A new way of accounting for ecological costs?
January 7, 2012 7:30 PM   Subscribe

Social Credit is a movement that takes a different view of economic expansion. Mostly it focuses on how value is created and what happens to the excess value. Proponents can be very aggressive or very mellow but a key part of their philosophy is that we must recognize the value we've inherited from the past. In other words, we don't start our lives with an empty ledger but have inherited many physical and intellectual gifts from previous generations. Recently I began wondering whether we shouldn't look at the other side of the ledger, particularly when it comes to ecological impacts - i.e., the messes we inherit. It turns out that in the early 90s, some social credit economists were writing about this and were even talking about climate change as something that needed to be added to the equation. Is this an idea whose time has finally come?
posted by BillW (12 comments total) 9 users marked this as a favorite
While I find social credit conceptually interesting, there doesn't seem to be much here beyond an invitation to discuss the subject.
posted by StrikeTheViol at 7:45 PM on January 7, 2012

One thing that I was curious about is why social credit seemed to have taken off in Canada, and fizzled elsewhere, at least historically. Maybe post something about that?
posted by StrikeTheViol at 7:48 PM on January 7, 2012

Most interesting. I se many of the insights I admire in Coase, but that economist's dislike of 'blackboard (mathematical) economists probably made him indifferent to Douglas.
posted by anigbrowl at 8:04 PM on January 7, 2012

Social credit didn't really take off in BC, but was a convenient vehicle for W.A.C. "Wacky" Bennett to run the province like a benevolent dictatorship for 20 years.
posted by Grimgrin at 8:13 PM on January 7, 2012

Any how does accounting for ecological impact change the ultimate conclusions?

"This principle that the earth belongs to the living, and not to the dead, is of very extensive application and consequences" -Thomas Jefferson
posted by jeffburdges at 8:18 PM on January 7, 2012 [1 favorite]

is the "very aggressive" one showing comic sans in its advertisment because of my browser/installed fonts?
posted by This, of course, alludes to you at 8:21 PM on January 7, 2012

Marx talked about "socially congealed labor time," which is, effectively, the same thing. But he wouldn't have turned it into a fetish in its own right.
posted by outlandishmarxist at 10:14 PM on January 7, 2012 [1 favorite]

This is the same stuff that Ezra Pound used to promulgate?
posted by thelonius at 10:21 PM on January 7, 2012

From what I understand, it is an attempt to prevent massive accumulations of wealth by distributing excess value in the form of a regular dividend to the entire population. The original assumption is that value is derived primarily from land in the form of agriculture and mineral resources - hence the associated history in farming areas such as Saskatchewan, California and Australia, and perhaps it's persistent appearance in 20th century England where mining was a dominant element of wealth.

I had not known that Ezra Pound was a follower but I had known that it had an unfortunate (though not intrinsic) association with Fascism because Douglas was one of those people for whom the Jews were the source of all financial woes - but he was hardly alone in that lie.

What is more interesting is that Upton Sinclair was a keen follower and actually ran for Governor of California in 1934 on a Social Credit platform. and in 1938 the science fiction author Robert Heinlein ran for State Representative as a Social Credit candidate. Heinlein also wrote Social Credit into his novel Beyond This Horizon and his first attempt at writing a novel was a thinly veiled screed on Social Credit titled For Us The Living: A Comedy of Customs.
posted by BillW at 5:53 AM on January 8, 2012 [2 favorites]

Isn't this what taxes, and specifically death/inheritance taxes, are supposed to correct for?
posted by gjc at 7:18 AM on January 8, 2012

Also, it sounds like the guy from the very aggressive link, is dealing from an incorrect position:
"Before we go further it is important that you understand how the banks create money. Most people believe that every single dollar the banks lend comes from money deposited in their bank as savings. This is most definitely not the case. The banks use a fraudulent process called Fractional Reserve Banking to create this money."
This is technically incorrect, and it is something I've seen more and more of lately from Ron Paul and OWS types alike. It stems from a misunderstanding, I think, of what the different components of the money supply are. Banks cannot conjure up money out of thin air; they can only lend out dollars people have actually given them. The money creation happens on the balance sheets only.

Start with $100. The owner of that $100 deposits it in a bank. The bank can lend out (for sake of argument) $90 of that. So you have the depositor who has a credit of $100, the borrower who has $90 and the bank which has $10 and book assets of $190. If you play that all the way out (the borrower deposits his $90 and his bank loans out $81, and so on), you get this. But there are still only $100 in actual dollars out circulating. The other $800 is not actual currency, but a valuation. The banks can't write checks on that balance. The only thing they can do with it is use that number to convince other people to lend them money. "Hey, can we borrow some money from you? We have a lot of people who owe us money and they will be paying us back, so you know we will be able to pay you back."

(Well, actually, if all of that leverage happens all at once, there is almost NO money out circulating. There is just $10, $9, $8.10, $7.29 [...] $0.01 sitting in reserves under different accounts. If everything is rounded to the penny, it leverages out 72 times, and there is $0.09 out circulating, and $99.91 in reserves. But it doesn't happen instantly; every borrower takes their money and does something with it before it theoretically gets redeposited, and that's where the value of fractional reserve banking comes in. With each iteration, some transaction happens, hopefully adding value/wealth/prosperity.)

Fractional reserve banking isn't fraudulent, it is simply leverage. It is a way to use the available currency more efficiently. A way to visualize it is to imagine the currency as actual gold. The bank can't lend out gold it doesn't have, and it would be wasteful to have a bunch of gold sitting in vaults doing nothing. So they are allowed to loan most of it back out and put IOUs in the vault. Played out as above, if it all happened at the same bank, they will have ~$800 of IOUs in the vault against that $100 of gold.

But you have to remember that while those loans out increase the money supply in a leveraged way, when people pay back their debts, the money supply de-leverages. If you consider just that initial $100 deposit in a closed system, when all those loans get paid back, the bank will just end up with that $100 initial deposit. Probably a little more, since they are likely charging interest, and maybe a little less if someone absconds with the gold they borrowed.
posted by gjc at 7:49 AM on January 8, 2012 [5 favorites]

While I agree that leveraging is not "creating money," the theory of Social Credit says that economics by leveraging is the problem. It creates a de facto inflationary spiral that is the cause of periodic collapses. Regulation as a solution to something built into an economic process is an open admission that the system is flawed.
posted by BillW at 7:13 PM on January 8, 2012

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