Friday, 5 December 2008

Economic Sabotage

By: Socred - B.A., SCMP

Douglas's ideas on economic sabotage are essential in understanding his belief that the current economic system is producing nowhere near capacity, and that the price of goods for sale could be reduced significantly. Often, economists will criticize Douglas's theories by pointing out that there is not this pool of unused capacity that Douglas claimed. Some Social Crediters have even stated that Douglas's comments about the unused capacity in the economy were merely specific to a period of severe depression. The purpose of this essay is to show that the unused capacity is being used up through the superflous production of products that nobody needs or desires, and is part of what Douglas coined "economic sabotage".

The concept of economic sabotage is essential to understanding Social Credit, and Douglas commented on it in his first article to appear in the New Age:

"The economic effect of charging all the waste in industry to the consumer so curtails his purchasing power that an increasing percentage of 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." (C.H. Douglas, "A Mechanical View of Economics")

Douglas defined wealth as personal well-being. And if the purpose of production is consumption, then the only purpose of production is to increase our well-being. Goods and services which do not enhance our well-being are merely a waste. However; as Douglas states, all waste in industry must be charged to the consumer, since the consumer ultimately pays for everything. The fact that the consumer has to pay for all waste in industry diminishes his purchasing power in relation to the things he does need or desire. Consequently; there is a great deal of unused capacity in the economic system which is being wasted on producing things that the consumer does not need or desire but simply exists in order to distribute income. We have been hypnotized into believing that you must produce a chia pet in order to eat a steak, but in reality, what you need to produce in order to eat a steak is steak, and the production of the chia pet actually diverts resources away from the production of steak. The fact that people claim that Douglas overstated his price rebate is due to this hypnotic effect.

As Douglas stated in "Credit-Power and Democracy":

"The enormous increase of sabotage of all descriptions which is the outstanding feature of contemporary industry is due to the blind effort to equate purchasing-power to production without altering the principles of price-fixing" (C.H. Douglas, "Credit Power and Democracy" pge 18)

Only through price fixing via a price rebate can the increasing sabotage in industry be curtailed. This is due to the fact that a price rebate mechanism allows the consumer to control industry. No longer would it be necessary to produce all sorts of wasteful products which nobody wants or needs, and industry's efforts can be adjusted to producing the things that increase the consumers well-being. Instead of production for the sake of distributing income, or for its own sake, we would have production for the sake of increasing our true wealth. The enormous scale of this industrial sabotage is hard to understand, because we have been hypnotized into believing that all production is necessary, but this is only true if consumers controlled production.

There can be no better elaboration on the scale of economic sabotage in our current economic system than in Douglas's book "Economic Democracy", so it is reproduced below:

"But it may be advisable to glance at some of 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 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 was necessary to preserve the system from spontaneous combustion.

The simplest form of this process is that of " making work " ; the elaboration of every action in life so as to involve the maximum quantity and the minimum efficiency in human effort. The much- maligned household plumber who evolves an elaborate organisation and etiquette probably requiring two assistants and half a day, in order to " wipe " a damaged water pipe, which could, by methods with which he is perfectly familiar, be satisfactorily repaired by a boy in one-third the time ; the machinist insisting on a lengthy apprenticeship to an unskilled process of industry, such as the operation of an automatic machine tool, are simple instances of this. A little higher up the scale of complexity comes the manufacturer who produces a new model of his particular speciality, with the object, express or subconscious, of rendering the old model obsolete before it is worn out. We then begin to touch the immense region of artificial demand created by advertisement ; a demand, in many cases, as purely hypnotic in origin as the request of the mesmerised subject for a draught of kerosine. All these are instances which could be multiplied and elaborated to any extent necessary to prove the point. In another class comes the stupendous waste of effort involved in the intricacies of finance and book-keeping ; much of which, although necessary to the competitive system, is quite useless in increasing the amenities of life ; there is the burden of armaments and the waste of materials and equipment involved in them even in peace time ; the ever-growing bureaucracy largely concerned in elaborating safeguards for a radically defective social system ; and, finally, but by no means least, the cumulative export of the product of labour, largely and increasingly paid for by the raw material which forms the vehicle for the export of further labour.

All these and many other forms of avoidable waste take their rise in the obsession of wealth defined in terms of money ; an obsession which even the steady fall in the purchasing power of the unit of currency seems powerless to dispel ; an obsession which obscures the whole object and meaning of scientific progress and places the worker and the honest man in a permanently disadvantageous position in comparison with the financier and the rogue. It is probable that the device of money is a necessary device in our present civilisation ; but the establishment of a stable ratio between the use value of effort and its money value is a problem which demands a very early solution, and must clearly result in the abolition of any incentive to the capitalisation of any form of waste.

The tawdry " ornament," the jerry-built house, the slow and uncomfortable train service, the unwholesome sweetmeat, are the direct and logical consummation of an economic system which rewards variety, quite irrespective of quality, and proclaims in the clearest possible manner that it is much better to " do " your neighbour than to do sound and lasting work. The capitalistic wage system based on the current methods of finance, so far from offering maximum distribution, is decreasingly capable of meeting any requirement of society fully. Its very existence depends on a constant increase in the variety of product, the stimulation of desire, and in keeping the articles desired in short supply." ( C.H. Douglas, "Economic Democracy" pge 74-78)

As Douglas states, we must abolish any incetive to the capitalization of waste. Social Crediters envision a new society, where wasted effort is no longer rewarded. It is waste, or economic sabotage, that accounts for the vast difference in current financial prices and those proposed by a Social Credit rebate system. Economists are so blind to the forms of waste that exist in our economy that they cannot see the vast pool of unused capacity that could be diverted to the production of goods and services that actually increase our well-being. Further, the beneficial effects of this policy to our environment would be immense.

The fact that so much sabotage exists in our current economic system is due to the fact that we make scarcity a value. Orthodox economics is the "science" of scarcity, or the "allocation of scarce resources", whereas, Social Credit is the science of abundance, or the distribution of abundant resources. It is primarily due to the fact that our current economic arrangement in terms of prices rewards scarcity that businesses actually pursue it as a policy. The object of business is to deliver the minimum amount of product for the maximum price. A smart businessman seeks to control prices through monopoly control of the industry in which he is engaged. While markets which exhibit attributes of perfect competition do exist (especially in commodity markets), the whole purpose of advertising and packaging is to differentiate product enough to give a business some degree of monopoly control over prices (i.e. "monopolistic competition). Douglas noted this fact in his testimony before the Select Standing Committee on Banking and Commerce.

"Well, to return to what I was saying. Modern business is practically based on the creation of a scarcity of value. The whole efforts of general business communities are to be able to control prices to such an extent that you get the maximum price for the minimum delivery. Taking it collectively that is the basis of the whole thing, and is, according to the rules of the game, perfectly legitimate. Your object in business at the present time is to make money. It is not to deliver goods. The delivery of goods is incidental to the making of money, and if you can deliver fewer goods for more money then that is sound business, and the banker is a sound business man." (C.H. Douglas, testimony before the Select Standing Committee on Banking and Commerce)

Businesses produce in order to earn a profit, and if it is profitable for them to increasingly engage in economic sabotage, they will continue to do so. However; through the price rebate mechanism, businesses will find it profitable to increase the distribution of goods and services that people desire, and they will increasingly engage in these activities. Douglas didn't claim that the price rebate could be as high as 75% because he was an dreamer; he was an engineer, and a pragmatist. Douglas saw the immense waste in industry which most of us fail to see because he was able to dehypnotize himself of what he called the "black magic" of finance. Remove this waste which is charged to the consumer, and prices could be reduced significantly. The first step in this process is to understand that money is not a commodity which is scarce, but merely a ticketing system which enables the efficient distribution of production.