Social Credit In New Zealand
The first noteworthy proponent of Social Credit in New Zealand was H. M. Rushworth, Country Party MP for the Bay of Islands from 1928 to 1938. In the House he proposed major Social Credit arguments, namely, that credit and the monetary system should be controlled by the people through the Government; that a gap existed between purchasing power and production costs; that the gap could be bridged by the issue of credit; and that Parliamentary party control should not be unduly rigid.
At that time the New Zealand Social Credit Association was an educational body, prevented by its constitution from being a political party. In 1936 it was a major force in getting the first Labour government, who, under Michael Joseph Savage, campaigned for monetary reform, elected. Labour used social credit to good effect, using the newly nationalised Reserve Bank to fund the building of 40,000 state houses and to provide low interest overdrafts for the dairy board and other producer boards, but it didn't last.
In May 1953, the New Zealand Social Credit Political League was formed. Lead by W.B. Owen it contested 79 seats in the 1954 Parliamentary elections, polling 11.31% of all votes cast, but did not win a seat. The election policies were similar to those put forward by Rushworth 20 years previously, but they also included pledges to reduce taxation progressively which would lead to falling costs of production and an increase in the purchasing power of incomes; to abolish social security tax without reducing benefits; to support private enterprise; and to enact legislation to eliminate unfair trade practices.
In 1957 the party gained 7.21% and 1960, under new leader P. H. Matthews, 8.62%. Additional policies included setting up a national monetary authority to ensure a balance between production and income; reducing bureaucratic controls; encouraging farming; reducing school classes sizes; improving health services; encouraging preventive medicine; introduction of a Bill of Rights limiting the powers of Government and safeguarding the rights of the individual; allowing pensioners to travel free on Government-owned services outside holiday periods. All those policies endure today.
The party gained its first MP in 1966 when a massive effort by supporters saw Kerikeri accountant Vernon Cracknell win the Hobson seat in Northland.
In 1981 under charismatic leader Bruce Beetham, who had won the Rangitikei seat in a by-election in 1977, the party gained its highest ever vote - 20.65% of all votes cast, but won only two seats under the "first past the post" electoral system. It has contested every election since 1954.
It has always advocated policies that were ahead of their time - proportional voting in 1972 (enacted 1993); an anti nuclear New Zealand in 1978 (enacted 1987). It published "You and Your Environment", a 28 page document about protecting the environment, recycling, etc in 1973, and "Industry an People" a 16 page document proposing new concepts for industrial organisation, and ways to provide income for workers losing jobs due to the advancement of computers and robot technology.
Monetary reform is now being promoted in New Zealand and internationally by economists, professors of economics and economic commentators. You can read more about that at www.tellmemore.org.nz
Members of Parliament
- Vernon Cracknell (1966–1969)
- Bruce Beetham (1977–1984)
- Gary Knapp (1980–1987)
- Neil Morrison (1984–1987)
The Origins of Social Credit
Development of modern banking has resulted in nations losing the power to issue most of their own money. The present economic system, world wide, is based on debt, issued by private banks.
This confers immense power on the few who create money and control it, and causes economic problems individuals, families, businesses and nations as a whole. Its effects are extreme in some situations, resulting in abject poverty while plentiful goods are denied to those needing them.
The Social Credit movement provides practical means to remedy these problems.
Its founder, Clifford Hugh Douglas, was a brilliant Scottish engineer of international renown. During the first World War the British government employed him to rationalize and improve aircraft production.
While working on the accounting system of this industry, he noticed that it did not pay out in wages, salaries and dividends the total value of its production. After the war, he studied other industries producing consumer goods, and found that the same principle applied. He formalised this study to produce what he called his A plus B "theorem", that industry had two sets of costs, those he classified as "A" costs (wages salaries and dividends) which provided "purchasing power" for consumer goods, and "B" costs such as bank interest and depreciation charges which did not. His formula simply rationalised that "A" can not equal "A plus B", i.e. consumers could not afford to buy the product of their work. Although he recognised that one industry, banking, produced no goods but did put money into consumers' hands, he still considered that there was an incipient "gap" in the economy that required a steady input of new money. Putting it another way, there are forces in the economy which tend to push prices above the level which consumers can afford to pay.
While industry was expanding and paying out wages etc. for capital goods, or while industry was producing non-consumer goods such as armaments, the "gap would be filled, or in inflationary situations, overfilled. When conditions such as this no longer applied, there would be recession and poverty among plentiful unsold production.
His opponents actively attacked this concept. His supporters became engaged in interminable attempts to prove deductively that he was right. The result was prolonged and inconclusive debate.
In modern science, such a proposition would be treated as a hypothesis, more correctly because of its tangible mathematical expression as a "model" to be tested inductively against reality. Treated this way, it is the only hypothesis that explains satisfactorily the economic events of the twentieth century . His prediction of financial collapse and "poverty amidst plenty" came all too true in the Great Depression, and history shows that later prosperity generally occurred only in times of war, preparation for it, or reconstruction after it. The complete failure of orthodox thinking to explain these events suggests that, eventually, the Douglas analysis in economics may rank with major theories in the field of science.
He also showed mathematically that the banking system, rather than "on lending" money, created new credit that functioned as money. While nowadays no good school text on Economics fails to explain this, in Douglas ' time it was a revolutionary and strongly-contested idea. Even though the Charter of the Bank of England, founded as a private concern in the seventeenth century, granted it the right "to create money out of nothing".
In his time, he recommended various measures to overcome the problems he detected.
Social Credit is bound constitutionally to take account of his economic analysis. Its aims and philosophy are in agreement with his strong emphasis on the rights and freedoms of individual men and women. Its main economic policies are based on updating his thinking to modern conditions.
Written by: John Rawson, Life Member