The revival of currency crankism.<\/em><\/p>\n\n\n\n \nIn the course of our nearly one hundred years of socialist activity, one\n of the ideas that we have had to deal with from time to time has been \ncurrency crankism \u2013 the idea that economic and social problems are \ncaused by some flaw in the monetary system and that what is required to \nput things right is not to get rid of the profit system that is \ncapitalism but mere monetary reform (of one kind or another, depending \non which particular school the currency crank belongs to). Author: Adam Buick<\/p>\n\n\n\n Back to the Economics Index<\/a><\/p>\n\n\n\n
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\nBetween the wars the most popular school of currency crankism in Britain\n was Social Credit, based on the ideas of Major Douglas (as he was \nknown). His explanation for the slump \u2013 of poverty amidst potential \nplenty, of unmet needs alongside idle factories and widespread \nunemployment, of piles of unsold goods being destroyed \u2013 was simple, not\n to say simplistic: it was due to a lack of purchasing power, to people \nnot having enough money to buy what they needed or to constitute a \nmarket worth catering for. The solution, too, was simplistic: distribute\n purchasing power free to people in the form of a “social dividend” paid\n by the government.
\nDouglas believed that banks could “create credit” by the mere stroke of a\n pen, but that they deliberately kept money scarce so as to be able to \ncharge a higher rate of interest. Hence his solution that the banks \nshould be taken over by the government and their supposed power to \ncreate credit exercised but in the general interest, as “social credit”.
\nIn fact, there is no chronic shortage of purchasing power. Sufficient to\n buy the product is generated as wages and profits in the course of \nproduction; slumps are not caused by an absolute shortage of purchasing \npower but arise when, because of falling profit prospects, capitalist \nfirms choose not to spend all their profits on fully renewing or on \nexpanding production. Nor can banks “create credit”; they are \nessentially only financial intermediaries, borrowing money at one rate \nof interest from people with cash to spare and lending this at a higher \nrate to those needing money to spend or invest, their profits coming \nfrom the difference between the two interest rates.
\nThis being the case, the main result of applying “social credit” would \nbe roaring inflation. All the other problems of capitalism, including \nperiodically re-occurring “poverty amidst plenty”, would continue \nunabated. They will only end when the means of production are brought \ninto common ownership and democratic control so that they can be \noriented towards directly satisfying people’s needs \u2013 when banks, money \nand all the rest of the buying and selling system will have become \nredundant.
\nNormally, lack-of-purchasing power currency crank theories flourish in \ntimes of slump. However, according to an article by Derek Wall, “Social \nCredit: The Ecosocialism of Fools”, in the September issue of \nCapitalism, Nature, Socialism, the modern-day followers of Major Douglas\n are well ensconced in the Green Party:
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\n“Brian Leslie, whose parents were members of the Social Credit \nGreenshirts during the 1930s, chairs the Green Party Economics Working \nGroup. The newsletter, Sustainable Economics, is almost entirely \nconcerned with social credit and Party economics speaker Molly Scott \nCato advocates monetary reform . . . Frances Hutchinson, a former member\n of the Green Party left grouping, the Association of Socialist Greens, \nhas revived the Douglas Social Credit Secretariat . . . Wilfred Price, a\n member of the Greenshirts in the 1930s, joined the Ecology Party (now \nthe Green Party) in the early 1980s and powerfully spoke for social \ncredit as a form of green politics.”
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\nCurrency cranks find it easy to infiltrate the Green Party because of \nthe tendency amongst its members and supporters to blame “big banks” and\n international financial institutions for ecological problems and the \nravages of capitalist globalisation. The Green Party has, for instance, \nlined up alongside the Tories, the UKIP and other reactionaries in the \n“defend the pound” camp because it sees the euro as an international (in\n the sense of anti-national) currency.
\nDerek Wall’s article concentrates on the political side of Social Credit\n rather than on its economic fallacies (though he recognises these), in \nparticular on the anti-semitic position it took up between the wars. The\n title of his article is taken from August Bebel, a pre-WWI German \nSocial Democrat, who once quipped that “anti-semitism is the socialism \nof the fool”, by which he meant the anti-capitalism of the fool. And it \nis, of course, a short step between denouncing “global finance” for \ncausing problems to blaming “international Jewish bankers” or some other\n supposed international conspiracy or cabal. It was a step that Douglas \nhimself took. Wall quotes him as writing in Social Credit (1933):
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\n“In a remarkable document which received some publicity some years ago, \nunder the title of ‘The Protocols of the Learned Elders of Zion’, a \nMachiavellian scheme for the enslavement of the world was outlined. The \nauthenticity of this document is a matter of little importance; what is \ninteresting about it, is the fidelity with which the methods by which \nsuch enslavement might be brought about can be seen reflected in the \nfacts of everyday experience.”
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\nWall \u2013 a Green Party member who describes himself as an “eco-Marxist” \u2013 \nrecognises that Social Credit doesn’t have to be anti-semitic and that \nits supporters in the Green movement (with one exception) are not. His \nconcern is to warn the Green Party and the anti-globalisation movement \nagainst embracing monetary reform as a quick-fix solution but also of \nthe dangerous company they risk falling into if they continue down the \nroad of blaming “global finance” for ruining “national” \u2013 and local \u2013 \neconomies.<\/p>\n\n\n\n
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