Posted on: July 07, 2015 by M. Oliver Heydorn

Category: Social Credit Views

Laudato Si and Missed Opportunities

    The latest encyclical, Laudato Si, is generating a great deal of heat both inside and outside of the Catholic Church – and more heat than light I am afraid. Instead of discussing the various and, in some cases, quite serious scientific, philosophical, and theological concerns that a number of commentators have raised in reference to it (consider, for example, the following interview with Chris Ferrara: http://athanasiuscm.org/2015/06/26/interview-018-chris-ferrara-discusses-laudato-si/), I wish to focus on a more immediately practical matter.

     As I read it, one of the core messages of the encyclical is that we must act now so as to protect the environment and that this must be done in such a way that the world’s poor are not further disenfranchised.

     Now, I don’t suppose there are too many people who would disagree, in the abstract, with this call to action – whether or not they agree with the Francis’ acceptance of anthropogenic ‘climate change’, a view which is, of course, not binding on Catholic believers.[1] There are many more individuals who, for various reasons, would take issue with the blunt notion that the twin evils of  'capitalism' and 'consumerism' are the prime culprits when it comes to environmental degradation.[2] Indeed, whatever the problems with the so-called ‘free market’ economy, the encyclical is fatally flawed in terms of the flavour of the solutions that it suggests; fatally flawed because these solutions are proposed in accordance with the false assumptions of economic orthodoxy and, as such, they can never deliver the intended results.[3]

     From a specifically Social Credit point of view, the most problematic paragraph in the whole encyclical is, without any doubt, paragraph 128:

128. We were created with a vocation to work. The goal should not be that technological progress increasingly replace human work, for this would be detrimental to humanity. Work is a necessity, part of the meaning of life on this earth, a path to growth, human development and personal fulfilment. Helping the poor financially must always be a provisional solution in the face of pressing needs. The broader objective should always be to allow them a dignified life through work. Yet the orientation of the economy has favoured a kind of technological progress in which the costs of production are reduced by laying off workers and replacing them with machines. This is yet another way in which we can end up working against ourselves. The loss of jobs also has a negative impact on the economy “through the progressive erosion of social capital: the network of relationships of trust, dependability, and respect for rules, all of which are indispensable for any form of civil coexistence”.[104] In other words, “human costs always include economic costs, and economic dysfunctions always involve human costs”.[105] To stop investing in people, in order to gain greater short-term financial gain, is bad business for society.

     It is true that human beings have a vocation to ‘work’ or are meant to ‘work’, if all we mean by work is engaging in meaningful and especially creative activity. As Douglas once put it: "The healthy human individual requires work of some kind, just as he requires food; but he is not a healthy individual, mentally at any rate, if he cannot find work for himself, and probably find work which he can do far better than that which is arranged for him by somebody else." [4]

     Unfortunately, in this particular excerpt, Francis appears to identify ‘work’ with work in the formal economy or employment: “The goal should not be that technological progress increasingly replace human work, for this would be detrimental to humanity. Work is a necessity, part of the meaning of life on this earth, a path to growth, human development and personal fulfilment. Helping the poor financially must always be a provisional solution in the face of pressing needs. The broader objective should always be to allow them a dignified life through work.”[5] On the contrary, it is important to point out that much of the work that is undertaken at present occurs outside of the formal economy and is often unpaid: take, for example, the work of mothers, homemakers, volunteers, caregivers, etc. To this list may be added the work of those who engage in scientific or artistic endeavours and who remain unremunerated for their efforts. The second false assumption that is suggested by this excerpt is that work in the formal economy is necessarily (and perhaps also exclusively) a source of ‘dignity’. The reality is that many (most?) jobs in the modern, industrialized economy, to the extent that they are useless, witless, redundant, destructive, and/or exploitative in nature, may just as easily constitute violations of the dignity of the human person, whereas much of the unpaid work that is undertaken in society is quite dignified. In other words, work does not necessarily equal employment and employment does not necessarily bestow dignity.

     The greatest problem with paragraph 128, however, is that while Francis recognizes that technological and industrial progress is resulting in the replacement of human labour by machine labour, he views it as an undesirable goal (presumably because it would and is already creating a pool of permanently unemployed persons): “The goal should not be that technological progress increasingly replace human work, for this would be detrimental to humanity.” In actuality, the progress of the industrial arts is our greatest ally when it comes to addressing the myriad of social problems with which we are confronted. If only we could harness or maximize the advantages conferred by technological developments via a suitable reform of the financial and economic systems, we could then deal effectively with the environmental problem, the unemployment problem, and the poverty problem in one single coup de force. We could kill three birds with one stone. The replacement of human labour with machine labour is only ‘detrimental to humanity’ under the existing financial and economic conventions. Those conventions can and should be changed.

     The Social Credit analysis of the British engineer, Major C.H. Douglas (1879-1952), reveals how all of these long-standing social troubles are intimately interconnected and his remedial proposals would, by addressing the key structural problem with modern civilization, provide for, or at least contribute mightily to, the effective resolution of all of them.

     In general, the replacement of human labour by machine labour is a very good thing. Why? Because it allows us to increase the volume of production while diminishing the amount of time and effort that human beings would otherwise have to spend in the productive process, thus freeing up time-energy units that could then be spent on activities of a higher, more spiritual nature. Technological progress transfers the curse of Adam, i.e., the necessity of toil, from the backs of men to the backs of machines. Clearly, there are some forms of production which are better handled by human beings than by machines – the interests of human beings in high quality, nutritious food, artistic products, health care, education, and other personal services, for example, are not always amenable to techniques of mass machine production – but there are many other products in everyday use that, on account of their overwhelmingly functional and pragmatic purposes, are better made by machines than by human beings.

     Now, and this is critical point, because of the nature of existing financial (i.e., banking and cost accountancy) conventions, the constant technological improvement in industry which, on a physical plane, simultaneously increases the volume of production while throwing people out of work, is the same process which, on a financial plane, generates an ever-increasing gap between the rate of flow of consumer prices and the rate of flow of consumer incomes with which those prices may be liquidated. Real capital, in the form of machinery and equipment generates allocated charges of various kinds: capital loan repayments, depreciation charges, maintenance and obsolescence charges, etc. These charges, which manufacturers are forced to pass on to the consumer under threat of bankruptcy, exceed the incomes that are simultaneously being distributed to workers in the course of production. As a result, there is a gap between prices and incomes, a gap that is usually exacerbated by a number of other factors.[6] This is the fundamental structural problem with modern civilization: the financial system is inherently unbalanced. Just as imbalance in the human body can only result in ill-health, a condition that might even terminate in death, our economies are perennially ‘ill’ because of this financial imbalance. Unless it is dealt with properly, the situation can only induce further dysfunction – of an economic, social, cultural, political, and environmental nature.

     In the main, the reigning economic order deals with the endemic deficiency of consumer buying-power by constantly injecting additional debt-money so that the level of consumer purchasing power can be supplemented, either directly (via consumer loans), or indirectly (via the increased employment made possible by government or business loans in pursuit of economic ‘growth’). Such compensatory debt-money does not liquidate costs, however, but only transfers them to a future point in time. The debts incurred will have to be paid back in loan repayments, taxes, and prices. We muddle along by perennially mortgaging future incomes in order to permit present consumption and to keep the economy afloat. This way of dealing with the problem is unstable, inflationary, non-sustainable (because of the build-up of debt), and highly wasteful in terms of resources.

     In lieu of this madness, Douglas proposed that it would make much more sense and result in greater human satisfaction if equilibrium were to be restored by creating, free of debt, sufficient money in each period to bridge the recurring gap between prices and incomes. By distributing a certain proportion of this compensatory credit in the form of a National Dividend to each citizen and the remaining portion in the form of a National Discount or compensated prices, the twin problems of unemployment and of poverty could be resolved. Individuals whose work, on account of technological progress, is no longer required in the formal economy would nevertheless retain an income and be freed so that they could engage in meaningful activities of their choosing. The artificial link which presently makes employment, at least for most people, a necessary condition for the receipt of an income would be severed. At one and the same time, it is anticipated that the buying-power of the dividend in conjunction with compensated prices would, in the case of a highly industrialized society, be sufficient to ensure “a certain standard of self-respect, of health and of decency....”[7], thus resulting in the elimination of poverty without introducing socialistic measures such as redistributive taxation or the command economy.

     There is yet a third major benefit to filling the gap with debt-free money: it is the single greatest thing that could be done in the interests of environmental protection. At present, the requirement that the gap be filled, if it be filled, or to the extent that it be filled, by additional debt-money contracted from private banks, combined with the insistence on the policy of full employment, i.e., that all able-bodied adults of employment age must work for a living or be supported by those who do when work is unavailable, means that we cannot consume in full whatever the economy produces unless we are willing to engage in excessive economic activity and continual economic growth. We need to constantly earn more and more money, not merely to consume in full what is on offer in the market but also to service the ever-growing mountain of past debts.

     The implications of an economy run after the pattern of a cancerous tumour (N.B. not primarily because of ‘greed’ or ‘consumerism’, but because of artificial financial demands and constraints) for the environment should be clear. We produce and consume many more goods and services than the sensible provision for authentic human needs would require in order to make an economy that is saddled by an unbalanced financial system function. The alternative under current financial conventions is economic stagnation and collapse. Fill the gap with debt-free money along Social Credit lines and the economic cancer that is threatening the environment can be put in remission … permanently.

     In other words, if people are really interested in significantly reducing pollution, slowing down the rate of resource consumption, and preserving biodiversity, the best thing to do would be to change the rules of the financial game so that people can consume everything that they produce in each economic period without a certain proportion of that consumption being made dependent on full employment, excessive economic activity, and constant economic growth.

     The Social Credit monetary reform would also benefit the environment by rendering financial credit freely available for investment in the development of pollution-reducing technology and in public programmes aimed at environmental protection and restoration. In addition to the artificial scarcity of consumer credit, our economies also suffer from an artificial scarcity of producer credit. Private banks, which provide the modern economy with 95% of its money supply in the form of bank credit (intangible numbers created out of nothing), will only lend for activities that are profitable under the existing system, a system which is structurally anemic due to the underlying lack of consumer buying-power. Under a financial system which actually reflected physical facts, i.e., under an honest and sane financial system, whatever is physically possible would be financially possible. If, on the one hand, there is a demonstrable environmental need, and, on the other, the resources (human and material) to respond to this need actually exist, there would, in a Social Credit economy, be no merely financial reason for failing to actualize the desired production. Sufficient credit to duly represent a society’s productive potential would always be forthcoming … money, after all, is or should be nothing more than an accounting mechanism at the service of the authentic common good.

     Perhaps the single greatest psychological and cultural barrier to the kind of rational financial reform that would salvage the environment is the fixed belief that full employment is somehow a necessity, an expectation that it is somehow inherent to the nature of life on this planet.

     Thus we read in the encyclical: “129. In order to continue providing employment, it is imperative to promote an economy which favours productive diversity and business creativity.”[8] On the contrary, it is critical that people come to understand that the economy does not exist to provide employment, but rather to deliver the goods and services that people need to survive and flourish, and to do this with the least amount of human effort and resource consumption. It is also critical that they come to understand that so long as we irrationally insist on a policy of full employment there can be no solution to the environmental problem.

     The reality is that, thanks to modern technology, we can produce everything that people can reasonably consume with profit to themselves, with only a small percentage of the adult population actually working in the formal economy.[9] This means that all of the work that goes beyond what is physically required to meet that particular objective is simply waste. Large numbers of people would be better off tending their gardens instead of getting up and going to work each morning. Their work, and the individual and corporate consumption that make it possible or tolerable, only exist because, under current conventions, work is the necessary agent in distributing the bulk of goods and services to the public. Such wasteful work has more to do with distributing incomes than it does with meeting authentic human needs. Furthermore, since unemployment has shown itself to be an intractable problem (there are always more people in need of work than jobs that can be provided), the realization of the ideal of full employment is not even possible under modern conditions. Thank God! The dearth of jobs is actually a sign of authentic economic progress.

     In practical terms, the false economic 'dogma' of full employment serves as a societal straightjacket. By depriving people of leisure time and economic security, it continually reinforces the existing economic, social, and political landscape thus making it incredibly difficult for individuals to reflect, question, and take the effective action that alone can improve social and environmental conditions:

      “Employment as an end in itself is a concerted policy to be found in practically every country. It is an international policy, and it proceeds from the great international power in the world – the power of finance. It is conscious, and it is sustained by every argument and force at the disposal of that great international power, because it is the means by which mankind is kept in continual, if concealed, slavery.

      May I ask you to divest your minds as far as possible of every political preoccupation and to consider whether the fundamental policy of Fascist Italy, so-called Communist Russia, the United States, Germany, and Great Britain is not identical, and that is, by varying methods but with identical objectives, to force people to subordinate themselves, for a number of hours per day greatly in excess of those really necessary, to a work system?”[10]

     On a more positive note, there are some hints in the encyclical that attention to the real problem may eventually occupy the focal point of the Church’s social theorists:

Par. 6 “My predecessor Benedict XVI likewise proposed “eliminating the structural causes of the dysfunctions of the world economy and correcting models of growth which have proved incapable of ensuring respect for the environment”.[10]

Par. 109 "Finance overwhelms the real economy. ...the lessons of the global financial crisis have not been assimilated."

Par.189 "Today, in view of the common good, there is urgent need for politics and economics to enter into a frank dialogue in the service of life, especially human life. Saving banks at any cost, making the public pay the price, foregoing a firm commitment to reviewing and reforming the entire system, only reaffirms the absolute power of a financial system, a power which has no future and will only give rise to new crises after a slow, costly and only apparent recovery. The financial crisis of 2007-08 provided an opportunity to develop a new economy, more attentive to ethical principles, and new ways of regulating speculative financial practices and virtual wealth. But the response to the crisis did not include rethinking the outdated criteria which continue to rule the world."

     The nations of the world do not need socialism, World Government, or a universal eco-spirituality; what the nations of the world desperately need is to re-align their financial operating systems in accordance with Social Credit principles. As I argued in The Economics of Social Credit and Catholic Social Teaching, Catholics could and should play a pivotal role in re-orienting our economies along Social Credit lines. Social Credit is not merely compatible with Catholic Social teaching, I dare to say that is the only feasible economic order that would properly fulfill ‘catholic’ ideals.

 

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     On the necessity of a Social Credit monetary reform if we are ever to adequately care for our environment, our communal home, please read Robert Klinck's brilliant article entitled "Finance and the Environment": 

KlinckFinanceEnviron-1.pdf 

 

 

 

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[1] Questions of a strictly empirical nature that have no bearing on or connection with the deposit of faith are outside of the Church’s jurisdiction as a teacher of religious truths.


[2] Cf., for example, paragraph 27 from the encyclical: “Other indicators of the present situation have to do with the depletion of natural resources. We all know that it is not possible to sustain the present level of consumption in developed countries and wealthier sectors of society, where the habit of wasting and discarding has reached unprecedented levels. The exploitation of the planet has already exceeded acceptable limits and we still have not solved the problem of poverty.”


[3] Economic orthodoxy is intellectually bankrupt. Perhaps the most obvious indication of this sad reality is the fact that all (or almost all) of the world’s economies that are run along orthodox lines are literally bankrupt as well, with financial liabilities exceeding financial assets.


[4] C.H. Douglas, Security: Institutional and Personal (Liverpool: K.R.P. Publications Ltd., 1945), 6. As Edward Minton has pointed out in recent private correspondence, Douglas’ position on this matter is actually an application of the principle of subsidiarity to the sphere of work. If individuals, families, etc., can create meaningful ‘work’ for themselves outside of the realm of paid employment, why should governments and industry be tasked with the job of arranging work for them? It is only because such meaningful work is not automatically supported by an income under existing economic conventions that paid employment must be created by an outside party.


[5] Another section that gives this same impression is paragraph 127: “Work should be the setting for this rich personal growth, where many aspects of life enter into play: creativity, planning for the future, developing our talents, living out our values, relating to others, giving glory to God. It follows that, in the reality of today’s global society, it is essential that 'we continue to prioritize the goal of access to steady employment for everyone',[103] no matter the limited interests of business and dubious economic reasoning.”

 
[6] These factors include: savings, the re-investment of savings, profit-making, deflationary banking policies, and taxation, amongst others.


[7] C.H. Douglas, Money and the Price System (Vancouver: The Institute of Economic Democracy, 1978), 11.

Cf. also, C.H. Douglas, The Monopoly of Credit, 4th ed. (Sudbury, England: Bloomfield Books, 1979), 102:

“The practical effect of a National Dividend would be, firstly, to provide a secure source of income to individuals which, though it might be desirable to augment it by work, when obtainable, would, nevertheless, provide all the necessary purchasing power to maintain self-respect and health. By providing a steady demand upon our producing system, it would go a long way towards stabilising business conditions, and would assure producers of a constant home market for their goods.”


[8] Cf. also, Par. 129: “To ensure economic freedom from which all can effectively benefit, restraints occasionally have to be imposed on those possessing greater resources and financial power. To claim economic freedom while realconditions bar many people from actual access to it, and while possibilities for employment continue to shrink, is to practise a doublespeak which brings politics into disrepute. Business is a noble vocation, directed to producing wealth and improving our world. It can be a fruitful source of prosperity for the areas in which it operates, especially if it sees the creation of jobs as an essential part of its service to the common good.”


[9] One good book to read on this aspect of the problem is Jeremy Rifkin’s The End of Work. Cf. Rifkin, Jeremy. The End of Work. New York: Jeremy P. Tarcher/Penguin, 2004. Rifkin has estimated that by the middle of this century only 5% of the labour force will be required to run a developed nation's factories.


[10] C.H. Douglas, Security Institutional and Personal (Liverpool: K.R.P. Publications Limited, 1945), 5. Cf. also, C.H. Douglas, Programme for the Third World War (Liverpool: K.R.P. Publications Limited, 1943), 6: “... if you can control economics, you can keep the business of getting a living the dominant factor of life, and so keep your control of politics – just that long, and no longer.” The policy of full employment is the prime method of making "the business of getting a living the dominant factor of life"; it is the prime policy behind our dispossession and disenfranchisement.

 

 

 

 

 

 

 

 

 


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