Salient. Official Newspaper of the Victoria University Students' Association. Vol 41 No. 21. August 28 1978

The Fundamental Problem

The Fundamental Problem

The fundamental problem with Social Credit theory is that it does not grasp the nature of monopoly capitalism. It attacks the financial system without realising that there are contradictions in the system of production which no amount of fiddling with the financial superstructure can put right. Social Crediters, wedded as they are to small scale commodity production under capitalism, attack financiers without attacking the monopoly capitalist class as a whole.

The central economic contradiction of capitalism (namely, the conflict between the accumulation of capital and the distribution of consumer goods) is intensified under the conditions of monopoly. Monopolistic corporations are no longer subject to the pressures of price-competition which characterised the early period of capitalism, and subjected individual capitalists to the law of the equalisation of the average rate of profit.

Because of their control over markets, supplies and finance, monopoly capitalists can restrict production, jack up prices and earn super-profits. With the whole of modern capitalist economies dominated by monopolies, there is a constant tendency towards stagnation. In the absense of counteracting government action a monopoly capitalist economy will soon dive into a deep and prolonged depression; that was what happened in the 1930s.

After the experience of the thirties, western governments have kept 'priming the pump', running budget deficits in order to keep demand buoyant and guarantee corporate profitability. However, when a monopolistic company encounters an increase in demand for its products it does not have to increase production in order to boost profits. Often it is simpler to merely increase prices. This is the Archilles heel of Keynesian economics. In order to avert economic crisis the 'pump' has to be primed faster and faster at the cost of accelerating inflation.

By enforcing a partial monopoly over the supply of labour, unions also contribute to the upward spiral of prices and incomes.

Beyond the occasional blank declaration that the 'price of living' must be stabilised. Social Credit has nothing to offer that grapples with the real economic and social causes of inflation. Their claim to control inflation by increasing the money supply would have exactly the opposite effect. The money supply would outpace the production of goods and services even faster, subjecting us to galloping inflation.