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Re: Fw: [socialcredit] Re: OWNERSHIP: RE: Calculations regardingA + B, rev 2 -- A + B Theorem: refuting the critics -- Wally
Wally,
I appreciate your presenting an extensive case to support Douglas' A+B
theory and to refute Moulton's critique of that theory. It will take
me considerable time to study and respond intelligently to your case,
but I will try to do so in the next week or so and in the meantime send
it out to others who can analyze your case seriously from the logic of
binary economics. (To aid the serious reader I have attached Moulton's
critique of Douglas.)
Please keep in mind that I totally agree with Douglas in terms of the
purchasing power gap under the present system. Under the
present flawed system, capital ownership and the cash flow that results
from the productiveness of capital is highly concentrated into the
hands of a relatively tiny ownership elite, who cannot, even if they
wanted to, physically consume all that cash flow, especially if wage
rates were set by global market forces. In other words, under the
present wage/welfare slave system, new capital formation (about $7,000
per capita annually at present rates of growth in the U.S. economy
alone) is financed in ways that "capital breeds capital" for the same
elite, adding additional pressures on the purchasing power gap and
further distorting domestic and global market forces. Moreover, binary
economists agree with Douglas that something should be done to make a
private property, free market, limited government economy bring
aggregate purchasing power (i.e., effective demand) in balance with
aggregate production (i.e., aggregate supply). And we would agree that
monetary policy and "social credit" (broadly defined) is the most
important (but not the only) structural change that is necessary to
grow a free enterprise system and make it work most effectively.
Binary economists would close the purchasing power gap through
comprehensive monetary, tax, income maintenance, inheritance and other
fundamental reforms in national ownership policies that encourage
faster rates of non-inflationary growth, universal access to future
capital ownership and full distributions of capital incomes. (A
description of each of these fundamental reforms is covered in our book
"Capital Homesteading for Every Citizen" which is downloadable free
from our web site and summarized in the flyer at
http://www.cesj.org/publications/capitalhomesteading/whatif-flyer.pdf.)
Wally, do you object to a system that makes capital ownership and
socially-generated capital credit accessible to every citizen as a
fundamental right of citizenship? Do you consider such a system
unjust? If social credit can be directed to the consumption side of
the economic equation to close the purchasing power gap, what's wrong
with using social credit on the production side of the equation to
achieve the same goal? Do you disagree with any of the specific points
in the matrix comparing Kelso's Just Third Way with capitalism and
socialism at http://www.cesj.org/thirdway/comparison3rdway.htm?
Again, I appreciate your respectful posting, unlike those of Ryan. I'm
still disappointed that you and Vic Bridger have allowed him to engage
in libelous, uncivilized and juvenile behavior on the COG Ownership
forum to carry your message.
I will send a blind copy of this posting to Professor Robert Ashford
and Dr. Norman Bailey who may wish to respond to your arguments, if
they have the time.
For a Just Market Economy,
Norm Kurland
www.cesj.org
Wallace M. Klinck wrote:
-----
Original Message -----
Sent: Saturday, July 09, 2005 2:05 AM
Subject: Re: [socialcredit] Re: OWNERSHIP: RE:
Calculations regarding A + B, rev 2 -- A + B Theorem: refuting the
critics -- Wally
From: Wally Klinck
Norman,
Dr. Harold Moulton's critique of
Douglas's A + B Theorem is the usual one that has been made on many
occasions by various critics. Say's Law posits that the financial
disbursements made in the act of production are sufficient to
facilitate the consumption of the production of the same period. That
Moulton finds an identity between the totality of financial incomes
disbursed and prices of goods produced is merely axiomatic and hardly
surprising. As Douglas emphasized, however, the claim that there
exists no overall deficiency of purchasing power in comparision with
prices because incomes were paid out in respect of all the stages of
production, including those accounting for "B" payments, is merely a
general statement which does not bear upon the specifics of the case.
What is important is not the equality between disbursed incomes and
prices but rather to what extent the disbursed incomes are AVAILABLE to
consumers so that they may claim the production of the period in which
they originated.
Moulton may be correct in saying
that the payments made to other organizations, designated by Douglas as
"B" payments are not sent "out of the country." Multi-stage production
is financed by short-term bank "replacement" loans which are repayable
by industry to the bank. Industry has no option but to keep up
repayments if it wants the bank to continue to facilitate its
operations--without which accomodation it will cease to exist. When an
industrialist borrows from a bank to produce a factory and pays out
this money as wages in advance of final production, it must repay this
loan. If the business makes an issue of equity shares and recovers
these incomes from the persons to whom it was paid, the money must be
repaid to the bank and is cancelled out of existence--thus sending it
to oblivion. If business makes allocated charges in respect of real
capital, as it must through established accountancy principles, and
recovers this through the agency of prices the money is immobilized as
purchasing-power. The consumer is, in effect, forced to reinvest his
income in industry. This procedure suggests that we consume currently
everything we produce--including our physical capital. Physical
capital endures far into the future although the money reflection of it
is prematurely cancelled. The consumer is rightly charged for capital
depreciation but not properly credited for capital appreciation. The
reader can readily deduce that this issue is fundamentally related to
questions of capital ownership.
Moulton is wrong in suggesting that
Douglas only looked at the individual enterprise. He examined the
costing procedures of a large number of businesses and the A + B
Theorem is a generalized macroeconomic statement embracing each modern
industrial economy as a whole.
Douglas has repeatedly rebutted
arguments similar to those of Moulton made by various critics and a
considerable number of these historic rebuttals are compiled in the
recent book "As + Bs and All That" authored by Victor Bridger of the
Social Credit School of Studies near Brisbane.
In his book "Aladdin's Lamp: The
Wealth of the American People," Gorham Munson observes that when
Moulton claims that "there is an identity between the market price of a
commodity and the sums received by those engaged in its production" so
that "the selling prices and the income of producers necessarily must
be equal," he is endorsing the cornerstone of financial orthodoxy--the
"one thing"... "as Stuart Chase is correct in saying that it is ...
that economists almost to a man agree upon." Munson goes on to say
that Moulton's formulation "entirely ignores the rate at which selling
prices are generated and the rate at which incomes are distributed"--an
admittedly subtle question which he explores exhaustively in Chapter
7, titled "The Creeping Error," of his book. Moulton obviously does
not understand the significance of the role of replacement credits
issued as debts (repayable loans) by the banks to facilitate
multi-stage industrial production. That is, he does not seem to
understand the nature and significance of the credit factor in prices.
Central to Douglas's ideas is his
concept of real cost, i.e., that the true cost of production is
consumption for the nation as a whole. This implies that the true
physical cost of production is typically falling with the general
accretion of capital (visible all around us), occuring because capital
appreciation is exceeding capital depreciation. This core aspect of
Social Credit is usually neglected, or passed over--conveniently or
otherwise--as unimportant by the critics.
That there is an identity between
incomes paid out for production and the prices of that production is of
small help to humans having immediate needs when an increasing
proportion of those incomes are not available so that they may access
the fruits of industry as these emanate from it. As John Hargrave has
explained, we frequently hear critics say that "in time all B Costs
come through as purchasing-power." "That, of course, is quite
impossible. A Costs are becoming B costs, but B Costs never become
A--purchasing-power. B costs are spent A costs....B Costs are debt,
not purchasing-power....we often hear that 'B Costs have been paid out
as A Costs (wages, etc.)...at some time or another.' Therefore, it is
argued, A + B are available as purchasing-power; and as total costs are
exactly A + B ... there is no shortage of purchasing-power.... The key
words are 'have been paid out.' A Costs have been paid out and have
been spent." He provides a diagram to assist those who cannot
understand the "time lag" involved in this argument. He goes on, "When
people say: 'In the long run all Costs must be purchasing-power ...'
they forget 'the long run' is Eternity. It is quite true that in
Eternity all costs (A + B) are purchasing-power. Obviously, they must
be. But they are only available as purchasing-power to Gods, Angels,
Archangels, Spirits, Demons and other Timeless Beings. That is of
little help to mortals on earth, who, unfortunately, can only use the
purchasing-power available to them at any given moment."
If nothing intervened to
"compensate" the widening deficiency between industrial financial
prices and incomes available to meet them, the economic system would
collapse. As Douglas pointed out, the main mediating factor is the
accumulation of debt which cannot be liquidated by incomes generated by
the economy. This is quite different from effective financial incomes
which should be, but are not, adequate at all times to liquidate the
full financial costs of production--without leaving a trail of
accumulating debt. A recent article by major Canadian Bank economists
published in large daily newspapers cited that Canadian consumer debt
alone had now reached nearly 120% of annual income. I believe that in
1944 it was approximately 5%. These economists declared that this
situation has come about because of a lack of income! Needless to say,
their recommentation was not to supplement consumer income by
additional non cost-creating financial payments, but to generate more
income by means of increased production without any fundamental changes
to orthodox accounting practices and monetary policy--the very factors
responsible for the increasing burden of exponentially accumulating
debt!
The following comments taken from a
book by H. M. Murray should effectively dispense with the erroneous
conclusions of Dr. Harold Moulton and other critics of Social Credit:
"THE STRUGGLE FOR MONEY BY "H.M.M."
"(Glasgow: William MacLellan, 1957)
"CHAPTER EIGHT: The Remedy (pages 60
to 69)
"In general terms the remedy consists
in restoring to the consuming public the purchasing power it is robbed
of daily with every new credit--as distinct from replacement
credits--created by the banks to finance the needs of production and
commerce, and the activities of the Government and Local Government
bodies; and this consists, among other things, in transferring the
National Debt--so far as it is internal debt--to the other side of the
nation's balance-sheet, as the National Credit it really is--while
recognising and acknowledging the rights of all those who have been
induced to invest their savings in Government securities--provided it
really is their savings that are invested, and not merely money got by
way of bank overdrafts, a practice fathered by the banks during the
First World War, and still practised for all I know. This would form
the foundation of the National Credit Account.
"Replacement credits are ones which
cancel and replace earlier new and replacement credits. They don't
cause any fresh inflation, but they keep earlier inflations and debts
alive after the incomes they represent and replace have been spent, and
cease to exist as anybody's purchasing power; and they carry these
earlier debts forward in current costs and prices and debts. They are
never anybody's income.
"So if justice is to he done, and 'the
strange discordance between the consuming and producing power' Sir
Winston [Churchill] complained of is to be overcome, free issues of
money or credit, from the National Credit Account, must be distributed
to the consuming public, to bring their total purchasing power up to
the level of total prices; and so enable them to buy and pay for
everything they care to produce, cancel the bogus debts attached
thereto, and so become solvent and free, probably for the first time in
history.
"The whole present structure of costs,
prices and debts is built up on cumulative, inflationary, snowball
lines; whereas the community's total personal income, which is set the
impossible task of liquidating this cumulative snow-ball, is
non-cumulative. It is earned, spent, and gone-- earned, spent, and
gone--in endless succession. Hence the mountains of bogus debts called
into being to bridge the gap between the two, and the mountains of
useless labour and wasted material they involve, now crushing the
peoples of the world, and threatening their existence. Their salvation
depends on, and awaits, the squeezing out of all this inflationary
water from the price snowball.
"To stop the bankers' depredations we
must:
"1. Set up a National Credit Account.
At present we have only a National Debt Account; the banks having
usurped all our National Credit--to create our National Debt!
"2. Institute a National Dividend;
"3. Finance New Production by drafts
on the National Credit Account, and not out of Savings; and
"4. Allow a Just Price Discount on all
personal purchases, out of income, for final use or consumption--to
adjust book prices to actual incomes.
"The National Credit Account: This would be a compilation of the money
valuation of all the country's capital assets and resources, whether
publicly or privately owned--everything, in fact, that might appear in
prices as a cost, if requisitioned or used; and this necessarily
includes an actuarial estimate of the commercial capitalized value of
the population itself--an indispensable asset that gives value to all
other assets. (A number of years ago the value of a citizen of the
U.S.A. aged 25 was said to be about £10,000. That was before the Second
World War. The figure varies with the actuarial expectation of life and
the plant capacity of the country, so should be considerably higher
now.)
"These capital assets are the
country's Real Credit, and sum up and measure its capacity to create
and deliver goods and services; and on it the National Dividend would
be based, and financial credit be created against it by the Treasury.
"The National Dividend: Once the fact is grasped that all the financial
credits the banks create and lend us are really our own--being drafts
on the nation's real credit--its ability to produce a wealth of
goods--it becomes apparent that whatever the community has the ability
to produce or do, and cares to produce or do, it can not only finance
without the slightest difficulty, but also finance the consuming public
to buy and pay for it when produced or accomplished; and in so doing
liquidate, for good, all the formal debts incidental to its production
or doing, without having to incur and sustain fresh and larger debts in
the process, as now.
"The National Dividend would be based
on the National Credit, and would be a debt-free issue of credit from
the National Credit Account, and added to the bank account of every
member of the community, at regular intervals, independently of any
other income he--or she--may have or earn--everybody's share being
equal.
"The National Dividend is a gift from
the past--from the National Heritage--and represents what I have
slumped together roughly and called the unpaid wages of the Machine;
and its purpose is to keep the community's income always abreast of its
productive capacity.
"This would usher in an honest
self-liquidating economic system, and a new and hopeful era for the
whole world, free from bogus National Debts and the cut-throat
competition for money and markets they engender, at home and abroad,
which at present threatens to put an end to everything and everybody.
"Financing New Production: Just as people can't eat their cake and have it,
even so they can't invest their money in industry and at the same time
retain it for buying the final products of that industry--i.e.,
consumer goods--in the price of which the money invested re-appears as
a cost, although it no longer exists as anybody's purchasing power.
"The money invested increases output,
costs and prices; but reduces to the same extent the community's
purchasing power and ability, as consumers, to pay these prices and buy
the fruits of the investment in the shape of goods produced. Hence the
need for financing all production by drafts on the National Credit
Account, and not from Savings; and counter-balancing the costs for the
consuming public via the National Dividend and the Just Price Discount.
The banks do actually finance industry at present by drafts on the
nation's real credit--its ability to produce goods and render services.
Their offence, or crime, is that they wrongfully--or sinfully--record
them as drafts on their own credit, a proceeding which drives
us, and the world, on to ruin and disaster.
"The Just Price Discount: Every business without exception must fix its
prices to cover all its costs and yield a profit if it is to remain in
existence.
"Its prices are made up of two groups
of costs--Inside Payments and Outside Payments. The Inside Payments are
the wages and salaries paid to the employees, plus the distributed
profits or dividends allocated to the owners or shareholders. The
Outside Payments are all other payments, made to outside firms and
concerns for goods and services needed to run the business--buildings,
plant and machinery and tools, raw materials and intermediate
products--and final products in the case of retail
businesses--transport, repairs, and so on--also rates and taxes; and
these Outside Payments are obviously not income to anybody in
the business that makes the payments.
"If we call the Inside Payments A, and
the Outside Payments B, total costs are A plus B; so it is equally
obvious that the owners and employees of the business cannot, between
them, possibly buy--with their joint incomes, represented by A--the
total output of the business, the price of which is A plus B--even if
they wanted to, which, of course, they don't. That is true of every
individual business, so it is true of all businesses collectively, in
any week, month, year, or period of years we like to take; from which
it follows that the country's total income--every country's total
income--all the world's total income--is at all times insufficient to
buy its total output; and to that fact all the world's major troubles
are due.
"That is the late Major C. H.
Douglas's famous A plus B theorem; and many people, including not a few
professional economists--but no bankers, so far as I am aware--have
rushed into print to prove it false, only to reveal their utter
incapacity to handle figures correctly. Disregarding the elementary
fact that comparisons between A and B payments, to have any value or
validity, must be taken for the same periods of time, they
analyze the B payments--the Outside Payments--and find, correctly, that
they were all, originally, at one time or another, Inside
Payments--i.e., A payments, payments of income in some business or
other--and conclude from that, quite wrongly, that B payments are
payments of income too; consequently, they contend, the community's
total income is always able to buy and pay for everything that is
produced. And if they are Socialists or Communists they may add that
all that is wrong is that most of the money is in the wrong hands, the
hands of the rich.
"The reasoning is as false as to say
that, as everybody now alive was born, therefore everybody born is
still alive!
"(B payments are carried by
"replacement" credits; and replacement credits are debts due to the
banks, but are never anybody's income.) Critics of the theorem shut
their eyes to the glaring evidence provided by the whole labour world's
eternal cry for higher wages, and their resort to endless strikes to
enforce their claims, merely to try and keep themselves abreast of
ever-rising prices--a feat impossible of attainment, because every
increase in wages is also a corresponding increase in costs and prices.
"They also shut their ears to the
Government's eternal cry that we must increase our exports--merely
because the home population hasn't the money to buy everything it
produces. Mr. R. A. Butler, when Chancellor of the Exchequer, was
reported as saying at a meeting in Edinburgh on 24/10/52, that if
Britain could not improve her export trade, she could not improve her
balance of trade, "Unless you sell more than you buy in food and raw
materials," he said, "you will go bust."
"Sheer lunacy! Let him explain how the
world can sell more than it can buy, since every sale is a purchase--
except by piling up debts--bogus debts--and cutting its own throat.
"The same pathetic, and brainless,
banker-inspired cliches are being dinned into our ears every day in the
week, in and out of Parliament--and in the Press--without investigation
as to their meaning or truth, by those who utter them.
"Hitler said earlier that Germany must
export or die; and the whole world can say the same and believe it to
be true--and even go to war in defence of that belief--without
apparently realising the fact that as every export is an import
somewhere, and every import an export, they are all bound to "bust" or
die--and probably will, unless they learn to talk sense.
"For the contention to be true that
the community's income is able to buy everything that is produced, it
would be necessary, either that all the money now classified as a B
cost should have been saved intact from the day when it was an A cost
and somebody's income, and not spent at all until the work done, or the
service rendered in return for these payments, was embodied in the
costs and prices of consumer goods and sold to a final consumer, months
or years ahead; or else that producers of raw materials--possibly on
the other side of the globe--and the makers of intermediate or final
products, should delay paying their workers until the retailers of the
final products had sold them to final consumers, and passed back the
money received to the various contributors in the productive
chain--only to find, in both cases, that they had all starved to death
because of the lengthy interval between the work done and its just
reward in consumable goods.
"A little thought would have shown
these hasty critics that although all B payments were at one time A
payments, that time is always in the past--often a very distant
past--and, needless to say, all money and credit that was income in the
past was spent in the past--probably within a week or two of its
receipt, for most people--and repaid to the banks, and thereafter
ceased to exist as anybody's income, although it continued to exist in
the costs and prices of today--via replacement credits--as a B payment
and a communal debt; and so is not available for final personal
purchases at all.
"How much have you left--you who may
read this--of your wage or salary at the end of a week or month? And
where has it gone after you spent it? Back to the banks to cancel
earlier bogus bank debts, and no longer exists as anybody's purchasing
power. Yet your employers will still be in debt to the banks for the
money you have spent--as well as for the money you haven't yet
spent--if any!
"Great Britain's bogus Internal
National Debt today (1954) of £24,468,484,647 (Whitaker's Almanack
1956) is living testimony to the truth of the theorem.
"Nationalising industry, or the
banks--or both--does nothing, and can do nothing, by itself, to redress
this discrepancy between incomes and prices. Only a change to honest
bookkeeping can do that; and if we get honesty there, nationalising
anything of a productive nature will be easily seen by everybody--even
Socialists and Communists--to be the most inefficient and
unsatisfactory way of doing it.
"All money and credit
distributed as income is only income once--i.e., at the point in the
productive chain where it is received, directly, as wages, salaries, or
dividends (A payments); thereafter it continues in existence,
somewhere, as a B cost, and is carried forward into the future, by
means of replacement credits that are never anybody's income. These
replacement credits are debts--bogus debts--repayable to the banks; and
as things are they can only be repaid by substituting new debts for old
ones. They can never be wiped out. They can only mount up as additions
to the National Debt, and suck away the financial life-blood of the
nation, and--by repetition everywhere--of the world.
"Although it is
true that the employers and employees of any business do not want to
buy the whole of their own output--because it would be too much of a
good thing, and would prevent them from buying other people's goods;
collectively, taking all businesses and outputs into account, they do
want to buy it all, since they have produced it--unless they are
producing the wrong kind of goods--which is exactly what they are
doing, and have to do to a very large extent--guns instead of butter;
atom bombs instead of houses; exports in excess of imports--and they
ought to be able to buy them all--even the guns, and atom bombs, and
surplus exports--without putting themselves in debt. All these B costs
in prices are "water"--bogus debts which must be squeezed out of
prices, or compensated for by financial adjustments, if the public are
to acquire and own all the wealth they--with the help of the machines
produce; and, by acquiring it, survive. The question is how is it to be
done. Douglas’s Just Price formula supplies the answer.
"If money or
credit didn't exist it would be easy to see that the Real Cost of
producing anything is the amount of energy--human and
non-human--consumed or used up in producing it--which means, if we care
to think it over, that the Real Cost of Production is Consumption. So,
if we know the money value of the nation's total production and
consumption, capital appreciation and depreciation, imports and
exports, in any accountancy period--and Government departments can
easily supply that information--the Just Price of any article is easily
and automatically found.
"The formula is
that its Cost Price should be to its Just Selling Price as the money
value of the nation's Total Production (including Capital Appreciation
and Imports) is to the money value of its Total Consumption (including
Capital Depreciation and Exports):
"Just Price =
Cost Price x [(Cost Price of Total Consumption including capital
depreciation and exports) divided by (Cost Price of Total Production
including Capital Appreciation and Imports)]
"Thus, if in any
accountancy period, twice as much–in terms of money--is produced as is
consumed, the Just Selling Price of articles bought by final consumers
in that period would be half their Cost Price. If the ratio were three
to one the Just Selling Price would be a third of its Cost Price; and
similarly with other ratios.
"The beauty of
this formula is that besides conveying the products of industry to
would-be consumers on all income levels with, the maximum of speed and
efficiency--that is, as fast as productive capacity can adapt itself to
real demand--the fluctuations of the discount rates serve also as a
useful barometer, indicating to everybody when it is desirable to
increase production and when to slow it down; and provide them with a
personal urge or incentive to do the one or the other when required;
for if production and productive capacity increased faster than
consumption --as it normally does even now--the Just Price Discount
would rise and the net Just Price fall in proportion, which would
enable people on lower income levels to increase their purchases as the
needs of the higher income levels became satisfied, until the wants of
all income levels were fully satisfied; and when that happened demand
would fall
away to some extent, and stocks accumulate, so producers would
naturally slow down production for the time being and take a holiday.
But as stocks got lower while production was suspended the discount
rate would fall too, which would raise the Just Price correspondingly,
and reduce everybody's purchasing power, and consequently their
purchases, and so give a clear indication to the whole community when
it was time to increase output again; and the declining purchasing
power of their money would give them a strong incentive to set the
wheels of industry whirring again to increase it.
"But though the Just Price formula is based on all production
and consumption, capital appreciation and depreciation, imports and
exports, the Just Price Discount is granted only on final consumers'
purchases, as all production costs are eventually embodied in final
retail prices.
"It is obvious, of course, that retailers couldn't possibly
grant such discounts without going bankrupt, so where else should the
adjustment take place than where the financial maladjustments have
their origin--in the banks themselves. Retailers would give final
purchasers a receipt for their purchases on a standardised form. These
receipts would be handed into the banks by the purchasers--as cheques
are now--and the appropriate discount be credited to their bank
accounts."
END OF EXCERPT FROM "H.M.M."
-----
Original Message -----
Sent:
Sunday, June 26, 2005 11:40 AM
Subject:
[socialcredit] Re: OWNERSHIP: RE: Calculations regarding A + B, rev 2
Dr. Harold Moulton, president of the Brookings Institute during the
Depression, offered the clearest statement (see below) I've seen to
explain why no nation would ever substitute Major Douglas' A+B theorem
for Say's Law. (The Formation of Capital, 1935.) Kelso's binary
economics leverages Moulton's recognition of the "social nature" of
banking and credit policy to make Say's Law of Markets workable through
universal access to capital ownership and dividend distributions,
without violating property rights of existing owners.
Ryan has hijacked the focus of the Capital Ownership Group's forum on
ownership policy from a capital ownership solution to address the
legitimate problem Douglas was wrestling with (i.e., the income
distribution gap) to a solution that totally ignores the social effects
of maldistribution of capital ownership. Unlike the pseudo
intellectualism and political naivete of Ryan, Moulton and Kelso
recognized the dangers of printing money that was not backed by
productive assets and Kelso offered a practical solution to that the
problem. (See http://www.cesj.org/homestead/reforms/moneycredit/wsj-031005-mdg.htm
and
http://www.cesj.org/binaryeconomics/price-money.html)
The Diagnosis of Major
C. H. Douglas
(From Appendix A:
“Other Analyses of Savings Process,” The Formation of Capital, pp.
179-181)
No little publicity
has been given to an analysis of the sources of economic difficulty by
Major C. H. Douglas of the British Royal Air Force.
Major Douglas finds the roots of the economic disease in the
discrepancy between payments for wages, salaries, and dividends, and
the prices of products. He argues that since the aggregate price of all
goods offered for sale greatly exceeds the aggregate disbursements to
consumers, depression is inescapable unless bank credit is issued to
individuals in sufficient amounts to make up the deficiency in
purchasing power.
Douglas arrives at the
conclusion that the money income available for the purchase of
commodities is deficient by a process which eliminates from the picture
a large part of the national income. He contends that the price of a
given commodity must cover "(A) all payments made to individuals
( wages, salaries, and dividends); (B) all payments made to
other organizations (raw materials, bank charges, and other external
costs )."
Now the rate of flow
of purchasing power to individuals is represented by A, but
since all payments go into prices, the rate of flow of prices cannot be
less than A + B. The product of any factory may be
considered as something which the public ought to be able to buy,
although in many cases it is an intermediate product of no use to
individuals but only to a subsequent manufacturer; but since A
will not purchase A + B, a proportion of the product
at least equivalent to B must be distributed by a form of
purchasing power which is not comprised in the descriptions grouped
under A.
This means that if the
payments made by a given business under A amounted to one dollar and
the payments made under B amounted to another dollar, the price of the
commodity produced would be two dollars; but there would be only the A
dollar available with which to buy it.
The fallacy in Major
Douglas' analysis is that he concentrates attention upon a single
business rather than upon the national economy as a whole. These
"external" payments to other organizations do not involve sending the
money outside the country, and hence their disbursement is a part of
the national income as a whole. That is to say, the payments for raw
materials, bank charges, etc., are also disbursed to individuals by raw
material producing industries and "other organizations" in the form of
wages, salaries, and dividends. Taking the national economy as a whole
the aggregate prices of goods and services simply cover the aggregate
disbursements of wages, salaries, rents, commissions, and profits to
individuals engaged in the processes of production.
The analysis which we
have made in America's Capacity to Consume, revealing a demand
for consumption goods insufficient to call forth the full output of our
productive establishment, is not to be regarded as supporting either
the position of Major Douglas or of Foster and Catchings. Our analysis
did not show that the aggregate disbursements of national income to
individuals were less than the aggregate prices of the goods and
services turned out; on the contrary, we contended that they were
virtually identical. We were concerned with the allocation of the
national income as between savings for investment and expenditures for
consumptive purposes; and we showed merely that the proportion of the
total income received by individuals which found its way into
consumptive channels was inadequate to induce full capacity production.
<!--[if !supportFootnotes]-->
<!--[endif]-->
William B. Ryan wrote:
But John, A+B is a deductive argument that refutes
Say's "Law." It is an included subset of Douglas'
more comprehensive inductive argument in which the
Dividend becomes the independent variable in place of
the bankers' (or capitalists') independent variable,
where economic sovereignty it transferred to consumers
expressing their free choices in free markets. It's
what he meant by Economic Democracy.
>From Per's most recent post I do not know if he has
converted to believing the theorem. I doubt it,
though would welcome his reply in clarifying the
matter. I've attached below in PDF his initial
posting to this list with my replies from September,
2004.
The problem is that you cannot prove or refute the
theorem using algebraic manipulations alone, because
it involves parametric change through time. Change
through time can be expressed mathematically, with
calculus. Or, it can be expressed graphically on
charts with plots of the phenomena you are examining
analytically on the Y axis against time on the X axis.
It can also be explained rudimentarily through
certain relationships expressed algebraically with
change in those relationships expressed verbally.
For example, take the relationship A/A+B. If the
ratio of B is increasing to A, then it is necessarily
the case that the ratio of A is falling in respect to
A+B.
-
--- John G Rawson <johngrawson@hotmail.com> wrote:
I believe this is the best example I have seen of the
absolute futility of approaching the A+B Theorem
deductively.
Just imagine if scientists tried to "prove" something
really complicated like continental drift by using the
laws of thermodynamics, forces associated witwh
crystallisation and recrystallisation or, solid flow,
and a huge lot of other data that we laymen are
unaware of. And just imagine the multinationals with
a pecuniary interest in land stability, so that news
of the tsunami was suppressed because it negated the
orthodox theory.
As a scientific Model, A+B explains the relatively
simple phenomena of economics better than any other
idea, it has led to predictions far more accurate than
those based on any other, tested honestly against
reality in this way it has about five times or more
veracity than the only alternative, its opposite.
Faith in which has led to wars, starvation of
millions, and dire destruction of our environment.
For Heaven's sake, lets stop fiddling with continually
reinventing or uninventing the idea while people
suffer unnecessarily.
Regards. John R.
From: Per Almgren <info@nordspar.se>
Subject: [socialcredit] Calculations regarding A + B,
rev 2
Date: Thu, 23 Jun 2005 16:16:58 +0200
This is a version that hopefully has somewhat better
English
language and the calculation have been extended.
Some calculation regarding the A + B theorem
[snipped]
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