An Historical Footnote

["William B. Ryan" <william_b_ryan@xxxxxxxxxxx>]

> From W. E. Turner, *Stable Money: A Conservative Answer to Business
Cycles,* 1966:

Nearest thing to a plan striking at the basic flaw in the economy
perhaps was offered by a British engineer, Major C. H. Douglas, and
known unfortunately as "Social Credit."  It is entirely possible that
it was defeated as much by its very name as anything else.  Most
people assumed without investigation that it was socialism, which it
by no means was.  It was upon the Social Credit structure that several
bills were introduced in Congress, including the Goldsborough bills,
any one of which could have routed the depression in a matter of
months.  Major Douglas and his followers were not always practical,
however, and allowed their plan to become laden with numerous
unnecessary and highly complicated features.

The plan provided for debt-free money distributed in such quantities
as to assure a stable and prosperous price level.  Its weakness lay in
the impractical schemes for its distribution, which smacked of
socialist subsidies.

Even before the inauguration, the Democratic House had passed the
Goldsborough bill--which could have erased depression and brought
lasting stability without any of the controls that came with the
deficit spending programs that were to develop...

While the 1932 Goldsborough bill is discussed later more fully, and
its unfortunate aspects pointed up, it might be well to note at this
point how closely it came to becoming the law of the land.  On this
point, Senator Owen in testimony a decade later offered this
historical note:

"I want to say more, and that is that it would be very unwise to treat
this matter as a partisan matter.  I want to compliment Mr.
Goldsborough for the great work he did in bringing about a better
relation and understanding of these matters by the examination which
he caused from 1922 on up to 1932, and the bill which he then
presented, with the approval of the Committee on Banking and Currency
of the House--and I believe it was practically a unanimous report.  It
was debated 2 days in the House, a very simple bill, declaring it to
be the policy of the United States to restore and maintain the value
of money according to the standards of 1921 and 1929, and directing
the Secretary of the Treasury, the officers of the Federal Reserve
Board, and the Reserve banks to make effective that policy.  That was
all, but enough, and it passed, not by a partisan vote.  There were
117 Republicans who voted for that measure.  That measure was treated
as our great leaders on both sides would have it treated, as a
non-partisan patriotic measure intended to protect the people of this
country from the agony of repeated depressions which have taken place
and vexed our soul so frequently in the past.  As I say, 117
Republicans voted for that bill, and it passed by 289 to 60, and of
the 60 who voted against it, only 12, by the will of the people,
remain in the Congress."

But Roosevelt at that moment became convinced that his AAA and NRA
proposals should be given a trial first, and the monetary reform bills
were sidetracked.

When the AAA act reached the Senate, an amendment by Senator Elmer
Thomas of Oklahoma was tacked on.  This authorized the President (1)
to issue $3 billion in greenbacks to retire government debts, (2) to
accept silver in payment of war debts up to $100 million, (3) to
permit free coinage of silver at a ratio to gold to be fixed by the
President, and (4) to devalue the gold dollar up to 50 percent.
Roosevelt agreed to the amendment but decided, under pressure from his
"sound money" advisers, not to use it...

There were numerous other efforts at providing debt-free money,
including bonus bills for veterans which twice were vetoed on grounds
they were of all things "inflationary."  At every crucial time the
Roosevelt administration chose "sound money" policies which cost us
our hope for recovery until war mobilization.

Roosevelt willingly enough supported legislation providing deficit
money to extend government powers through work projects and hand-outs
under the control of ambitious bureaucrats like Harold Ickes.  Net
contributions to buying power by the government reached a peak of $600
million a month in 1936 when the bonus was granted, fell to less than
$100 million a month in 1937 and to practically nothing in 1938.  When
more depression resulted, we lifted our deficit to $300 million a
month in 1939, and with war financing it rose to astronomical figures.

In other words, through deficit spending the government added some $3
billion to the national buying power--at the expense of future
taxpayers--when the need was for at least $10 billion.  And instead of
injecting it through a network of government projects, it should have
been spent only for the goods and services for which a government
normally spends money in the course of its constitutional functions.

Such debt-free money would have obviated the need for the vast program
designed to divide up existing incomes and curtail production to
demand.  It would have made unnecessary the gold purchase and silver
maneuvers through which we merely increased our potential money
supply.  It would have made unnecessary the vast security insurance
program which rapidly is becoming unmanageable and which itself is
deflationary to the extent that future recipients are compelled to
set aside funds for later use.  Most of all, it would have released
our full productive powers and enabled America to surge forward
economically to a point that depressions and consequent wars would
have been avoided...

Throughout the history of America, the pursuit of fundamental monetary
reform has gone on uninterrupted.  The closest near-miss came in the
form of something unfortunately call Social Credit.

An overwhelming majority of the United States Congress favored it as
early as 1932, and in one form or another it has persisted since.
Only the futile hope that a confident new President could restore
prosperity without abandoning the debt-money system America had
inherited kept Social Credit from becoming the law of the land.  By
1936, when the New Deal had proved incapable of dealing effectively
with depression, its proponents were back again in strength.  The last
significant effort to gain its adoption came in 1938...

Inasmuch as Social Credit represents the only fundamental change in
the American money system which came close to adoption, and because it
embodies some principles which relate to the "stable money" proposal
here offered, more detailed attention is accorded it at this point.

Social Credit is the outgrowth of a cumbersome monetary philosophy
advanced originally be Great Britain's Major C. H. Douglas, and during
the early depression years gained considerable headway in England,
Australia, South America, Canada, and even the United States.

The Goldsborough bill of 1932--which passed the House of
Representatives by a whopping majority, and stopped only when
Roosevelt decided to seek "relief" through AAA production
controls--was based solidly on the Social Credit philosophy.

Originally known as "economic nationalism," the name was changed to
the misleading "Social Credit" when fascism usurped the term.  Because
of its present name, it is assumed erroneously to be a form of
socialism and automatically rejected by most conservatives.

Striking at the heart of our economic problem, Social Credit seeks to
promote a monetary policy which would assure adequate purchasing power
to meet maximum goods and services output at all times and thereby
insulate a nation against booms and busts.  For that job, however, it
chose the unfortunate method of dividends payable directly to citizens
and subsidized discounts payable to businesses.  It has the virtue of
recognizing capitalism as entirely necessary and of consistently
opposing socialism and Communism...

Being a political movement, Social Credit necessarily makes use of
prejudice appeals, conjuring up an enemy known as Finance
Capitalism--the banking system as the source of money.  This
emotionalism has brought much discredit to it.

Social Crediters have scant patience with the production limitation
notions of the Roosevelt New Deal.  They sought instead to raise
consumer purchasing power in accordance with production.  The methods
adopted, while capable of measuring up to the job, were so unwieldy
and complicated that the marvel is anyone even tried to understand...








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