93-505: The Douglas Credit Party was an Australian political party based on the Social Credit theory of monetary reform , first set out by Clifford Douglas . It gained its strongest result in Queensland in 1935 , when it gained 7.02% of first preferences under the leadership of the psychiatrist Dr Julius Streeter. Streeter had returned to Australia in 1919 as a war hero after being a surgeon in
186-511: A "Compensated Price" and a "National (or Consumer) Dividend", a National Credit Office would be charged with the task of calculating the size of the rebate and dividend by determining a national balance sheet , and calculating aggregate production and consumption statistics. The price rebate is based upon the observation that the real cost of production is the mean rate of consumption over the mean rate of production for an equivalent period of time. where The physical cost of producing something
279-615: A Social Credit bookroom in George Street, Sydney . A small monthly newsletter was also produced and circulated via this centre. The ongoing influence of Social Credit ideas was also revealed in the heyday of the One Nation Party in the late 1990s, with that party's promotion of a National Credit Authority. A Social Credit Secretariat in Queensland continues to promote Social Credit via the internet. Social Credit Social credit
372-631: A few seats in federal elections but failed to gain many votes. At the 1961 federal election , three candidates – William Ward, Albert Lee and Kenneth Whiteman – unsuccessfully stood for the Senate in New South Wales. They polled about 15,000 primary votes across the State. Some support was gained in a few New South Wales federal electorates, notably the Labor-held seat of East Sydney and a few strong Labor seats in
465-487: A good is $ 100, and the ratio of consumption to production is 3/4, then the real cost of the good is $ 100(3/4) = $ 75. As a result, if a consumer spent $ 100 for a good, the National Credit Authority would rebate the consumer $ 25. The good costs the consumer $ 75, the retailer receives $ 100, and the consumer receives the difference of $ 25 via new credits created by the National Credit Authority. The National Dividend
558-534: A greater loyalty to a particular party organisation. However, some followers entered directly into the political party fray, and others sought to influence the policies of existing political parties, especially the Australian Labor Party (ALP). However, not all supporters of the movement were involved with Labor. Charles North , the state president of the Western Australia branch of the movement during
651-497: A group of artists and craftsmen who established a community in Ditchling , Sussex, England, in 1920, with the motto "Men rich in virtue studying beautifulness living in peace in their houses". The guild sought to recreate an idealised medieval lifestyle in the manner of the Arts and Crafts Movement . It survived for almost 70 years until 1989. The Big Society was the flagship policy idea of
744-399: A law that intensified production means a progressively higher ratio of overhead charges to direct labour cost, and, apart from artificial reasons, this is simply an indication of the extent to which machinery replaces manual labour, as it should. If overhead charges are constantly increasing relative to income, any attempt to stabilize or increase income results in increasing prices. If income
837-417: A period to time of articles produced by factories making consumable goods divided up into A1 costs which refer to money paid to individuals by means of salaries, wages, dividends, etc., and B1 costs which refer to money paid to other institutions. Let A2, B2 be the corresponding costs of factories producing capital equipment. The money distributed to individuals is A1+A2 and the cost of the final consumable goods
930-429: A railway which was constructed a year, two years, three years, five or ten years ago, where charges are still extant), cannot be liquidated by a stream of purchasing power which does not increase in volume and which has a period of three weeks. The consequence is, you have a piling up of debt, you have in many cases a diminution of purchasing power being equivalent to the price of the goods for sale. According to Douglas,
1023-463: A small part of the economy, with small business owners hiring employees, usually young, inexperienced people. Distributism requires either direct or indirect distribution of the means of production (productive assets)—in some ideological circles including the redistribution of wealth —to a wide portion of society instead of concentrating it in the hands of a minority of wealthy elites (as seen in its criticism of certain varieties of capitalism ) or
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#17330932174471116-421: A society marked by widespread property ownership. Cooperative economist Race Mathews argues that such a system is key to creating a just social order . Distributism has often been described in opposition to both laissez-faire capitalism and state socialism which distributists see as equally flawed and exploitative. Furthermore, some distributists argue that state capitalism and state socialism are
1209-436: A standard, or measure, of value. Douglas believed that money should act as a medium of communication by which consumers direct the distribution of production. Closely associated with the concept of cultural inheritance as a factor of production is the social credit theory of economic sabotage. While Douglas believed the cultural heritage factor of production is primary in increasing wealth, he also believed that economic sabotage
1302-435: A superfluous accumulation of them. Douglas believed that excessive capital production is only a temporary correction, because the cost of the capital appears in the cost of consumer goods, or taxes, which will further exacerbate future gaps between income and prices. In the first place, these capital goods have to be sold to someone. They form a reservoir of forced exports. They must, as intermediate products, enter somehow into
1395-535: Is A1+B1. If money in the hands of the public is to be equal to the costs of consumable articles produced then A1+A2 = A1+B1 and therefore A2=B1. Now modern science has brought us to the stage where machines are more and more taking the place of human labour in producing goods, i.e. A1 is becoming less important relatively to B1 and A2 less important relatively to B2. In symbols if B1/A1 = k1 and B2/A2 = k2 both k1 and k2 are increasing. Since A2=B1 this means that (A2+B2)/(A1+B1)= (1+k2)*A2/(1+1/k1)*B1 = (1+k2)/(1+1/k1) which
1488-643: Is a distributive philosophy of political economy developed in the 1920s and 1930s by C. H. Douglas . Douglas attributed economic downturns to discrepancies between the cost of goods and the compensation of the workers who made them. To combat what he saw as a chronic deficiency of purchasing power in the economy, Douglas prescribed government intervention in the form of the issuance of debt-free money directly to consumers or producers (if they sold their product below cost to consumers) in order to combat such discrepancy. In defence of his ideas, Douglas wrote that "Systems were made for men, and not men for systems, and
1581-404: Is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do". The Democratic Labour Party of Australia espouses distributism and does not hold the view of favouring the elimination of social security who, for instance, wish to "[r]aise the level of student income support payments to
1674-506: Is any charge in respect of which the actual distributed purchasing power does not still exist, and that practically this means any charge created at a further distance in the past than the period of cyclic rate of circulation of money. There is no fundamental difference between tools and intermediate products, and the latter may therefore be included. In 1932, Douglas estimated the cyclic rate of circulation of money to be approximately three weeks. The cyclic rate of circulation of money measures
1767-498: Is beneficial for a person and his family and is, in fact, a right due to God having "given the earth for the use and enjoyment of the whole human race". G. K. Chesterton presents similar views in his 1910 book, What's Wrong with the World . Chesterton believes that whilst God has limitless capabilities, man has limited abilities in terms of creation. Therefore, man is entitled to own property and treat it as he sees fit, stating: "Property
1860-466: Is considered to be the preferred alternative to private banks . G. K. Chesterton considered one's home and family the centrepiece of society. He recognized the family unit and home as centrepieces of living and believed that every man should have his property and home to enable him to raise and support his family. Distributists recognize that strengthening and protecting the family requires that society be nurturing. Distributism puts great emphasis on
1953-495: Is constant or increasing, and overhead charges are continuously increasing due to technological advancement, then prices, which equal income plus overhead charges, must also increase. Further, any attempt to stabilize or decrease prices must be met by decreasing incomes according to this analysis. As the Phillips Curve demonstrates, inflation and unemployment are trade-offs, unless prices are reduced from monies derived from outside
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#17330932174472046-623: Is increasing. Distributism List of forms of government Distributism is an economic theory asserting that the world's productive assets should be widely owned rather than concentrated. Developed in the late 19th and early 20th centuries, distributism was based upon Catholic social teaching principles, especially those of Pope Leo XIII in his encyclical Rerum novarum (1891) and Pope Pius XI in Quadragesimo anno (1931). It has influenced Anglo Christian Democratic movements, and has been recognized as one of many influences on
2139-482: Is justified by the displacement of labour in the productive process due to technological increases in productivity. As human labour is increasingly replaced by machines in the productive process, Douglas believed people should be free to consume while enjoying increasing amounts of leisure, and that the Dividend would provide this freedom . Critics of the theorem, such as J. M. Pullen, Hawtrey and J. M. Keynes argue there
2232-476: Is merely the art of the democracy. It means that every man should have something that he can shape in his own image, as he is shaped in the image of heaven. But because he is not God, but only a graven image of God, his self-expression must deal with limits; properly with limits that are strict and even small." According to Belloc, the distributive state (the state which has implemented distributism) contains "an agglomeration of families of varying wealth, but by far
2325-426: Is no difference between A and B payments. Other critics, such as Gary North, argue that social credit policies are inflationary. "The A + B theorem has met with almost universal rejection from academic economists on the grounds that, although B payments may be made initially to "other organizations," they will not necessarily be lost to the flow of available purchasing power. A and B payments overlap through time. Even if
2418-539: Is not that we shall be put into somebody else's Utopia , but we shall be put in a position to construct a Utopia of our own." The idea of social credit attracted considerable interest in the interwar period , with the Alberta Social Credit Party briefly distributing "prosperity certificates" to the Albertan populace. However, Douglas opposed the distribution of prosperity certificates which were based upon
2511-470: Is not the only cause of inflation, and inflation is systemic according to the rules of cost accountancy given overhead charges are constantly increasing relative to income. In other words, inflation can exist even if consumers have insufficient purchasing power to buy back all of production. Douglas claimed that there were two limits which governed prices, a lower limit governed by the cost of production, and an upper limit governed by what an article will fetch on
2604-486: Is provided by loan credit (bank overdrafts) or export credit. Beyond empirical evidence, Douglas claims this deductive theorem demonstrates that total prices increase faster than total incomes when regarded as a flow . In his pamphlet entitled "The New and the Old Economics", Douglas describes the cause of "B" payments: I think that a little consideration will make it clear that in this sense an overhead charge
2697-450: Is something we call a price opposite to it." Money is effective demand, and the means of reclaiming that money are prices and taxes. As real capital replaces labour in the process of modernization, money should become increasingly an instrument of distribution. The idea that money is a medium of exchange is related to the belief that all wealth is created by the current labour of the world, and Douglas clearly rejected this belief, stating that
2790-525: Is that a man shall believe that he can get what he wants by the aid of it." According to economists, money is a medium of exchange . Douglas argued that this may have once been the case when the majority of wealth was produced by individuals who subsequently exchanged it with each other. But in modern economies, division of labour splits production into multiple processes, and wealth is produced by people working in association with each other. For instance, an automobile worker does not produce any wealth (i.e.,
2883-414: Is the explanation of the increasing necessity of what has come to be called economic sabotage; the colossal waste of effort which goes on in every walk of life quite unobserved by the majority of people because they are so familiar with it; a waste which yet so over-taxed the ingenuity of society to extend it that the climax of war only occurred in the moment when a culminating exhibition of organised sabotage
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2976-415: Is the materials and capital that were consumed in its production, plus that amount of consumer goods labour consumed during its production. This total consumption represents the physical, or real, cost of production. where Since fewer inputs are consumed to produce a unit of output with every improvement in process, the real cost of production falls over time. As a result, prices should also decrease with
3069-495: Is the primary factor decreasing it. The word wealth derives from the Old English word wela , or "well-being", and Douglas believed that all production should increase personal well-being. Therefore, production that does not directly increase personal well-being is waste, or economic sabotage. The economic effect of charging all the waste in industry to the consumer so curtails his purchasing power that an increasing percentage of
3162-736: The American Solidarity Party generally adheres to Distributist principles as its economic model. Ross Douthat and Reihan Salam view their Grand New Party , a roadmap for revising the Republican Party in the United States , as "a book written in the distributist tradition". The Brazilian political party, Humanist Party of Solidarity , was a distributist party, alongside the National Distributist Party in England, and
3255-470: The American Solidarity Party have advocated distributism alongside social market economy in their economic policies and party platform. According to distributists, the right to property is a fundamental right, and the means of production should be spread as widely as possible rather than being centralised under the control of the state ( statocracy ), a few individuals ( plutocracy ), or corporations ( corporatocracy ). Therefore, distributism advocates
3348-456: The Basque Country in a region of Spain and France, was founded by a Catholic priest, Father José María Arizmendiarrieta , who seems to have been influenced by the same Catholic social and economic teachings that inspired Belloc, Chesterton, Father Vincent McNabb , and the other founders of distributism. Distributist ideas were put into practice by The Guild of St Joseph and St Dominic ,
3441-465: The Battle of Ypres where he was injured by mustard gas . The Australian followers of Social Credit were ambivalent about direct political action. Some felt the existing form of democracy, with its emphasis on parties of the "left and right", to be inimical to genuine representation of the people. A number of Social Crediters felt that parliamentarians should have a first loyalty to their constituents and not
3534-615: The Democratic Labour Party in Australia. In the first round of the 2024 Romanian presidential election , candidate Călin Georgescu , a far-right independent candidate who advocates for a system based on distributism and sovereigntism received 23% of votes and qualified for the second round. Distributism is known to have influenced the economist E. F. Schumacher , a convert to Catholicism. The Mondragon Corporation , based in
3627-570: The Hunter Valley . Also at the 1961 federal election, several candidates contested the poll under the banner of the Australian National Party. The party was short-lived and some of its members joined the ranks of a revived Social Credit Movement of Australia (Queensland), which contested nine seats at the 1963 Queensland state election and three seats at the 1969 Queensland state election with only meagre results. Its strongest support
3720-539: The social market economy . Distributism views laissez-faire capitalism and state socialism as equally flawed and exploitative, due to their extreme concentration of ownership. Instead, it favours small independent craftsmen and producers; or, if that is not possible, economic mechanisms such as cooperatives and member-owned mutual organisations , as well as small to medium enterprises and vigorous anti-trust laws to restrain or eliminate overweening economic power. Christian democratic political parties such as
3813-578: The 1930s, was a Nationalist Party member of the Western Australian Legislative Assembly . At the height of the economic depression in the 1930s, advocates of Social Credit theory were successful in gaining majority conference support within the ALP for financial reform along the lines of that proposed by Social Credit theory. However, the policy was never put into practice by subsequent Labor governments. The party's strongest federal result
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3906-425: The A + B theorem in his book, Credit-Power and Democracy , in critique of accounting methodology pertinent to income and prices. In the fourth, Australian Edition of 1933, Douglas states: A factory or other productive organization has, besides its economic function as a producer of goods, a financial aspect – it may be regarded on the one hand as a device for the distribution of purchasing-power to individuals through
3999-534: The Alberta Agricultural Committee of the Alberta Legislature in 1934, Douglas said: Now we know there are an increasing number of charges which originated from a period much anterior to three weeks, and included in those charges, as a matter of fact, are most of the charges made in, respect of purchases from one organization to another, but all such charges as capital charges (for instance, on
4092-471: The B payments are received and spent before the finished product is available for purchase, current purchasing power will be boosted by B payments received in the current production of goods that will be available for purchase in the future." A. W. Joseph replied to this specific criticism in a paper given to the Birmingham Actuarial Society, "Banking and Industry": Let A1+B1 be the costs in
4185-595: The Henderson poverty line". The American Solidarity Party has a platform of favouring an adequate social security system, stating: "We advocate for social safety nets that adequately provide for the material needs of the most vulnerable in society". The position of distributists, when compared to other political philosophies, is somewhat paradoxical and complicated (see triangulation ). Firmly entrenched in an organic but very English Catholicism , advocating culturally traditional and agrarian values, directly challenging
4278-486: The United States in the 1930s, distributism was treated in numerous essays by Chesterton, Belloc and others in The American Review , published and edited by Seward Collins . Pivotal among Belloc's and Chesterton's other works regarding distributism are The Servile State and Outline of Sanity . In Rerum novarum , Leo XIII states that people are likely to work harder and with greater commitment if they possess
4371-409: The amount of time required for a loan to pass through the productive system and return to the bank. This can be calculated by determining the amount of clearings through the bank in a year divided by the average amount of deposits held at the banks (which varies very little). The result is the number of times money must turnover in order to produce these clearing house figures. In a testimony before
4464-436: The automobile) by himself, but only in conjunction with other auto workers, the producers of roads, gasoline, insurance, etc. In this opinion, wealth is a pool upon which people can draw, and money becomes a ticketing system . The efficiency gained by individuals cooperating in the productive process was named by Douglas as the " unearned increment of association" – historic accumulations of which constitute what Douglas called
4557-504: The consumer is forced to pay for all the costs of production, including waste. The economic effect of charging the consumer with all waste in industry is that the consumer is forced to do much more work than is necessary. Douglas believed that wasted effort could be directly linked to confusion in regard to the purpose of the economic system, and the belief that the economic system exists to provide employment in order to distribute goods and services. But it may be advisable to glance at some of
4650-448: The cultural heritage. The means of drawing upon this pool is money distributed by the banking system. Douglas believed that money should not be regarded as a commodity but rather as a ticket, a means of distribution of production. "There are two sides to this question of a ticket representing something that we can call, if we like, a value. There is the ticket itself – the money which forms the thing we call ' effective demand ' – and there
4743-433: The cultural inheritance is the property of all of us, without exception." Adam Smith , David Ricardo and Karl Marx claimed that labour creates all value . While Douglas did not deny that all costs ultimately relate to labour charges of some sort (past or present), he denied that the present labour of the world creates all wealth. Douglas carefully distinguished between value , costs and prices . He claimed that one of
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#17330932174474836-409: The cultural inheritance of society is the primary factor in the creation of wealth, which makes money a distribution mechanism, not a medium of exchange. Douglas also claimed the problem of production, or scarcity , had long been solved. The new problem was one of distribution. However, so long as orthodox economics makes scarcity a value, banks will continue to believe that they are creating value for
4929-479: The economic ideas of Pierre-Joseph Proudhon and his mutualist economic theory. The lesser-known anarchist branch of distributism of Day and the Catholic Worker Movement can be considered a form of free-market libertarian socialism due to their opposition to state capitalism and state socialism. Some have seen it more as an aspiration, successfully realised in the short term by the commitment to
5022-406: The factors resulting in a misdirection of thought in terms of the nature and function of money was economists' near-obsession about values and their relation to prices and incomes. While Douglas recognized "value in use" as a legitimate theory of values, he also considered values as subjective and not capable of being measured in an objective manner. Thus he rejected the idea of the role of money as
5115-483: The first, but is simpler. It assumes that the primary objective of the industrial system is the provision of employment. 3. And the third, which is essentially simpler still, in fact, so simple that it appears entirely unintelligible to the majority, is that the object of the industrial system is merely to provide goods and services. Douglas believed that it was the third policy alternative upon which an economic system should be based, but confusion of thought has allowed
5208-411: The greater number of owners of the means of production". This broader distribution does not extend to all property but only to productive property; that is, that property which produces wealth, namely, the things needed for man to survive. It includes land, tools, and so on. Distributism allows society to have public goods such as parks and transit systems. Distributists accept that wage labour will remain
5301-537: The hands of the state (as seen in its criticism of certain varieties of communism and socialism ). More capitalist-oriented supporters support distributism-influenced social capitalism (also known as a social market economy) , while more socialist-oriented supporters support distributism-influenced libertarian socialism . Examples of methods of distributism include direct productive property redistribution, taxation of excessive property ownership, and small-business subsidization. Distributists advocate in favour of
5394-577: The industrial system to be governed by the first two objectives. If the purpose of our economic system is to deliver the maximum amount of goods and services with the least amount of effort, then the ability to deliver goods and services with the least amount of employment is actually desirable. Douglas proposed that unemployment is a logical consequence of machines replacing labour in the productive process, and any attempt to reverse this process through policies designed to attain full employment directly sabotages our cultural inheritance. Douglas also believed that
5487-405: The interest of man which is self-development , is above all systems, whether theological, political or economic." Douglas said that Social Crediters want to build a new civilization based upon " absolute economic security " for the individual, where "they shall sit every man under his vine and under his fig tree ; and none shall make them afraid." In his words, "what we really demand of existence
5580-485: The land on which they labour, which in turn will benefit them and their families as workers will be able to provide for themselves and their household. He puts forward the idea that when men have the opportunity to possess property and work on it, they will "learn to love the very soil which yields in response to the labor of their hands, not only food to eat, but an abundance of the good things for themselves and those that are dear to them". He also states that owning property
5673-544: The logical conclusion of capitalism as capitalism's concentrated powers eventually capture the state. Thomas Storck argues: "Both socialism and capitalism are products of the European Enlightenment and are thus modernising and anti-traditional forces. In contrast, distributism seeks to subordinate economic activity to human life as a whole, to our spiritual life, our intellectual life, our family life." A few distributists, including Dorothy Day , were influenced by
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#17330932174475766-487: The long-term consequence of this policy is a trade war , typically resulting in real war – hence, the social credit admonition, "He who calls for Full-Employment calls for War!", expressed by the Social Credit Party of Great Britain and Northern Ireland , led by John Hargrave . The former represents excessive capital production and/or military build-up. Military buildup necessitates either the violent use of weapons or
5859-517: The major consequence of the problem he identified in his A+B theorem is exponentially increasing debt. Further, he believed that society is forced to produce goods that consumers either do not want or cannot afford to purchase. The latter represents a favorable balance of trade , meaning a country exports more than it imports. But not every country can pursue this objective at the same time, as one country must import more than it exports when another country exports more than it imports. Douglas proposed that
5952-414: The media of wages, salaries, and dividends; and on the other hand as a manufactory of prices – financial values. From this standpoint, its payments may be divided into two groups: Now the rate of flow of purchasing-power to individuals is represented by A, but since all payments go into prices, the rate of flow of prices cannot be less than A+B. The product of any factory may be considered as something which
6045-413: The mere concept of anarchism. Chesterton thought that distributism would benefit from the discipline that theoretical analysis imposes and that distributism is best seen as a widely encompassing concept inside of which any number of interpretations and perspectives can fit. This concept should fit a political system broadly characterized by widespread ownership of productive property. In the United States,
6138-503: The modern economy is a monetary one. Initially, money originated from the productive system, when cattle owners punched leather discs which represented a head of cattle. These discs could then be exchanged for corn, and the corn producers could then exchange the disc for a head of cattle at a later date. The word "pecuniary" comes from the Latin pecunia , originally and literally meaning "cattle" (related to pecus , meaning "beast"). Today,
6231-515: The money they produce by making it scarce. Douglas criticized the banking system on two counts: The former Douglas identified as being anti-social in policy. The latter he claimed was equivalent to claiming ownership of the nation. According to Douglas, money is merely an abstract representation of the real credit of the community, which is the ability of the community to deliver goods and services , when and where they are required. In January 1919, "A Mechanical View of Economics" by C. H. Douglas
6324-423: The open market. Douglas suggested that this is the reason why deflation is regarded as a problem in orthodox economics because bankers and businessmen were very apt to forget the lower limit of prices. Douglas proposed to eliminate the gap between purchasing power and prices by increasing consumer purchasing power with credits which do not appear in prices in the form of a price rebate and a dividend. Formally called
6417-418: The people displaced from the industrial system through the process of mechanization should still have the ability to consume the fruits of the system, because he suggested that we are all inheritors of the cultural inheritance, and his proposal for a national dividend is directly related to this belief. Douglas criticized classical economics because many of the theories are based upon a barter economy , whereas
6510-438: The popularity of political Catholicism across Europe . According to historian Michael A. Riff, a common feature of these movements was opposition to secularism , capitalism, and socialism. In 1891 Pope Leo XIII promulgated Rerum novarum , in which he addressed the "misery and wretchedness pressing so unjustly on the majority of the working class" and spoke of how "a small number of very rich men" had been able to "lay upon
6603-650: The precepts of Whig history —Belloc was nonetheless an MP for the Liberal Party, and Chesterton once stated, "As much as I ever did, more than I ever did, I believe in Liberalism. But there was a rosy time of innocence when I believed in Liberals". Distributism does not favour one political order over another (political accidentalism). While some distributists such as Dorothy Day have been anarchists , it should be remembered that most Chestertonian distributists are opposed to
6696-401: The price of subsequent ultimate products and they produce a position of most unstable equilibrium, since the life of capital goods is in general longer than that of consumable goods, or ultimate products, and yet in order to meet the requirements for money to buy the consumable goods, the rate of production of capital goods must be continuously increased. The replacement of labour by capital in
6789-420: The principle of subsidiarity. This principle holds that no larger unit (whether social, economic, or political) should perform a function that a smaller unit can perform. In Quadragesimo anno , Pope Pius XI provided the classical statement of the principle: "Just as it is gravely wrong to take from individuals what they can accomplish by their own initiative and industry and give it to the community, so also it
6882-572: The principles of subsidiarity and solidarity (built into financially independent local cooperatives and small family businesses ). However, proponents also cite such periods as the Middle Ages as examples of the long-term historical viability of distributism. Particularly influential in the development of distributist theory were Catholic authors G. K. Chesterton and Hilaire Belloc , two of distributism's earliest and strongest proponents. The mid-to-late 19th century witnessed an increase in
6975-413: The product of industry must be exported. The effect of this on the worker is that he has to do many times the amount of work which should be necessary to keep him in the highest standard of living, as a result of an artificial inducement to produce things he does not want, which he cannot buy, and which are of no use to the attainment of his internal standard of well-being. By modern methods of accounting,
7068-441: The productive process implies that overhead charges (B) increase in relation to income (A), because "'B' is the financial representation of the lever of capital". As Douglas stated in his first article, "The Delusion of Superproduction": The factory cost – not the selling price – of any article under our present industrial and financial system is made up of three main divisions-direct labor cost, material cost and overhead charges,
7161-486: The productive system and the monetary system are two separate entities. Douglas demonstrated that loans create deposits , and presented mathematical proof in his book Social Credit. Bank credit comprises the vast majority of money, and is created every time a bank makes a loan. Douglas was also one of the first to understand the creditary nature of money. The word credit derives from the Latin credere , meaning "to believe". "The essential quality of money, therefore,
7254-463: The productive system. According to Douglas's A+B theorem, the systemic problem of increasing prices, or inflation, is not "too much money chasing too few goods", but is the increasing rate of overhead charges in production due to the replacement of labour by capital in industry combined with a policy of full employment. Douglas did not suggest that inflation cannot be caused by too much money chasing too few consumer goods, but according to his analysis this
7347-427: The progression of time. "As society's capacity to deliver goods and services is increased by the use of plant and still more by scientific progress, and decreased by the production, maintenance, or depreciation of it, we can issue credit, in costs, at a greater rate than the rate at which we take it back through prices of ultimate products, if capacity to supply individuals exceeds desire." Based on his conclusion that
7440-555: The proximate causes operating to reduce the return for effort; and to realise the origin of most of the specific instances, it must be borne in mind that the existing economic system distributes goods and services through the same agency which induces goods and services, i.e., payment for work in progress. In other words, if production stops, distribution stops, and, as a consequence, a clear incentive exists to produce useless or superfluous articles in order that useful commodities already existing may be distributed. This perfectly simple reason
7533-432: The public ought to be able to buy, although in many cases it is an intermediate product of no use to individuals but only to a subsequent manufacture; but since A will not purchase A+B; a proportion of the product at least equivalent to B must be distributed by a form of purchasing-power which is not comprised in the description grouped under A. It will be necessary at a later stage to show that this additional purchasing power
7626-522: The ratio of which varies widely, with the "modernity" of the method of production. For instance, a sculptor producing a work of art with the aid of simple tools and a block of marble has next to no overhead charges, but a very low rate of production, while a modern screw-making plant using automatic machines may have very high overhead charges and very low direct labour cost, or high rates of production. Since increased industrial output per individual depends mainly on tools and method, it may almost be stated as
7719-455: The real cost of production is less than the financial cost of production, the Douglas price rebate (Compensated Price) is determined by the ratio of consumption to production. Since consumption over a period of time is typically less than production over the same period of time in any industrial society, the real cost of goods should be less than the financial cost. For example, if the money cost of
7812-491: The return of a guild system to help regulate industries to promote moral standards of professional conduct and economic equality among members of a guild. Such moral standards of professional conduct would typically focus on business conduct, working conditions and other issues in relation to industry specific matters such as workplace training standards. Distributism favours cooperative and mutual banking institutions such as credit unions, building societies and mutual banks. This
7905-436: The role of these factors in production, he considered the " cultural inheritance of society " as the primary factor. He defined cultural inheritance as the knowledge, techniques and processes that have accrued to us incrementally from the origins of civilization (i.e. progress ). Consequently, mankind does not have to keep " reinventing the wheel ". "We are merely the administrators of that cultural inheritance, and to that extent
7998-424: The teeming masses of the laboring poor a yoke little better than that of slavery itself". Affirmed in the encyclical was the right of all men to own property, the necessity of a system that allowed "as many as possible of the people to become owners", the duty of employers to provide safe working conditions and sufficient wages, and the right of workers to unionise . Common and government property ownership
8091-531: The theories of Silvio Gesell . Douglas' theory of social credit has been disputed and rejected by most economists and bankers. Prominent economist John Maynard Keynes references Douglas's ideas in his book The General Theory of Employment, Interest and Money , but instead poses the principle of effective demand to explain differences in output and consumption. Douglas disagreed with classical economists who recognised only three factors of production : land , labour and capital . While Douglas did not deny
8184-467: The utter confusion of thought which has undoubtedly arisen from the calm assumption of the book-keeper and the accountant that he and he alone was in a position to assign positive or negative values to the quantities represented by his figures is one of the outstanding curiosities of the industrial system; and the attempt to mould the activities of a great empire on such a basis is surely the final condemnation of an out-worn method. In 1920, Douglas presented
8277-413: Was at the 1934 election , at which it gained 4.69% of the national lower house vote. The party did not win seats in either election. After Streeter's death in 1946, the party went into a terminal decline. During the 1960s, there were several attempts in Queensland, South Australia and New South Wales to revive the political fortunes of Social Credit. In South Australia, the "Liberty League" contested
8370-544: Was expressly dismissed as a means of helping the poor. Around the start of the 20th century, G. K. Chesterton and Hilaire Belloc drew together the disparate experiences of the various cooperatives and friendly societies in Northern England, Ireland, and Northern Europe into a coherent political theory which specifically advocated widespread private ownership of housing and control of industry through owner-operated small businesses and worker-controlled cooperatives. In
8463-605: Was in the Maryborough area of central Queensland. A single Social Credit candidate stood in the 1969 federal election in the Sydney seat of Banks, but gained little support. At the 1974 federal election , another attempt was made in NSW to win a seat in the Senate, but again the votes gained were minimal. For some decades until the late 1960s, the late Mrs J Elvin operated, on a voluntary basis,
8556-406: Was necessary to preserve the system from spontaneous combustion. Douglas claimed there were three possible policy alternatives with respect to the economic system: 1. The first of these is that it is a disguised Government, of which the primary, though admittedly not the only, object is to impose upon the world a system of thought and action. 2. The second alternative has a certain similarity to
8649-413: Was the first article to be published in the magazine New Age , edited by Alfred Richard Orage , critiquing the methods by which economic activity is typically measured: It is not the purpose of this short article to depreciate the services of accountants; in fact, under the existing conditions probably no body of men has done more to crystallise the data on which we carry on the business of the world; but
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