Major Douglas's Gospel

By R. F. HARROD

THE works of Major Douglas throw out a challenge which every thinking man must appreciate. We live in a society in which on the one hand many needs, often most urgent needs, for goods and services remain unsatisfied, and on the other a vast quantity of people earnestly desire to be em- ployed in producing them, factories are working below capacity and savings exist which would willingly be placed for the construction of increased capacity, if required, on the basis of a small but assured profit. Moreover, if at any time it were proved that our technical powers were so great that all needs could be satisfied without utilizing the full working power of the community, greater leisure would be greedily welcomed by many ; yet as things are, leisure for most involves penury and misery with primary needs un- satisfied. The challenge implied by this is obvious and irresistible.

Now there is probably a vague belief in the minds of those financial authorities, whom Major Douglas would have us think so sinister, that, if things are allowed to take their course and some minor adjustments are made, certain natural forces in the system will lead us back to a fairly full level of employment. The present upward phase of the trade cycle encourages them in that belief. Moreover, they probably think that orthodox economists, who have applied a mathe- matical apparatus to exploring the equilibrium of the system, could justify that belief in rigidly logical terms.

There are, however, good grounds for holding that neither of these beliefs is justified, that there are no forces in the system, if left to itself, which guarantee its full working, and that economists have not satisfactorily analysed the nature of the economic equilibrium from that particular point of view. Economists have reached definite conclusions on other problems connected with the equilibrium. But they have not given a satisfactory account of what determines the quantity of resources that will get employed. Recently serious though inconclusive attempts have been made to grapple with this problem.

While this work proceeds at leisure, years pass, the waste and suffering continue, setting up a tension likely, as Major Douglas rightly claims, to generate wars and revolutions. His challenge is insistent. What of the solution he offers ?

It has two characteristics which predispose one in its favour. One is its economy of means, the other its generality. Its economy of means may be contrasted with socialist pro- posals. Socialists, concerned, among other things, with the same problem as Major Douglas—the failure of our capitalist system to function at full capacity—propose centralized control over the whole economic system and all its workings.

The Socialist plan, if put into execution, should, whatever else its results, succeed in setting all to work. But what a mighty effort is needed for its execution ! The problem of unemployment cries for quick and drastic remedy. The other ideals of Socialism call for gradual, slow and carefully planned adjustment. To link the two sets of problems is wrong in principle. Major Douglas isolates the unem- ployment problem—though he would disapprove of this name for it—and offers a remedy especially appropriate to it. This procedure is right in principle.

The second characteristic of his solution that calls for commendation is its generality. Whatever the deficiencies of particular industries may have been on the side of pro- duction or marketing, recently and formerly, it is clear that the evil from which we are suffering is something more than the sum of these deficiencies. The institution of planning schemes for industries seriatim leaves the central problem untouched. Major Douglas recognizes that what

is required is a stimulus or corrective applied to the system as a whole.

Moreover, I believe that, though Major Douglas's scheme of subsidized prices would lead to limitless inflation if adopted as a permanent system, it is worth serious attention ta a recipe in the downward phase of the trade cycle.

If clear and concentrated thinking were to be applied to the general problem, I do not think we should fail to get substantial results. Unfortunately, these qualities are not prominent in the work under review. The Douglas Manual* is by way of setting out the quintessence of Major Douglas's thought. It is a collection of extracts from his various writings. It was to be hoped that these would be sorted out and brought together in such a way as to present a clear and coherent scheme. But the result is a disappointing hotch- potch. The book abounds in epigrammatic aphorisms and witty diatribes. There is humanity, also, and a prophetic strain. Occasionally in certain passages some semblance of systematic thought seems to be taking shape, but it quickly fades out into obscurity. Neither his diagnosis of the present system nor his practical proposals are presented in a clear and orderly way. There is nothing for the mind to grip.

Some propositions have a specious appearance of precision, but they seldom bear close examination. For instance, his famous A plus B theorem is set out. He divides the pay- ments which the business world has to make into two categories : A, payments for wages, salaries and dividends, which collectively constitute the whole income which the community has to spend in buying goods ; and B, other payments, for plant, &c. Since the total purchasing power available for buying goods is only equal to A, and total business costs are equal to A plus B, there is a permanent and systematic excess of business costs over business receipts. Does Major Douglas really not appreciate that the B pay- ments constitute receipts of other businesses ? If he examines the accounts of a business making consumers goods, he will no doubt find that the moneys paid out by such a business to consumers (A) do not provide consumers with sufficient purchasing power to buy the goods at their cost value (A plus B). But if he examines the accounts of a business engaged on making plant he will find that such a business pays more to consumers, as wages, &c., than it takes back from them ; for all its receipts constitute the B payments of other businesses.

This clear and precise but fallacious proposition is char- acteristically followed by a dark and obscure passage which suggests that some of the B payments may not constitute receipts by others because they go as premature repayments of loans to banks. Such payments should properly be put into a separate—call it Category. But Major Douglas must remember that the business world not only makes C payments but also has certain C receipts, constituting the new loans allowed by banks, which may normally be expected to balance the C payments.

What is so tantalizing about Major Douglas's failure to be coherent is that he has grasped an important truth. He is right when he urges that there is a problem of general purchasing power, transcending the problems of particular industries, urgent and isolable. Moreover, he has probably done more than all the economists put together to persuade a mass of people that this is so. If only a chariot of clear thinking could be hitched to his splendid enthusiasm and redoubtable power of propaganda !

* The Douglas Manual. Being a recension of passages from the works of Major C. H. Douglas, outlining Social Credit, compiled

by Philip Mairet. (Stanley Nott. 5s.)