IN OFFERING to the Canadian public my views upon the possibility of re-establishing progressive prosperity, I tried to emphasize the magnitude of the task and to warn against the belief that there is any magic or simple route by which any approach to the solution of that problem could be accomplished.
I tried to make clear my belief that currency expansion, private bank credit inflation, the raising or lowering of tariffs, the forestalling or wiping out of international and domestic debts by moratoriums, cancellations or repudiation, the establishment of a national central bank or any other of the innumerable individual enterprises that are currently discussed will, if tried alone, serve no purpose other than to continue the depression in a more or less aggravated form.
The solution of the problem that I suggested involves:
(1) The establishment of a management of credit by men properly equipped and placed in a position of "unchallengeable independence,” whose primary duty would be the maintenance of prosperity by providitig the circulation of purchasing power necessary to sustain such standard of living as the power of the people to create and use real wealth makes possible.
(2) The establishment of a department of economy and taxation, whose duty and responsibility would be the regulation of the circulation of credit purchasing power by taxation, and the maintenance of economic order by the regulation of production and the prevention of unreasonable prices.
(3) The establishment of a department of international trade and credit, whose duty and resi»nsibility would be to maintain the buying power of the Canadian dollar in foreign markets by keeping the exchanges of Canadian international trade and credit in equilibrium.
Anything short of this wide and sweeping programme is, in my opinion, doomed to failure.
Mr. Plumptre Agrees
A. F. W. PLUMPTRE, student of John Maynard Keynes of Cambridge, and lecturer on Money in the Department of Economics of Toronto University, has written for Maclean's two articles which purjx>rted to be a critical analysis of the programme I outlined.
1 should have supposed that the important point at issue was the soundness of my proposals. Mr. Plumptre, however, took so much space to set forth his views that I am not only a “radical" but an "emotional, illogical devil hunter” with an "anti-banker mania,” that I feel he rather beclouded the primary issue. Now I am not concerned about what Mr. Plumptre thinks of me as a person, but I am concerned with his economic views, and I was agreeably surprised at the extent to which he agreed with me when he dealt with the facts.
First, he agrees that "it is a fallacy that Canadian money must be secured by gold.” Thus he concedes the purpose of my first article, namely, the destruction of the illusion that gold is a necessary security for the value of the domestic purchasing power medium of exchange. *
Next, Mr. Plumptre agrees that: "The fallacy that bankers loan only other people's deposits is just as pronounced as the fallacy that money is backed by the security of gold. The banker, in tire main, does not lend accumulated savings.”
He agrees, further, that the bankers could cause substantial variations in the volume of bank deposits, which constitute the most important form of money, but denies the validity of the assumption that because the bankers possess that power they are exercising it. In support of this denial, he draws an analogy between the position of the bankers and that of a herd of cows which does not use physical powers it admittedly possesses,
I venture the suggestion that Sir Herbert Holt, Andrew Mellon, J. P. Morgan and Montagu Norman will learn with surprise and amusement that bankers, with cowlike innocence, “shrink from rather than desire the perquisites, privileges and responsibilities of dominion.”
What the professor hoped to prove by citing the weakness of the bovine intellect I do not know, but a little later on he completely abandons that argument and performs a feat in economic gymnastics that could be
properly described only by Stephen Leacock. He turns a complete somersault, throws the cow' over the moon and lands fairly on the banker’s neck. He points out: “Mr. McGeer has discovered the missing breastplate in the armor of the bankers.”
And here it is: “As a system, the banks no longer merely passively receive deposits and distribute loans but are the chief creators of loans and deposits. . . . The system as a whole creates and distributes credit ... All the defensive arguments w'hich picture the banks merely as societyserving go-betweens between outside depositors and borrowers fall to the ground.”
Later on, he reiterates the conclusion—“There can be no doubt that, as a system, the Canadian chartered banks control in large measure the volume of money available in Canada” - and agrees with me that the volume of purchasing power, which he agrees now consists of token currency, bank notes and bank credit, does affect “the general prosperity of the country.”
Control is Essential
1HAVE said that this is a power that no private profitmaking monopoly should enjoy; that it should be in the hands of men who have no interest in the profit-earning power of either money or credit; that the management of the issue and circulation of purchasing power should be recognized as the most conspicuous responsibility of government and should be administered by men whose independence should be established and maintained in the same way that the independence of the judiciary is now sustained. Their responsibility should be the elimination of unemployment and the maintenance of all public enterprise at a minimum of expense to the taxpayers.
Although Mr. Plumptre erroneously tries to put me in the category of those who believe that prosperity can be re-established by an “expansion of currency” alone, he does agree that a substantial increase in the amount of purchasing power in circulation is an essential to prosperity; also that it is possible to conceive of an “ideal” volume of purchasing pow'er, and that, international agreement being difficult of attainment, Canada should act on her own initiative.
Now, I proposed that the taxpayers’ burdens should be relieved and the consumers’ purchasing power augmented by financing all public enterprise with national instead of private bank credit, and to regulate and control circulation by regulatory taxation. Mr. Plumptre dismisses this proposal on the ground that it is impracticable, arguing that the necessary measures for the control of the volume of credit in issue through taxation would not be "politically popular.”
There is no reason for the conclusion that such a programme will not be popular. The man who works, w'hether as the operator of a great railway or as a peasant laborer, is more anxious to have stable prosperity than he is to accumulate credit purchasing power. The only persons who would oppose maintenance of the activity of the circulation of the purchasing power medium of exchange would be those inspired by the covetous desire that finds satisfaction only in the accumulation of money wealth and credit power. I am of the opinion that their desires should not be considered.
To sum up, we find, despite the general criticism that Mr. Plumptre offers, that he agrees, or at the worst almost agrees with me, in the following fundamental propositions:
(1) That the cause of the depression is due in large measure to the failure of the circulation of credit purchasing power.
(2) That international agreement is not possible, and that Canadians must resort to their own devices to reestablish Canadian prosperity.
(3) That bankers can now control in large measure the volume of purchasing power in issue and in circulation.
(4) That the volume of purchasing power could be increased by financing all public enterprise with national credit, and that circulation of credit could be controlled by taxation.
(5) That government should set up the economic machinery essential to the regulation of the issue and circulation of credit, and some measure of price level control.
(6) That a closer approximation of the ideal volume of credit in circulation can and should be maintained.
The programme I have outlined does involve the monopoly of credit issue and circulation, and the monopoly of international trade and international exchange operations. It is useless to dismiss it on the ground that it involves sweeping innovations. We must act if we are to save ourselves from the fate of a world rushing toward disaster, a world that Lloyd George has said is confronted, “with fundamental changes of a gigantic character whose nature is unrealized by leaders except Mussolini and Stalin.”
Much as Mr. Plumptre and I agree, there are some matters upon which we disagree completely. Despite the fact that borrowing bank credit at interest for the purpose of financing all governmental enterprise has ended in governmental bankruptcy and confiscatory taxation, he justifies that unsound proposition upon the ground that “usury is inherent in a social system which allows private property and the disposal by each person of his own income largely as he sees fit.”
By so doing he repudiates the teachings of Moses, Solon, Socrates, Aristotle, Plato, Christ, Wycliffe, the Canonist doctrines, Luther, Bacon, Ruskin, Lincoln and a host of others. These men placed usury in the category of gambling, and treated it as a violation of the laws necessary to maintain the peace and order of mankind.
Interest is inherent in a social system where the volume of money or purchasing power in circulation is maintained at a level below that which is necessary to maintain pro gressive prosperity. Interest is a symptom of the disease of money shortage. Our civilization is dying for want oi purchasing power, and the extravagant exactions of interest are now intensifying the malady. No amount of argument can change that fact. Certainly none of the great teachers and philosophers have placed the right of the usurer to interest above the right of men to live.
MR. PLUMPTRE also maintains that the best method of securing monetary expansion is that of an expansion of bank credit. In taking this position, he overlooks a fact admitted by the bankers themselves, namely, that the banks already possess ample credit resources to meet the requirements of “sound borrowers.”
My contention is that, now that the power to pay interest is exhausted, further inflation of bank credit will not provide employment that must be characteristic of an age of leisure and plenty. Under such circumstances, the consumers’ purchasing power must be developed by the distribution of wages expended in public enterprise and social service, with national credit secured free from the disastrous cost that the issue of bank credit involves in interest charges necessary to maintain the expense and the profit which the operation of the private credit system demands. The day of interest-bearing credit is approaching a disastrous and definite end, and no amount of tinkering with this system will ever make it serviceable again.
There is just one other item upon which Mr. Plumptre and I disagree. He thinks that the necessary reforms can be brought about by offering pious advice to the bankers.
This suggestion is in line with the conclusion he offered that the modem superbank structure and credit system "just grew, Topsylike.” To men who have had experience with banking legislation, such conclusions indicate that Mr. Plumptre has little knowledge of the practical application of the theories of economy he has studied so effectively. I believe, and I have not the least doubt but that I am correct, that governments will never move against the power of the bankers to take away their right to issue credit as a substitute for money until the public is aroused to demand, with a united and mighty voice, the removal of the last barrier that stands between humanity, economic freedom and the conquest of poverty.
Before government can ever achieve that fundamental change, it will have to meet and overcome the united effort of the world’s bankers and credit dealers, who w*ill organize all the great power at their command to resist, hinder, delay and defeat the destruction of the right of a private monopoly to earn interest with credit issued as a substitute for money.—The End.
The story you want is part of the Maclean’s Archives. To access it, log in here or sign up for your free 30-day trial.
Experience anything and everything Maclean's has ever published — over 3,500 issues and 150,000 articles, images and advertisements — since 1905. Browse on your own, or explore our curated collections and timely recommendations.WATCH THIS VIDEO for highlights of everything the Maclean's Archives has to offer.