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Thursday, 12 April 2018 17:36

Social Credit and War

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     As today is Remembrance Day, I thought it would be appropriate for us to consider one of the implications of Social Credit theory with respect to war:

"(...) the financial system (...) is, beyond all doubt, the main cause of international friction. Since, as we have seen, no nation can buy its own production, it is inevitable that there will be a struggle for markets in which to get rid of the surplus. The translation of this commercial struggle in a military context is simply a matter of time and opportunity. "[1]

     Social Crediters have repeatedly warned that there is a chronic economic cause, entirely artificial in nature and, therefore, unnecessary, which inexorably leads nations to take up arms against each other. Due to the underlying deficiency in consumer purchasing power that afflicts all industrial societies operating under standard banking and cost-accounting conventions, countries are frequently pressured to alleviate the lack of liquidity in the domestic economy by seeking to export more than they import. A so-called "favorable trade balance" (which is undoubtedly unfavorable in real terms because it implies a net loss of real wealth) helps an economy to fill the gap between the prices of consumer goods and the consumers' income by getting rid of part of its surplus production, while, at the same time, increasing the flow of purchasing power to the consumer (through the jobs that are created and the profits that are obtained by the exporting companies). The problem is that it is mathematically impossible for all of the nations in the world to export more than they import; it is a zero-sum game. For every exporting champion, there must be a loser with a trade deficit. Countries that import more than they export are faced with a problem of a gap that has become even worse as a result of their commercial activities. Since every country is operating under the same internal deficit of purchasing power, the struggle for a favorable trade balance constitutes a struggle for survival. This leads, quite naturally, to economic conflict, or rather to economic warfare, in the form of commercial wars and "free trade” alliances, and, all too often, it can force or at least induce a military conflict. A country that does not manage to compete successfully through "innovation", hard work, and the achievement of lower prices in comparison with its rivals in the global struggle for an artificially scarce flow of purchasing power can choose to ensure its victory through war, i.e., by defeating his economic opponents on the battlefield. The real reason for the war will, of course, be more or less hidden from the public and a pretext will be found, but the war may allow the aggressor to destroy part of a rival's productive capacity and/or, through the eventual signature of peace treaties, to insist on more favorable commercial conditions for itself (as part of due reparations).

    The pressure placed on nations to compensate for their internal price-income gaps with favorable trade balances is intensified by the universally defended policy of full employment. If we madly insist, in direct opposition to the real physical potential of the modern industrial economy, that all (or almost all) must work in the formal economy in order to obtain purchasing power (or be supported by those who do), then we are demanding continued economic growth as an end in itself (as a means of distributing additional income as the population grows). The resulting production must find some outlet. If it can not be absorbed internally, a market must be secured for it abroad. It was for this reason that John Hargrave, leader of the Green Shirts (a paramilitary Social Credit group of the 1930s), courageously proclaimed on more than one occasion that "He who cries for full employment, cries for war".      

Major Douglas explored in some detail the purely economic causes behind modern war in a BBC speech entitled "The Causes of War":





[1] C. H. Douglas, The Monopoly of Credit (Sudbury, Inglaterra: Bloomfield Books, 1979), 92.



Last modified on Thursday, 12 April 2018 18:12

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  • Comment Link Oliver heydorn Wednesday, 22 January 2020 10:01 posted by Oliver heydorn

    Hi Roger, many thanks for your comment and interest!

    The question that you pose is one that is often raised in connection with the A+B theorem. It is necessary first to understand that when a business pays B costs to a prior firm in the chain of production, those B costs are the completion of an accountancy cycle. In other words, the recipient firm will take the money to pay down production loans or restore working capital (which would only be re-issued as income alongside an entirely new set of costs). This means that none of the B money would be transformed into incomes with respect to the cycle of production in virtue of which those B payments were issued. Any A payments that were represented by those B payments were A payments from past periods and would have (most likely) been spent by consumers on past production. They are thus not available to offset the B factor in prices now and there is a gap.

    To this observation one will then point out, quite rightly, that so long as production is being maintained in a steady-state of self-repeating motion, the current A payments of the recipient firm (the penultimate stage of production in my example) that are being issued on its current set of partially finished goods could be used to buy the final goods from the first firm, thus 'making up' for the B payment's contribution to the cost of the final goods. This is true, however, there are many things that a B payment can include which is not offset at all or only partially by any corresponding income. Long-term loan repayments (especially to a bank), depreciation, and maintenance costs, etc., either distribute no income in being spent, or do so at a slower rate than the rate at which they must be collected. So, the Social Credit claim, at bottom - and this is the ultimate point of A+B - is that it is in virtue of capital costs (the production, replacement, and maintenance costs of real capital, i.e., machines, equipment, software, etc.) that businesses are obliged to demand more money from consumers than they simultaneously distribute to the consuming public in the form of usable consumer income of all types. This would be and is the case even if production at all stages is being maintained in a steady-state of self-repeating motion. I hope you find this explanation helpful. Feel free to ask further questions as needed.

  • Comment Link Roger Ellis Monday, 20 January 2020 02:02 posted by Roger Ellis

    Hi Oliver,
    I am researching social credit and have a question you may be able to help me with.
    Specifically, CH Douglas based much of his thinking on a "gap" between purchasing power and the costs of production. But are not all the costs of A+B, income for other consumers in an economy? ie; even if wages + salaries + dividends are less than A+B wouldn't the income from premises rental (going to the landlord), the interest payments (going to the bank's shareholders) and the advertising costs (going to the proprietors of the newspaper) also add to the purchasing power being delivered into the economy by the factory?

    I look forward to hearing your response.
    Yours sincerely


  • Comment Link Wally Monday, 16 April 2018 01:07 posted by Wally

    Great article, Oliver—and so appropriate at this time. How tragic that innocent people are so easily seduced by appeals to loyalty and sacrifice to do the bidding of hidden influences behind the curtains who are the only ones to benefit while ordinary deceived souls must suffer en masse as mere cannon fodder. The whole thing is absolutely sickening. And those who understand human nature seem able to repeat these atrocities almost at will with unquestioning compliance of the victims who generally are historically illiterate and unsuspecting. All that is needed is the threat of an “external enemy”. Insecurity is a powerful weapon which people will do almost anything to avoid.


  • Comment Link Jim Monday, 16 April 2018 01:06 posted by Jim

    War itself should be considered an export. The whole purpose of war is to "dump" as many bombs and shells on the "importing nation" as possible without allowing the other nation to "dump" any of its exports in the form of bombs and shell in your nation.

  • Comment Link Arindam Sunday, 15 April 2018 05:07 posted by Arindam

    There is another mechanism by which the price-income gap can lead to war. Since government borrowing is one of the main methods of bridging the gap, and national security provides a convenient pretext for a massive increase in such borrowing, nations which are unsuccessful in export warfare would perhaps be tempted to create situations that justify high defence spending. Such politically tense situations could easily escalate into armed conflict.

    In relation to this, it is interesting to note that the nations that just attacked Syria, (France, UK, US) all run current account deficits, while countries which are reluctant to get directly involved (Germany, Italy, China, Japan) have current account surpluses.

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