Monday, February 11, 2008

Clifford Hugh Douglas (1879-1952)

by Anthony Cooney

The Problem of the 20th Century

When, in 1956, Ford’s opened their their first fully automated car plant in Detroit, they invited the automobile workers’ leader, Walter Reuther, to the ceremony and tour of inspection. “How yoo goin’ to collect doos of these machines, Mr. Reuther.” A smart-ass junior executive asked. Reuther looked him up and down in silence for a few moments and then replied, “Sonny. How are you goin’ to sell automobiles to these machines?

Peradventure. Mankind must find the answer to that question if it is to live with the machine on terms of human satisfaction, and not upon the terms of either Huxley’s Brave New World or Orwell’s Nineteen-Eighty-Four. On balance we are moving toward the Multinational’s and World Bank’s Brave New World, rather than the Marxist’s Nineteen Eighty-Four, but both are expressions of the Will to Power and a combination of the twin evils is always possible. Historically, in fact, not only Reuther’s question but also its answer was formulated over seventy-five years ago. For the science of economics the answer turned out to be as novel and as radical as the Copernican theory had been for the science of astronomy. Unfortunately politicians have gone on believing the economists’ superstition that the money-system is the center of the Universe, fixed and immutable by Divine decree, in spite of all evidence to the contrary.

Clifford Hugh Douglas was born in 1879, and that would appear to be the only fact about his life which he felt the public needed or wanted to know. He was a very private person and desired that no biography or obituary notices be published. He believed utterly that the message he had for Mankind was beyond all measure more important than he himself. The known details of his life may be stated briefly. He was the son of Hugh Douglas, an engineer. His mother, Louisa, nee Hordern, was the daughter of an Indian Civil Servant. He was married twice and was survived by a daughter, Miss M. Douglas. In 1910 he studied engineering for a year at Pembroke College, Cambridge. He took no degree there but he became a member of both the I.Mech.E, and the I.E.E., which bespeaks a dedicated “journeymanship” in engineering.

Douglas held positions as an engineer with the Canadian General Electric Co., as Asst. Engineer, Buenos Aires and Pacific Railway, as Chief Engineer and Manager in India for the British Westinghouse Co., and as Assistant SuperIntendent of the Royal Aircraft Factory, Farnborough. In India an important idea was planted in his mind when the Chief Comptroller told him that the annual ritual of melting down the Indian currency and re-coining it was a farce, “since the whole thing is a matter of credit.” However of more importance was his work as Supervisory Engineer of the Post Office Tube in London where he installed the world’s first fully automatic telephone system. It was here he discovered the great question of the 20th Century – “How are you going to sell (anything) to these machines?” He also got an inkling of the answer for he noticed that whilst there were no physical difficulties preventing completion of the work, he got orders, from time to time, to slow it up and pay off the men, because “There was no money available.”

With the coming of war Douglas volunteered for the Royal Flying Corps and rose to the rank of Major, remaining after the war in the Royal Air Force Reserve. In 1916 he was detached to Farnborough to sort out “a certain amount of muddle” in the Factory’s accounts. To speed up his examination of the accounts he introduced “tabulating machines.” It was here that he made his seminal discovery. The factory was generating costs at a faster rate than it was distributing money in the form of wages and salaries! – “How are you going to sell goods to these machines?” With characteristic modesty Douglas described his insight as “a glimpse of a portion of reality.”

The obvious question was, “Is this a peculiarity of a factory producing war weapons in time of war, or is it true of every business?” To find the answer Douglas collected information from over 100 large concerns and found that in every case the total costs always exceeded the sums paid out in wages, salaries and dividends. Here then was the mathematical identification, overlooked by both Marxist and Classical economists, of “Surplus Value,” or as Social Crediters call it more accurately, “The Unearned Increment of Association.” It follows that only a part of the final product can be distributed through incomes disbursed by its production, and moreover a diminishing part as industrial processes lengthen and become more complex, increasing the ratio of overheads to current wages. Unless this defect in Monetary “algebra” was corrected the distribution of the portion which could not be bought, must depend increasingly on work in progress on future products – whether needed or not – paid for by debt.

Toward Tomorrow

Douglas first broached his findings in an article in The Weekly Review in December, 1918, entitled The Delusion of Super Production. It aroused great interest and led to the meeting between Douglas and Orage which resulted in Orage throwing open the pages of The New Age to Douglas. It was in that journal that Economic Democracy was published chapter by chapter.

What a rumpus the New Age created in the Socialist and Labor camps when first this defense of dividends for everybody, irrespective of work, made its appearance. Mr. And Mrs. Sidney Webb were touched to their puritanic quick. Never, they said, would they countenance a proposal to give every citizen his birth right of an annual share of the communal production. Such a distribution would make future social reforms unnecessary; and where would the Fabians be then, poor things?

“Mr. George Bernard Shaw, with his workhouse scheme of a universal dividend in return for a universal industrial service, was silently contemptuous of Douglas. As a matter of fact, perhaps he had long ceased to feel in any possible need of a new idea and his juggling with his old ideas were sufficiently skillful to continue to deceive his public that he was still learning.

But the most bitter objection came, of course, from the Labor officials and the class Socialists whose bread of life depended upon diatribes against ‘unearned incomes.’ Our simple little proposal to put everybody upon an ‘unearned income’ threatened to take the bread out of their mouths; and tart and many were the comments we drew from them.

A credit reform league with branches throughout the country was organized. To secure his independence and to serve the cause of Social Credit, Douglas gave up his engineering career. To ensure an income independent of employment he opened a small yacht building yard on Southampton Water. Later he lived in a converted watermill in Hampshire and adapted the wheel to generate electricity. When he finally retired and moved to Fearnan in Perthshire he built a hydro-electric power plant on the burn which ran through his land. Decentralization of economic power was at the core of his teaching; he practiced what he preached.

Douglas and Orage set about interviewing politicians, businessmen and bankers – “We saw everybody we could and did our best to see everybody we should” Orage was later to say. Far from finding his discovery welcome, Douglas received a hostile reception and his ideas were boycotted.

The authenticated boycott against Major Douglas’ ideas has broken down under the continued stress of the money crisis and the attitude of ignoring the social credit proposals has changed to open discussion and open combating of them.

Douglas’ accurate forecasting of the “Great Depression” brought him world-wide recognition and following. The Spectator remarked “The works of Major Douglas throw out a challenge which every thinking man must appreciate. It (Social Credit) has two characteristics which pre-dispose one in its favour. One is its economy of means, the other its generality…He is right when he urges that there is a problem of general purchasing power.” The English Review stated, “Major Douglas is, at the lowest estimate, a strong original thinker in the field of economics. Knowledge of his thought cannot fail to benefit anyone who is seeking the way out of our present waste land.” The Yorkshire Post declared Social Credit to be “a theory which can no longer be ignored.” The Vancouver Province concurred “With simplicity and with unanswerable logic it calmly overturns the most cherished of doctrines and so-called axioms.” Charles Chaplin revealed in his autobiography that having read Douglas he saved his fortune from the Wall Street crash of 1929, by turning all his stocks and shares into solid worth because it occurred.

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