Google Scholar
7 Ibid., 211.
8 Ibid., 209.
9 Douglas, C. H., First Interim Report on the Possibilities of the Application of Social Credit Principles to the Province of Alberta (Edmonton, 1935).Google Scholar
10 Letter, Douglas to Reid, ibid.
11 The Douglas System of Social Credit: Evidence Taken by the Agricultural Committee of the Alberta Legislature, Session 1934, Evidence of Wm. Aberhart, 22.Google Scholar
12 See Douglas, C. H., The Alberta Experiment: An Interim Survey (London, 1937), 73 Google Scholar: “It would not be possible to claim that at any time the technical basis of Social Credit was understood by him [Aberhart], and, in fact, his own writings on the subject are defective both in theory and practicability.”
13 Aberhart, Wm., The Social Credit Manual (Calgary, 1935), 25.Google Scholar For other descriptions of Aberhart's system the reader is referred to his evidence before the Agricultural Committee of the Alberta Legisature, Session 1934; also see his “educational articles” in the Social Credit Chronicle, 1935.
14 Address to the Canadian Club of Toronto by William Aberhart, Sept. 13, 1935.
15 Ibid.
16 The Douglas System of Social Credit, Evidence of William Aberhart, 17.Google Scholar
17 Ibid., 18.
18 ProfessorAngus, H. F. as reported in the Edmonton Journal, 08 6, 1935.Google Scholar
19 The Douglas System of Social Credit, Evidence of William Aberhart, 73.Google Scholar
20 Douglas, The Alberta Experiment; see Appendix for Douglas-Aberhart correspondence.
21 Irving, J. A., “The Evolution of the Social Credit Movement,” Canadian Journal of Economics and Political Science, 08, 1948, 321–41.CrossRefGoogle Scholar
22 For the details of the insurgency in the Social Credit party see Irving, “The Evolution of the Social Credit Movement.”
23 1 Edw. VIII (first session), 1936, c. 5.
24 1 Edw. VIII (second session), 1936, c. 1.
25 O.C. 1092/36, Alberta Gazette, 1936, 818–26.Google Scholar
26 Ibid., Fonn B, Alberta Citizens' Registration Covenant.
27 This figure was released by the Government and is cited in McGoun, A. F., “Alberta: Economic and Political, I: Social Credit Legislation, a Survey,” Canadian Journal of Economics and Political Science, 11, 1936, 512–24.CrossRefGoogle Scholar
28 Van Allen, G. H. (Lib.), Edmonton, quoted in the Edmonton Bulletin, 08 27, 1936.Google Scholar
29 The use of the constituency party organization as an administrative instrument was not restricted to the registration of 1936. The credit house to be established by the Credit House Act and the prosperity certificates scheme were to be organized on a constituency basis.
30 I Edw. VIII (second session), 1936, c. 1, ss. 17, 36.
31 See McGoun, “Alberta: Economic and Political.”
32 Of the $3,200,000, $354,000 was redeemed as at March 31, 1936, from the sinking fund applicable to that issue.
33 The original issue of scrip in August, 1936 (see O.C. 815/36), amounted to $239,391, all of which was spent on roads. Subsequent reissues, the last in August, 1937, swelled the total scrip issue to $359,788, of which some $340,000 was redeemed by the province. As at September, 1937, revenue from stamp sales was $29,994.
34 Coe, V. F., “Dated Stamp Scrip in Alberta,” Canadian Journal of Economics and Political Science, 02, 1938, 60–91.CrossRefGoogle Scholar
35 1 Edw. VIII (second session), 1936, c. 3.
36 1 Edw. VIII (second session), 1936, c. 2.
37 Speech by Hon.Cross, W. W. reported in the Edmonton Journal, 03 30, 1937.Google Scholar
38 Ibid.
39 An abstract of the committee's report was released on January 6, 1937.
40 As reported in the Edmonton Journal, March 30, 1937.
41 1 Geo. VI (first session), 1937, c. 10.
42 A bill introduced by Representative T. A. Goldsborough (Dem.), Maryland, alleged to do away with what he termed “the Dutch system of finance” which, he said, “mortgages industry to protect property.” The bill recommended credit distribution in the form of national credit certificates for the purpose of financing a discount on prices to the consumer at retail, and a national consumers' dividend. Goldsborough's discount system was to operate in a manner identical with that proposed by Douglas in his draft scheme for Scotland. Goldsborough believed that inflation could be avoided by (1) open-market operations of the federal reserve system; (2) raising the reserve requirements of all banks; (3) raising bank re-discount rates; and (4) gradually paying off national, state, municipal, corporate, and personal debts.
43 Statutory duties of the board were as follows: appointing Social Credit technical experts; appointing members of the provincial credit commission; examining Social Credit legislation and making recommendations in respect thereof; rendering annual reports to the Legislature; recording and studying economic conditions in the province; and, finally, “requesting the executive council for the advice and cooperation of any department of government.”
44 Statutory duties of the provincial credit commission were as follows: to collect tax levies; to receive and administer securities assigned to it; to adjust claims, handle settlements, and adjust or liquidate debts—when application for such adjustment was made to the commission; to negotiate any transfer of Alberta credit with any firm, person, or corporate body who would be entitled to such credit and whose interests might be affected by the Act; to exercise all the powers granted commissioners under the Public Enquiries Act; and, lastly, to take the necessary steps to establish and maintain a reserve of “financial credit” sufficient to assure that treasury credit certificates (see below) would always be honoured in terms of Canadian currency in the extraprovincial market.
45 No retail discount rate would be published unless productive capacity exceeded total consumption by at least 10 per cent. The provincial credit commission was to have final say in the establishment of the discount rate, unless a new rate exceeded the old by more than 5 per cent, in which case the Social Credit board would determine the rate.
46 Social Credit Act, s. 32 (2).
47 Ibid., s. 34.
48 Supreme Court of Canada, Canada Law Reports, 1938, 117.Google Scholar
49 For the details of these measures and their constitutional consequences see Mallory, J. R., “Disallowance and the National Interest,” Canadian Journal of Economics and Political Science, 08, 1948, 342–57.CrossRefGoogle Scholar
50 Supreme Court of Canada, Canada Law Reports, 1938, 101.Google Scholar
51 2 Geo. VI (first session), 1938, c. 3.
52 2 Geo. VI (second session), 1938, c. 3.
53 Social Credit Board, Alberta's Treasury Branches (Edmonton, no date), mimeo.Google Scholar; also Powe, B. A., “The Alberta Treasury Branches and the Interim Programme,” M.A. thesis, University of Alberta, 1951.Google Scholar
54 Geo. VI, 1940, c. 14.
55 Powe, “The Alberta Treasury Branches and the Interim Programme.”
56 $32,000,000 in 1951, as compared with total deposits in Alberta of some $6,500,000,000.
57 The Alberta Story: An Authentic Report of Alberta's Progress, 1935-1952 (Edmonton, 1952).Google Scholar
58 As reported in the Edmonton Journal, March 24, 1943.
59 Annual Report of the Social Credit Board, 1944.
60 Ibid.
61 Ibid., 1946.
62 Ibid.
