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There are four main proposals offered for setting things right again, and finding our way out of the dreadful state into which we have fallen. The first three are false remedies, the fourth is the true remedy, which is the restoration of property, the building up of economic freedom for the mass of men, and the re-creating that independence of the family which industrial capitalism has destroyed. Much the greater part of this series will deal in detail with this true remedy, the restoration of property; but first of all we must examine the false remedies. It is urgent that we should examine them because they are clamoring to be put into practice, and the worse and the more false they are the greater is their attraction.

These three remedies are, in the order of their falsehood and their imperfection, first, Communism, which is the worst; secondly the guaranteeing of capitalism by the State; and thirdly, that most interesting and well-known but illusory scheme called National Credit. I am going to deal with each of these in turn before talking of how to reach the true remedy of property, coupled with a Guild system and with State control of monopolies.

Communism makes a violent and direct appeal because it is “radical,” in the original sense of the word “radical,” which means, “going to the root.” Communism goes to the root of the matter. It proposes to get rid at one blow of all the evils from which the modern industrialized proletariat suffers. The man from whom the pressure of those conditions has made life intolerable, grasps at the Communist, remedy as a man dying of thirst would grasp at a pitcher of clear looking water—not knowing that it was poisoned. The appeal of Communism is so immediate, so plain, so comprehensible to every intelligence and so complete that, wherever industrial capitalism exists, men flock to it. The idea arouses enthusiasm in the oppressed and men are prepared to devote themselves to it as to a new religion.

We shall see in a moment why, in spite of these advantages, Communism is not only to be condemned in plain morals and common sense, but also why it is on the way to partial failure already.

The second false remedy, State-guaranteed capitalism, is of high importance because it is being more and more applied in England, England being the country which first gave birth to industrial capitalism, the country whose language covers so great a part of the earth and the country which lends itself more than any other to successful political experiment. This false remedy has also taken root in England because it is the country in which, more than any other, men are prepared to obey laws in the making of which they have had little or no part.

It is not easy to find a name for this second false remedy, for, although it is already in full swing on our side of the Atlantic, it has not been given an official title; but we must give it a name if we are to deal with it at all: let us call it “Secure Capitalism.” It is not State Socialism (as it is often called), though it is accompanied by many features of State Socialism.

The characteristic of this second false remedy, both in motive and in plan, is the saving of capitalism by certain reforms which, it is hoped, will make it stable and permanent; the most important of these reforms being the maintenance of the unemployed proletariat out of the taxes.

The obvious evils of modern industrial capitalism, the evils which come home to all its victims and that are most acutely felt, are insecurity and insufficiency. Industrial capitalism, being defined as a condition in which wealth is produced by instruments the direction of which is vested in a wealthy minority and not in the workers who use those instruments, there follows all that set of evils which we have been describing and announcing in these articles. Of these evils, I repeat, the quite obvious ones, which millions have experienced and violently resent, are insufficiency of livelihood and the insecurity even of that insufficient livelihood. It is difficult to say which of these two evils is the more desperate, each of them has driven masses of men to the verge of revolution, and the two combined were rendering life impossible in the industrialized countries.

Now “secure” or “State-guaranteed” capitalism is a system wherein these two immediate and obvious evils disappear. Insecurity disappears because the livelihood of every citizen is guaranteed by the State at a certain fixed rate. We find, when the system is complete, (as it is already nearly complete in Great Britain), that the only difference between the employed and the unemployed man is that employed man may have (he does not always have) more to subsist on than the unemployed man. Insufficiency also disappears, in theory at least, for the public assistance given to the families that cannot obtain wages is calculated on a certain minimum, supposed to be sufficient to keep men clothed and fed and housed.

But “secure” or “State-guaranteed” capitalism, capitalism in its new reformed state, continues to manifest the original spiritual evil connected with all capitalism, which evil is the misuse of property; the special power of a small class of citizens, strong through no agency but their wealth, and the exploitation of the mass of men by masters to whom they owe no loyalty and with whom they have no spiritual tie.

When we come to study this proposed remedy of “guaranteed capitalism” in detail we shall see to what final evils this major spiritual evil of capitalism leads, however secure the livelihood of the people under it.

The third false remedy is the least bad and also the most interesting. It is the remedy called “National Credit.” It is associated with the name of its brilliant original expositor, who may well be called its discoverer, Major Douglas, and is therefore often called “The Douglas Scheme of National Credit.”

The central idea of this reform is to check up the total productive power of the community and then distribute to all members of the community credit tickets which will provide them with purchasing power equivalent to the total possible production. Supposing that in a community there are stores of raw material and plant capable of producing a hundred billion dollars worth of goods, and that the community is only actually producing fifty billion dollars worth, there is a margin of another fifty billions which is not in existence, but which could be called into existence by citizens presenting their credit tickets as payment for the goods they desire.

How it is proposed to make the scheme work we shall see later when we come to consider it in detail. It is enough to say for the moment that it has the great advantage over the other two that it neither exploits men nor degrades them. There is nothing servile about it. The man with his credit ticket at the end of the week, giving him purchasing power over and above his regular wages, sufficient to buy, say, a good overcoat, makes his choice of the article as freely as the richest man buying the same under our present conditions. The wage earner will live, (according to the supporters of the National Credit Scheme) in the same sort of way he did before, but only with this difference: that he will have a much more satisfactory income through having a larger and a regular purchasing power.

As we shall see, when we come to the details of this scheme a few articles ahead, there is a great deal to be said against, and that is why I have called it a false remedy; but it not false in the sense that it is bad morals or inhuman. It does not rob anyone; it does not in theory oppress anyone. It does not even order anyone about.

Here, then, we have the three main remedies proposed: 1. Communism; 2. Secure, or Guaranteed, Capitalism; 3. National Credit. Now let us go into each of these in turn and see why we have called them false remedies.

 

About the author: Hilaire Belloc

 

The French-born English writer Joseph Hilaire Pierre Belloc (1870-1953) was a noted poet, historian, essayist, and novelist. Throughout his literary career he was concerned with the problems of social reform. Belloc’s historical and biographical works include Europe and the Faith, The Servile State, An Essay on the Restoration of Property, and his most characteristic work, The Path to Rome. As one-half of the Chesterbelloc, Belloc outlined the socio-economic model of Distributism.

 

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13 Comments

  1. Very interesting start to what I hope is the full series of articles. It might help to give some indication as to when HB wrote this. I can tell, from the reference to Major Douglas, that it was after WWI, but then Belloc lived until the summer of 1953, so that leaves rather a lot of room chronologically. Thanks.
    Viking

  2. Indeed, I too hope sincerely to hear his further exposition upon all three of these ‘false remedies.’ The first is well known to us as the soviet-style communism that failed, the second as the Keynesian, New Deal-style capitalism that is finally failing now.

    The third will be greatly interesting to me because I have never yet heard of its strengths or its flaws. Keep up the good work!

  3. Brien, I believe that Labour and perhaps Liberal or even Conservative governments in the UK put into place many such programs of the sort of which Belloc spoke prior to the US New Deal, which was in turn before Keynes’s “General Theory”. As to the third type, you might want to Google for “Social Credit”. I believe “National Credit”, the term HB used, was changed to SC shortly after by Major CH (for “Clifford Hugh”) Douglas.
    Viking

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  5. This piece was written for an American audience.

  6. Pingback: Communism Has Failed - Christian Forums

  7. Interesting… when was it written?

    Thank you very much for the search terms, Vi King. I spent a very interesting few hours on what came up for “Social Credit.” I’m still trying to get my head around the A+B theorem – I think it’s left something out but it still deserves further thought.

    From what I could make out, Belloc’s main complaint about the idea was that it does temporarily and by a complicated manner what the restoration of property would do permanently and simply. But I’m more interested than ever to hear his own words.

  8. You’re quite welcome, Brien, glad you enjoyed your voyage into the waters of SC. I’m skeptical myself of the A+B theorem as an explanation of some gap between prices and incomes.
    Happy Thanksgiving to all my fellow Americans!
    Viking

  9. Brien Hartung; if Keynesianism fails then capitalism fails. Given the chronic and endemic structural problems of capitalism it needs Keynesian demand management.

  10. Wessexman,
    Indeed it does, and if this crisis becomes a full scale failure it will be a failure of capitalism itself.

    On further examination, the A + B theorem of Douglas would seem to ignore the following fact: the “B” payments made to other firms or entities for raw materials, machinery and other overhead may be a loss to the income of that firms employees, but they are not a loss to mankind simply speaking. On the contrary, when the firm buys a large quantity of timber, the woodcutters make an income, for example.

    Say’s Law would still seem to be very much in effect. The law of entropy aside, the results of a man’s labor put into making useful things results in useful things coming into existence – and therefore the ability to trade for other useful things.

    Production results in purchasing power, it is just a question of distributive justice to determine who gets it.
    Perhaps I am oversimplifying and misrepresenting Douglas, but his rejection of Say’s Law seems to rest on shakier ground than Say’s law itself.

  11. “On the contrary, when the firm buys a large quantity of timber, the woodcutters make an income.”

    Actually, Brien, the woodcutter generates revenue. There is a difference between revenue and income, as the woodcutter most likely has many debts to repay, or has to replace working capital. Therefore, only a small percentage of the revenue received by the woodcutter is actually distributed as income.

    Vi King, you say you’re “sceptical of the A+B theorem”, but you were not clear about this scepticism on the social credit email list.

    Perhaps you could elaborate here?

  12. Hi Socred,
    First of all, I don’t doubt that business revenues can be classified into those which someone in the firm gets (A), and those which go to suppliers and the like (B). That much seems axiomatic to me. But it seems to me that CH Douglas (CHD) errs, for one thing, in only counting wages, salaries, and dividends. Since A+B is supposed to show why there is a gap between output and consumer income, one must, I think, include such things as interest, rent, and entrepreneurial income, this last quite different from any of those that CHD included, at least in American national accounting. One that may have been paltry in CHD’s day but which is quite significant in ours is government transfer payments, such as American SS benefits to the retired and disabled, and similar programs elsewhere. There are also retained earnings, which go elsewhere, I know, and are thus B money. Still, they must be reckoned in the accounting.
    Another problem I have with A+B, Socred, is the issue as to how we could have survived this long if the gap is so large? I believe that the answer CHD gave was the issuance of credit by financial institutions, but that can scarcely be the answer in my estimation. For, such “additions” need to be paid back, and for the most part are. If consumers are unable to bridge the gap (because of insufficient income) without such creditary aid, then how in the world can they pay back the loans with interest on the same earnings? That just doesn’t make sense to me.
    Now, having said that, I’m inclined to think that there is probably a gap caused by under-consumption or over-saving. (The two are basically the obverse of each other.) This was surmised by John A. Hobson before CHD published his theories. But such can occur with A costs as readily as with B ones, I think.
    Sincerely,
    Viking

  13. Hi Vi King:

    Thank you for clarifying your position.

    Interest, rent and entrepreneurial salaries could broadly be put into the categories of wages, salaries and dividends. But it really doesn’t matter how many subsets you want to divide A into, because it is really irrelevant.

    The point is that A (income) is always less than A+B (prices).

    You asked why the economy has not collapsed if there is this inherent gap between income and prices.

    The answer is quite simple – exponentially increasing debt. In fact, that is the one of the consequences of the theorem, and this prediction by Douglas has come to fruition, so it only adds validity to his theorem.

    Savings can cause a “gap” between income and prices if there is “net savings” in the economy. You have to realize that some people are saving while others are spending their savings, and this process goes on simultaneously. People tend to save more as income increases, and income is generally increasing over time, so there does tend to be an increase in “net savings”.

    Douglas gave five “primary” causes of the gap between income and prices in his pamphlet “The New and The Old Economics”:

    “1. Money profits collected from the public (interest is profit on an intangible).

    2. Savings, i.e., mere abstention from buying.

    3. Investment of savings in new works, which create a new cost without fresh purchasing power.

    4. Difference of circuit velocity between cost liquidation and price creation which results in charges being carried over into prices from a previous cost accountancy cycle. Practically all plant charges are of this nature, and all payments for material brought in from a previous wage cycle are of the same nature.

    5. Deflation, i.e., sale of securities by banks and recall of loans. 1. Money profits collected from the public (interest is profit on an intangible).