The revival of currency crankism.
In the course of our over one hundred years of socialist activity, one of the ideas that we have had to deal with from time to time has been currency crankism—the idea that economic and social problems are caused by some flaw in the monetary system and that what is required to put things right is not to get rid of the profit system that is capitalism but mere monetary reform (of one kind or another, depending on which particular school the currency crank belongs to).
Between the wars the most popular school of currency crankism in Britain was Social Credit, based on the ideas of Major Douglas (as he was known). His explanation for the slump—of poverty amidst potential plenty, of unmet needs alongside idle factories and widespread unemployment, of piles of unsold goods being destroyed—was simple, not to say simplistic: it was due to a lack of purchasing power, to people not having enough money to buy what they needed or to constitute a market worth catering for.
The solution, too, was simplistic: distribute purchasing power free to people in the form of a “social dividend” paid by the government. Douglas believed that banks could “create credit” by the mere stroke of a pen, but that they deliberately kept money scarce so as to be able to charge a higher rate of interest. Hence his solution that the banks should be taken over by the government and their supposed power to create credit exercised but in the general interest, as “social credit”. In fact, there is no chronic shortage of purchasing power.
Sufficient to buy the product is generated as wages and profits in the course of production; slumps are not caused by an absolute shortage of purchasing power but arise when, because of falling profit prospects, capitalist firms choose not to spend all their profits on fully renewing or on expanding production.
Nor can banks “create credit”; they are essentially only financial intermediaries, borrowing money at one rate of interest from people with cash to spare and lending this at a higher rate to those needing money to spend or invest, their profits coming from the difference between the two interest rates. This being the case, the main result of applying “social credit” would be roaring inflation.
All the other problems of capitalism, including periodically re-occurring “poverty amidst plenty”, would continue unabated. They will only end when the means of production are brought into common ownership and democratic control so that they can be oriented towards directly satisfying people’s needs—when banks, money and all the rest of the buying and selling system will have become redundant.
Normally, lack-of-purchasing power currency crank theories flourish in times of slump. However, according to an article by Derek Wall, “Social Credit: The Ecosocialism of Fools”, in the September issue of Capitalism, Nature, Socialism, the modern-day followers of Major Douglas are well ensconced in the Green Party: “Brian Leslie, whose parents were members of the Social Credit Greenshirts during the 1930s, chairs the Green Party Economics Working Group.
The newsletter, Sustainable Economics, is almost entirely concerned with social credit and Party economics speaker Molly Scott Cato advocates monetary reform… Frances Hutchinson, a former member of the Green Party left grouping, the Association of Socialist Greens, has revived the Douglas Social Credit Secretariat… Wilfred Price, a member of the Greenshirts in the 1930s, joined the Ecology Party (now the Green Party) in the early 1980s and powerfully spoke for social credit as a form of green politics.”
Currency cranks find it easy to infiltrate the Green Party because of the tendency amongst its members and supporters to blame “big banks” and international financial institutions for ecological problems and the ravages of capitalist globalisation. The Green Party has, for instance, lined up alongside the Tories, the UKIP and other reactionaries in the “defend the pound” camp because it sees the euro as an international (in the sense of anti-national) currency.
Derek Wall’s article concentrates on the political side of Social Credit rather than on its economic fallacies (though he recognises these), in particular on the anti-semitic position it took up between the wars. The title of his article is taken from August Bebel, a pre-WWI German Social Democrat, who once quipped that “anti-semitism is the socialism of the fool”, by which he meant the anti-capitalism of the fool.
And it is, of course, a short step between denouncing “global finance” for causing problems to blaming “international Jewish bankers” or some other supposed international conspiracy or cabal. It was a step that Douglas himself took. Wall quotes him as writing in Social Credit (1933): “In a remarkable document which received some publicity some years ago, under the title of ‘The Protocols of the Learned Elders of Zion’, a Machiavellian scheme for the enslavement of the world was outlined.
The authenticity of this document is a matter of little importance; what is interesting about it, is the fidelity with which the methods by which such enslavement might be brought about can be seen reflected in the facts of everyday experience.” Wall—a Green Party member who describes himself as an “eco-Marxist”—recognises that Social Credit doesn’t have to be anti-semitic and that its supporters in the Green movement (with one exception) are not.
His concern is to warn the Green Party and the anti-globalisation movement against embracing monetary reform as a quick-fix solution but also of the dangerous company they risk falling into if they continue down the road of blaming “global finance” for ruining “national”—and local—economies.