Salient. Victoria University of Wellington Students' Newspaper. Volume 31 Number 16 July 16, 1968
The National and Labour parties have still to adjust to an important new factor in the New Zealand political situation: Social Credit is now, suddenly, arguing its case from the statements of economists whose references are impeccable.
Hence the endorsement by the Social Credit Leader, Mr. V. F. Cracknel, M.P., of the new International Monetary Fund scheme for creating international money, the physical existence of which will consist only of book entries.
The Minister of Finance, Mr. Muldoon, has expressed public surprise that Mr. Cracknell should take this position, but to anyone familiar with the basic ideas of Social Credit there is nothing surprising about it.
Consider this statement, for instance, made by the I.M.F. Managing Director, Mr. Pierre-Paul Schweitzer, himself: "These special drawing rights, created, as it were, by a stroke of the pen. will be essentially entries in the books of the Fund . . .Some people like to think of them as money, others as a form of credit . . .The material point is not how they are named but what can be done with them."
Such a comment contains all the essential elements of the Social Credit attitude towards money. So Mr. Cracknell quite naturally calls it "a tremendous step forward in international monetary thinking."
This is only one way in which major elements of Social Credit monetary theory as formulated in the 1920's by Major C. H. Douglas have been subsequently vindicated, and are to be found—couched in appropriate academic language—in almost any modern economics textbook.
But Douglas was an engineer, not an economist. It was the Social Creditors' misfortune that—like the Australian nurse Sister Kenny in her fight to obtain medical recognition of a new method for treating polio victims—they persisted in using their own terminology.
They suffered as a result a remarkable storm of abuse and ridicule which continues to this day. None of this alters the fact that in some important respects the Social Credit analysis of the operation of the financial system and its defects was way ahead of its time.
Economists have now caught up with these useful Social Credit ideas, as the new I.M.F. scheme and various current proposals for linking wages with productivity demonstrate. But this situation makes possible a peculiar political reaction.
Social Crediters are now free to argue the facts on which their case is based directly from the writing of economists. This is a technique which can be quite unsettling to their opposition.
For the first time Social Credit is achieving widespread credibility, which after next year may be reflected by an increasingly influential position in Parliament.
What Social Crediters are promoting is in fact a political policy. (Government should create more of the nation's credit supply at no cost to the people, and private institutions less), not a radical new economic theory. But to audiences untrained in economics, concepts like credit creation hit them as a major revelation, because they have always thought of banking in terms of the relending of cash deposits.
The psychological effect of this is that many people tend to accept the Social Credit policy along with the indisputable economic facts Social Crediters teach with it. (The process is something like this: "Social Crediters have been right all along about money being a matter of book entries made against the security of production—therefore their policy is right too.")
It is here that the political parties and financial institutions which have perpetuated false thinking about credit fall into a trap of their own making. The electoral ignorance on which they blame the Social Credit "protest" vote is a result of their own attitudes.
Right now the National Party is distributing a pamphlet on Social Credit in Canada by Mr. H. J. Walker, M.P., who makes this statement: "If Social Credit ever became the Government here, and decided to put into operation some of the cranky schemes which the party, including its leader the Member for Hobson, are advocating, they could wreck our financial institutions within a matter of days."