U N E M P L O Y M E N T

Arthur Kitson

VI.—CONSTRUCTIVE PROPOSALS



THE author of “Credit Power and Democracy” calls attention to the fact that the consumer is as essential to any economic system as the producer, and that the value of a productive plant is due as much to the market facilities for the disposal of its products as to its efficiency.  In this light, it will be seen that an economic system which does everything to encourage production and little or nothing to assist the consumer to acquire goods is bound to fail.

The author also demolishes the much-cherished socialistic theory that all wealth is labour’s creation.  On the contrary, he shows that labour’s contribution is comparatively small, probably less than 5 per cent., and is a necessarily decreasing quantity.  The wonderful productivity of modern industrialism is due to the researches and patient toil of scientists and inventors who bequeathed their discoveries to humanity.  In virtue of this rich legacy, every member of society should be entitled to a share of the product.  The potential wealth of this country is far beyond the dreams of avarice, and under a system of co-operation and good-will everyone might, by contributing a trifling amount of labour, receive a share of all the good things of life sufficient for his well-being, contentment, and happiness.  Every member might thus receive an income from the State instead of bein taxed.  By gradually replacing the wages system with a system of dividends, by giving a share to each and every member engaged in an industry in that particular undertaking, the evils now resulting from unemployment would disappear.


A NOVEL SCHEME.


To meet the discrepancy between prices and purchasing-power distributed, Major Douglas proposes that producers shall sell their products below cost at a price which shall bear the same ratio to cost as the total national consumption of all commodities does to the total national production of credit.  The difference between such prices and costs of production is to be made good by a draft from the Treasury on the national credit account.  Under this scheme, price, instead of being as now a function of money, becomes a function of production.  Hence any over-issue of money cannot affect prices, and the evils resulting from inflation under our present system are therefore eliminated.

Major Douglas has drawn up a plan embodying his propsals for dealing with the coal industry, as an illustration of how the present chaotic system can be replaced by an intelligent and practical method and which if successful, might be extended to other industries throughout the country.  He calls it :—

“A PRACTICAL SCHEME FOR THE ESTABLISHMENT
OF ECONOMIC AND INDUSTRIAL DEMOCRACY.”

“The following exemplary scheme, drawn up for special application to the mining industry, is designed to enable a transition to be effected from the present state of industrial chaos to a state of economic democracy, with the minimum amount of friction and the maximum results in the general well-being.”

I.

(1)  For the purpose of efficient operation each geological mining area shall be considered as autonomous administratively.

(2)  In each of these areas a branch of a bank, to be formed by the Miners’ Federation of Great Britain, shall be established, hereinafter referred to as the producers’ bank.  The Government shall recognize this bank as an integral part of the mining industry regarded as a producer of wealth, and representing its credit.  It shall ensure its affiliation with the Clearing House.

(3)  The shareholders of the bank shall consist of all persons engaged in the mining industry, ex. officio, whose accounts are kept by the bank.  Each shareholder shall be entitled to one vote at a shareholders’ meeting.

(4)  “The bank as such shall pay no dividend.

(5)  The capital already invested in the mining properties and plant shall be entitled to a fixed return of, say, 6 per cent., and, together with all fresh capital, shall continue to carry with it all the ordinary privileges of capital administration other than price-fixing.  Depreciation shall be set against appreciation.

(6)  The boards of directors shall make all payments of wages and salaries direct to the producers’ bank in bulk.

(7)  In the case of a reduction in cost of working, one-half of such reduction shall be dealt with in the national credit account, one quarter shall be credited to the colliery owners, and one quarter to the producers’ bank.

(8)  From the setting to work of the producers’ bank all subsequent expenditure on capital account shall be financed jointly by the colliery owners and the producers’ bank in the ratio which the total dividends bear to the total wages and salaries.  The benefits of such financing done by the producers’ bank shall accrue to depositors.


II.

(1)  The Government shall require from the colliery owners a quarterly, half-yearly or yearly statement, properly kept and audited, of the cost of production, including all dividends and bonuses.

(2)  On the basis of this ascertained cost, the Government shall by statute cause the price of domestic coal to be regulated at a percentage of the ascertained cost.

(3)  This price (of domestic coal) shall bear the same ratio to cost as the total national consumption of all descriptions of commodities does to the total national production of credit, i.e.,

Cost: Price :: Production : Consumption.

Price per ton = Cost per ton x
     Cost value of total consumption
     ——————
      Money value of total production

(Total national consumption includes capital depreciation and exports.  Total national production includes capital appreciation and imports.)

(4)  Industrial coal shall be debited to users at cost plus an agreed percentage.

(5)  The price of coal for export shall be fixed from day to day in relation to the world market and in the general interest.

(6)  The Government shall reimburse to the colliery owners the difference between their total cost incurred and their total price received, by means of Treasury notes, such notes being debited, as now, to the National Credit Account.

For a complete exposition of this scheme I must refer to the book and particularly to the appendix and commentary by Mr. Orage.


CAUSES OF UNEMPLOYMENT.


To recapitulate, I have endeavoured to show that unemployment is the inevitable result of our present economic system, which fails to distribute sufficient purchasing power to enable the public to purchase goods as fast as they are produced and as they are needed.  Effective demand therefore bears no coherent relation to natural demand.

A rational system would offer employment so long as labour is essential for producing goods, to supply the wants of the employees as well as the general public.  Thanks to inventions and discoveries, goods can be produced in such quantities and with so little labour that the real problem is how to distribute goods to the public regardless of the amount of labour required for their production.  Economic systems are made for the benefit of mankind ;  men are not created to be the slaves of any economic system.  The radical defects in our system are an insufficiency of purchasing power and an inequitable system of distribution.

I have endeavoured to show that what has been called from time immemorial the usury system is the enemy of civilization, and is the disease germ of every economic system now existing.  No system can possibly function satisfactorily or beneficially for all or for the majority of the members of any community that is based upon this principle.  One has only to calculate what the interest charges of any sum of money aggregate over an extended period of time to realize what an impossible system it is.

Not long since an American humorist wrote to Mr. John D. Rockefeller, the well-known American millionaire, suggesting a scheme by which he could enrich posterity.  He proposed that Mr. Rockefeller should set aside one-half of his wealth on interest at 5 per cent., and leave instructions that the interest should be re-invested on a 5 per cent. basis for a period of 500 years.  By that time the income from usury would have become so vast that every United States Citizen could draw an income of a million dollars per annum, supposing that the population by that time had grown to 10 times the present population !

The truth is that usury can only flourish over a limited period of time, and only to the extent of a certain small proportion of the capital created.  It is very similar to a system of gambling.  For every one who gains there are scores who must be losers.


THE REMEDY.


To remedy these evils, some such plan as that suggested by Major Douglas will have to be started.  The consuming public must have some control over prices as well as over the volume of purchase power that is created.  These are the two objects to which special attention must be paid and a complete change from the present system established.

Of course, the conclusion reached and the proposals suggested in these articles will doubtless cause consternation in the minds of some and amusement in others.  They will be pooh-poohed by most of the orthodox philosophers, and all the fogeys will hold up their hands in horror.  But on the ground of truth, I venture to say that, though they may be challenged, they cannot be permanently subverted.  We have only to wait until the intelligent public have had time to digest them thoroughly, and the present system has reached the final goal towards which it is rapidly hastening.