The Policy of a Philosophy
Excerpts from the book
A writer in a weekly review once paid him (Major Douglas) the following compliment. 'Adam Smith was the first great political economist. Since his day there have only been two others, Karl Marx and Major Douglas. All the rest have been and are 'economists' without practical sense or vision. Adam Smith was for capitalism; Karl Marx for communism; Major Douglas for economic democracy.'
The encounter with the journalist and editor Holbrook Jackson had been a fortunate one. He it was who realised that his old associate A.R. Orage was the only man in London likely to open the columns of his paper to the ideas and his parting shot to Douglas was, 'If Orage turns you down, give it up.'
Douglas turned up in Orage's office in army uniform but found the editor absent. However, the secretary Alice Marks, arranged an interview for the next day at eleven o'clock. On hearing later of the visitor and the appointment, Orage said with feigned severity, 'if you have wasted my time ... '. But punctually at the agreed time, he met Douglas. Orage was an excellent listener and Douglas ranged freely over the ideas he had in mind for the space of an hour. As the discussion drew to a close Orage said, 'Don't expect my verdict now; but you will hear from me before very long'. Shortly afterwards to Miss Marks he said, 'That is either a very wonderful or a very dangerous man. I am going home. I must digest what I have heard. Keep all visitors away'. At 5 a.m. next morning he was still digesting. The meeting was the first of many. It took Orage a year to master the subject. On Pound who was often present at later meetings the discussions exercised an influence which stayed with him to the end of his long life. Orage's doubts and scepticism gradually dissolved, and he set to work to publicise the ideas with such powers as were at his command.
The editor had not for some time been filled with such crusading zeal. Prior to 1918 his hopes for the world had been crumbling, for the Russian Revolution, which he had hoped would develop along Guild lines, was developing quite differently. As early as March 22nd 1917, he asserted that there would be a supplementary revolution to ensure economic freedom equivalent to 'the new political freedom'. But that movement leftward culminated in a Bolshevik coup and there came a realisation that 'a restored Feudalism' instead of democracy had appeared. Thus, in November 1919 he could ruefully write that he was by no means convinced that the Soviet system had any direct application to the needs of Britain.
It took an effort of will for the leftward leaning readers to discard their concern with the means of production in favour of a scheme which secured to them the product of production while retaining the efficiency, personal initiative and enterprise inseparable from private enterprise. But this is what Douglas was asking them to do in 1919. Those who were able to adapt to the new concept became the nucleus of the Social Credit movement.
It is a misnomer to refer to 'The Douglas Theory' in the singular. Keynes did not make that mistake using instead the plural, 'theories'. In the course of the inter war period Douglas put forward at least five separate theories and it is a combination of three of these that are being put forward here in explanation of his view. Indeed, it is only in what might be termed the final theory that he put forward a case that the more rigorous of the critics -- Gaitskell, Durbin, Hawtrey, Lewis, Keynes, MacPherson, Hiskett and Franklin -- never really succeeded in undermining. Manifestly, it was the notoriety of the early A+B format and the mention of it in the General Theory which created the impression of a single Douglas Theory.
It was a matter of fine judgement for Keynes as to how much acknowledgement he should give the engineer. Economists, other than those who have spent some time reading Keynes's Collected Works, may be unaware of the extent to which Douglas's name featured in the correspondence between Hawtrey and Keynes. On 7th November 1935 Hawtrey wrote to Keynes, 'This is Major Douglas's argument. Might you not acknowledge it?' In a further letter he pointed out that Keynes had endorsed Douglas's argument whilst not believing it to be of any practical consequence. This was 'asking for trouble'. But Keynes appears sincere in his belief that Douglas had overstated the position. For Douglas 'treats the whole of the excess of the entrepreneur's receipts over his prime cost (exclusive of user cost) as being necessarily deflationary', whereas Keynes made 'a sharp distinction between those financial provisions which are absorbed ... by replacement etc. and those which are not'. Keynes felt that the resemblance to his own theorising was very slight and did not endorse Douglas more than he had previously even under further prompting from Hawtrey. At one stage he had put in a reference to the Major in connection with his text on pages 99-101 but this was subsequently deleted.
With agonising slowness Keynes was putting together the General Theory. The deletions, alterations, consultations and correspondences with such as Hawtrey, Robinson and others were essential to ensuring its favourable reception and of the numerous matters to be taken into account there was the question of how Douglas's point could be put into a form suitable for inclusion in the thesis. Keynes intended to make employment an object of economic policy instead of a mere by product of production and a diminishing one at that. Perhaps the Major's contribution could be ignored altogether in view of his exaggerated approach, aims and objectives. But Hawtrey kept reminding him of it. The calm, collected, maddeningly imperturbable little man with the domed head had taken Hawtrey's best shots at Birmingham and hit back with telling effect. Thus, the engineer's name was cropping up from time to time in the correspondence between Hawtrey and Keynes. The latter's feathers could well have been ruffled at the point when Hawtrey expressed the view that he was making Douglas's point, for Hawtrey hastened to qualify the statement effusively writing: 'I did not mean to suggest that your argument ... was actually the same as his in all its horrors, but only that it is one arrow (and perhaps the only respectable one) in his quiver'. Hawtrey, nevertheless, pressed for a cross reference to be made between one of the passages on pages 99-101 and one on page 370 in which Douglas is expressly mentioned. But Keynes remained obdurate.
Around this time Albert Newsome, who wrote the 'Pontifex' column developed the habit of quoting Keynes on Douglas forgetting to give the source of the remarks. According to Newsome, Keynes declared at a public meeting that the future of civilisation lay between the choice of Major Douglas or Karl Marx and that he did not like the latter.
His rejoinders to the Agricultural Committee of the Alberta Legislature contain his best off the cuff thinking and exhibit Douglas the dissident, Douglas the radical at his most electrifying:
So far as Alberta is concerned, I take it from the information that has been given me, that all power over finance and banking as such has been skilfully removed from the power of this house. You have, if I may sting you into annoyance in this matter, been reduced to the status of a parish council in regard to the most important matter which affects you in Alberta. That is only a part of the general policy which is being pursued with great skill on the part of the advisors of the financial system to make every question larger and larger, so that you have to get a bigger and bigger conference before you get anything done, eventually leaving everything a world question, so that nothing can be done in regard to it unless you have a world conference, and we all know what comes out of world conferences ...
The first thing to do is to concentrate on the financial institutions and employ whatever powers you have got left, not to put too fine a point on it, to penalise these institutions. You have got to get a sanction in the political field to bring to bear on this situation to get something done. It is not the slightest use as far as I can see going to the financial people and saying: "This has to be done because of the state of the world, because the people are starving in the midst of plenty". Whether because whom the gods destroy they first send mad, or for what reason, they seem impervious to any argument of that kind. They are simply pursuing a perfectly standardised scheme and nothing seems capable of deflecting them from it, so that you have to get some power of bringing these people to reason. The question is what power can you bring to bear in Alberta? Can you tax them heavily? Can you place restrictions on the carrying on of that business? ... How can you go up to a bank manager or a bank director and say, "Look here, if you do not do certain things, if you won't listen to what we have to say about this sort of thing, we are going to make you feel it. We don't care how we make you feel it, but we are going to make you feel it. It is not personal; the questions at stake are much too great for anything of that kind, but we are going to locate you in the eyes of the public as being the people who are causing this trouble, and in every possible way which is still left to us by our legislative powers, we are going to put up something to bargain with. We are going to impose on you these things and we will take them off when you will do such and such, according to what we are advised by our expert advisers, but we have got you on the spot."
The role of Finance in promoting totalitarian revolutions or governments and in assisting them thereafter with various forms of aid became a specialised area of research among several writers. Some, but not all, of that work was to be confirmatory of Douglas. Why exactly would financiers wish to promote totalitarian governments? For Douglas the explanation lay in the way Socialism, in particular, aimed continually at the transfer of property to the State: 'This property then becomes available as security for State loans created by the financiers out of paper credits -- i.e. the monetisation of the collective credit of the community concerned. The Bond-holders are exactly what their title would imply -- they are the slave holders of the "New Order"'. Financiers, then, are seen as favouring police States which can cow their populations into obedience, ban trade unionism and enforce the regimentation necessary to ensure the repayment of loans.
Douglas was immensely prophetic. It is probably because so many of his prophecies are now the commonplaces of history that the original predictions and projections, made in a completely different era, are overlooked. In the early category would be the rejection of the gold standard long before its eventual abandonment. There would be the prediction of the economic collapse of Soviet Communism at a time when thousands were extolling its merits. His criticisms relating to the financial assistance given to totalitarian powers -- which then backfires on the donors -- periodically erupts from the mouths of other critics who have never heard of Douglas. As to his core economic theorem, its main thrust could be, and was, adapted or perverted, depending on the perception, into Keynesian orthodoxy. More interesting today might be Douglas's warnings relating to a sellout to an all pervasive centralised bureaucracy. As to methods of exerting political pressure on governments, his urgings against new political party formation often went unheeded by would-be political careerists, and the fact that the new parties would be of little avail had to be learned the hard way at successive intervals since his time. Conversely, elements of the methods of the Electoral Campaign in the shape of single issue politics often had conspicuous success.
Maurice Colbourne the actor, manager and director of stage plays, left to posterity a glowing account of Douglas's characteristics:
To look at him, he might be an gentleman farmer. His steady eyes and ruddy cheeks, and jovial personality, are those of a squire. A delightful host, his hospitality is of a kind rare in these hurried times, a hospitality in which one basks at ease from the first. And his conversation matches his wine. Not that it is sparkling, for this suggests brilliant conversation for conversation's sake, but, like good wine it has a bouquet about it. Living in the country Douglas is an adept at doing things for himself, with his own hands. A keen fisherman, as we have seen, he also sails his yacht single handed in the Channel off the coast of France. Then he laid down his own hard tennis court; and, just to keep his hand in, constructed an engine, for by profession Douglas is a civil engineer.
He has what is probably one of the best swept minds functioning today. It penetrates, too, without effort or conceit, beneath the fashions and the foibles of the times to the permanent things. He will let drop such a remark as that too much store is set on human life and not enough on human happiness, as though he were saying he thought tomorrow would be a fine day.