Renewed Interest: Analyst Ties Monetary Reform To Social Credit Movement

Interview with Richard C. Cook

ICONOCLAST: How did you come to the realization that the problem with the worldís economy lies in distribution, not production?

RICHARD COOK:
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I was really pondering over where all of the problems had come from. It had pretty much given us a century of world war side by side with tremendous industrial advances. That was the contradiction that I couldnít figure out.

I remember him saying, "We have this wonderful economy that produces so much. What are you so concerned about?"

I said, "Well, the real problem is distribution. Why if weíve got this bounty do we have so much poverty? So many countries of the world are left out. What is going on? Why has this happened?"

So from that point on, I just had that in my mind.
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So I did a lot of reading, and I came across the writings of the social credit movement in England. This had been established in the 1920s. Major C.H. Douglas was the founder of the social credit movement. It had actually come out of the English Reform Movement that had gone all the way back to the 1800s when they, too, were trying to figure out where did this contradiction come from. You know, here we have the Industrial Revolution, and yet we have so much poverty.

Of course, the Marxists were answering it one way, but the English Social Reformers were taking a different kind of approach, trying to reconcile economic democracy. Thatís where Douglas came in with his analysis of social credit where he demonstrated that the way industry operates in a modern technological environment is that you need fewer and fewer people to get more and more goods. (Thereís a vast literature that the U.S. really hasnít ever gotten into on this.) So if you rely on wages and salaries to distribute purchasing power, youíll never catch up because there arenít enough people needing those jobs to produce what needs to be produced.

Whatís going on? Whatís the contradiction? Basically what Douglas said was that there are a whole lot of factors that go into pricing besides wages and salaries. The biggest one probably is the fact that to produce at a high technologically level, corporations have to retain a lot of their earnings, and build that into capital equipment, plants, research, and that sort of thing. All of those come out on the pricing end because theyíve got to pay for it, but they donít come out in the purchasing power end.

Douglas then extrapolated that this gap as the benefit society gets from this tremendous producing powerhouse that we have, but it doesnít ever get to people in purchasing power, so Douglas came up with the idea of a "National Dividend" which is a distribution of purchasing power that is a lien on future production rather than against past costs. I began to work this theory out, and it really began to make sense.

Another thing Douglas pointed out is that the gap between purchasing power and prices is filled by debt. Thatís where consumer debt comes from. Thatís why people borrow so much on their credit card. The way countries try to get around that is to create a positive trade balance where what is paying for the lack of purchasing power is essentially profit we make from overseas customers. The United States tried really hard to have a positive trade balance after World War II to maintain the World War II full employment economy. We succeeded at that for about 20 years.

That was the whole purpose of the Breton Woods agreements and the IMF and the World Bank. It was to create overseas markets for U.S. production, but once the other countries of the world started to grow up, and we lost our trade balance, we were in big, big trouble. Thatís when the power of the banks and the financial world really escalated during the 1970s. Since the 70s, weíve been in a system where the Federal Reserve has tried, essentially, to create employment or growth through a financial bubble inflation/deflation cycle. Since the 70s, when I really began to examine the data, it was clear that thatís all weíve had. The only real financial growth weíve had since the 70s are bubbles that expand and deflate.
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What they tell me is this story is about how the British financiers were looking for somebody to counter Douglas because the social credit movement was becoming so powerful. Thatís when they discovered John Maynard Keynes. The whole theory of Keynesianism is when you have government deficit financing, high income tax, and essentially an inflationary growth policy to constantly pay down your debt. All of this was to counter Douglas because they saw that if Douglas came in with the social credit and the National Dividend, the power of the bankers and financing the production/purchasing power gap would be cut off at the knees. It became part of the political issue of the century, even though nobody had ever heard about him because the newspapers in the 1920s to not even mention Douglasí name in print.
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