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Jerby
Pro (for)
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youhavenoswag
Con (against)
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Is Social Credit a good idea?

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Voting Style: Open Point System: 7 Point
Started: 11/7/2013 Category: Economics
Updated: 3 years ago Status: Post Voting Period
Viewed: 575 times Debate No: 40154
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Jerby

Pro

I've been researching this for a long while, and, well, it seems like a good idea to me, reading the literature.

The basic proposition is this:

More costs are generated by production than there are simultaneously incomes distributed to meet them with. This causes consumer prices to rise above consumer incomes over time. To meet this rise in prices, a source of effective purchasing power not derived from current production is necessary to meet prices.

This can be met by new production or government expenditure funded from the creation of credit through bank loans, but ultimately only pushes the problem into the future. To make purchasing power fully effective, money must be created without debt and distributed to the consuming public as an increased income and as lowered prices in amounts sufficient to fully effect the distribution of goods.

What follows is a longer exposition to read, and a couple of websites at the end to research the matter further, as desired.

Social Credit came from a Scottish engineer, C. H. Douglas, who, when going through the accounts of the Farnsborough Royal Aircraft Factory in 1917, noticed that the total price of a week's production was more than the income distributions in that same week. He took up a study of about 100 businesses, and found that, with the exception of businesses headed towards bankruptcy, every single business was the same way.
Working earlier on projects for the English government, he found that projects which were perfectly possible- the machines ready, the men and expertise available- before the War of 1914-18, did not commence because of a lack of finance. But when the War came, there was plenty financing for it all.

He took up a detailed study of the way the economy worked, and published an article in a magazine in 1918. This article garnered interest, for it made the bold claim that the root of economic troubles, far from government interference, class troubles, or inexorable economic laws, was that more costs were entered into the price of production than there was simultaneously distributed to meet them with.

In later articles and books, he would clarify that this meant that the collective purchasing power of consumers was ineffective to purchase the whole of production, and more so, as overhead costs, representing, on the whole, the replacement of men by machines, built up costs without distributing incomes.

The solution was clear: balance income flows with price flows. Two methods were recommended for this.

The first was to dispurse, through the new creation of credit, a basic income to all citizens. The utility of this was that, as people were displaced by machines, they would be able to live with an amount of economic security; and as machines replaced men, wages would become less important as the basic income increased to cover more of the monetary cost of living- the real cost being already paid by the machines.

The second was to reduce prices as to control inflation through a subsidised price discount. One manifestation of the plan was for a public authority to offer businesses the choice to sign up with the new program, whereby they agreed to open up their books to scrutiny and agree to a certain profit margin. In return, the participating businesses were entitled to reduce the prices of all their goods by a certain percentage, with the loss being refunded by the authority through a new creation of credit.

Writing further, Douglas observed that the creation of credit was held in monopoly by the banks; and that the credit so issued always had a debt attached to it. This meant that banks had the ultimate power to determine whether an economy flourished or wilted, based on their willingness to grant loans. Furthermore, the banks were becoming more and more centralised, culminating in England in the Big Five by the 1920's. He saw that the direction of policy in a nation stemmed, not from the citizenry that constituted it, focused through the governmental representatives, but from the creators of credit, who could make any demand they wished, and withdraw credit if the policy creators did not acquiesce, ruining the country, and the current government along with it.

With their monopoly, they were also able to increasingly hold more and more of the country under mortgage, as booms and busts-initiated by their decisions- threw land and properties on the market at low prices, snapped up by speculators and the banks, and turned at a lucrative profit during the next boom.

The main reason that the monopoly on the creation of credit had such drastic economic effects was that, there being no other source of money to balance the widening gap between prices and incomes, constant capital expansion -both public and private- was required. The expansion had to constantly increase, as it itself created additional costs to be met over time, at the very least equivalent to the amount of the expansion, if not more. It was a looming wave, that had to be ever faster and faster outrun with debt.

In order to put his suggestions into place, the monopoly of the banks had to be broken, and the power of credit creation treated as a public utility, made responsible to the public interest. Only then could credit be created without creating a cost and be able to make up the deficiency.

This proved quite a difficult task, however. The whole of the political party system, the press, academia and the banks themselves were ranged against his ideas. The idea caught on in the English-speaking world, spread through study groups, and there was lively public debate about the subject.

The citizens of Alberta, Canada became convinced that Social Credit was the way to banish poverty amidst plenty, and into peace and prosperity. They voted out the United Farmers Alliance, with 57 out of 63 of the M.L.A. seats being Social Credit in the 1935 election. The history appears to show that heavy efforts were made to stop the new government; several propaganda groups sprang from nowhere denouncing the 'unsound financial principles' and proclaiming that the democratically elected government did not represent the wishes of the people.

The government's attempt to pass several acts that would put this policy into place were unanimously disallowed, some by the Lieutenant-Governor, some by the Prime Minister, Mackenzie King (who, elected in 1935, had promised "Hands Off Alberta"), and some by the Supreme Court - in a few cases, using the outdated Royal Prerogative to overrule the people's will.

Further efforts were made to work around this, but, even after being elected in a second time in 1939, the Social Credit government was unable to pass sufficient measures to put Social Credit into practce, even though it had implemented programs that managed to pay off the Province's debt (when no other had), increase services, and improve the Province's economy overall.

The Social Credit Party continued to exist for thirty years, but after the 1944 election, it became just another conservative party.

So there's the story and explanation of the idea. Here are some websites with many of Douglas's, and others', writings.

http://www.douglassocialcredit.com...

http://socialcredit.com.au...

My main request in this debate is, do you think the economic ideas are sound? I'd really appreciate your view. The ideas about the people having full access to their country's resources and the basic income being a part of automation I find sound, but I still wonder about the prices-above-purchasing-power idea. It seems solid but I've not been able to get an outside view on it.
youhavenoswag

Con

no its not
Debate Round No. 1
Jerby

Pro

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youhavenoswag

Con

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Debate Round No. 2
Jerby

Pro

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youhavenoswag

Con

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Debate Round No. 3
Jerby

Pro

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youhavenoswag

Con

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Debate Round No. 4
Jerby

Pro

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youhavenoswag

Con

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Debate Round No. 5
1 comment has been posted on this debate.
Posted by Jerby 3 years ago
Jerby
I apologize for not being able to post on the third round, as I had not been able to access the internet before then.

I would like to clarify- Am I supposed to expand and give commentary? I was expecting to have some points made against my initial exposition, and then I could go about those.
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