Social credit is a distributive philosophy of political economy developed in the 1920s and 1930s by C. H. Douglas. Douglas attributed economic downturns to discrepancies between the cost of goods and the compensation of the workers who made them. To combat what he saw as a chronic deficiency of purchasing power in the economy, Douglas prescribed government intervention in the form of the issuance of debt-free money directly to consumers or producers (if they sold their product below cost to consumers) in order to combat such discrepancy.
(From the wiki page)
previous (possibly incorrect) ChatGPT summary
Social Credit is an economic theory by C.H. Douglas that aims to fix a fundamental problem: the total cost of producing goods and services is always greater than the money people have to buy them. To solve this, Social Credit proposes a National Dividend, a regular payment given to all citizens to boost their purchasing power, and a Compensated Price Mechanism, which reduces prices so consumers can afford more while producers still make a profit. The idea is to ensure that the economy works for everyone by closing the gap between what people earn and what they need to spend, without relying on debt or heavy government control.
Stumbled onto this randomly and I find it interesting and rarely talked about. It almost seems like a capitalistic approach to communism which I had no idea existed. The oddest thing about it to me is that most parties advocating for it were highly religious and right wing. On the surface, it seems fairly progressive and left leaning to me though.
What are your thoughts?
I don’t claim to understand economics, but where does this “free” credit come from, how is it sustainable if cost to manufacture is always more than what people have. It seems you just push the difference into a delayed debt.
It can come from issueing new currency. The cost of that is inflation.
That’s what I’m wonder about mostly. This statement doesn’t occur in the wikipedia page, and seems unsubstantiated. A human or LLM hallucination.
You’re right, I’ll see if I can find a better (human written) summary. Asked ChatGPT for this one since I don’t understand it well enough to write one myself and I didn’t want to paste the whole wikipedia page in.
Cost to manufacture is not more than wages, but cost to purchase a good is always more than the total cost of labour needed to produce it, so long as profit exists.
The money isn’t free so much as redistributed from taxation elsewhere, think of it as the same as subsidising industry except only to the workers of that industry (instead giving it to owners and expecting the savings to trickle downwards). You could also consider it an income tax rebate with more fine-grained control of who gets it.
It doesn’t seem particularly ground-breaking of a concept; I see the value in investing money into necessary but unprofitable industry though my concern is that if you subsidise wages of a business with a profit incentive, management may lower wages to compensate.
I’m not going to lie, I don’t fully understand it myself (partially why I’m asking about it lol), so don’t take my word on this but:
My understanding is that the amount of money distributed throughout the country is directly tied to the value the country as a whole produces. It basically keeps the buying power equal to the production value.
I’m unclear on how this would work when global trade is added to the mix though.
Yeah, value of a product is what market will pay. If gov tops up your funds to buy things ( in a free market ) the prices go up. And then if you aren’t focused on just your economy, but global like you mentioned, the global buyers may really want the product, raising price higher, or not want products making unequal trade. I need a “Economic Theory for Five Year Olds” book
Market value and value are different things. Value is how much a product is socially necessary, and how hard it is to produce. Market value then is what people end up paying for it in a free market. They are often different, but in aggregate for the whole end up being the same.
I believe this is mostly managed through the Compensated Price part of Social Credit, but yeah I’m with you on that book. Was hoping someone here would be an expert on the subject
Edit: I apologize, I misread the question and the original post. You’re right this credit is coming out of thin air and makes no sense
If the people themselves pay for the manufacture directly rather than pay for the product then you can reduce the cost to the fundamental value of the product and ignore the price increase due to the demand
If a private company pays for the manufacture and the people pay for the product there will always be a cut the middleman has to take, and they will sell at the highest price someone is willing to pay. This is the cost that people can’t pay
Everyone can afford the construction costs of a home, but can’t afford the competitive price