Crisis in Alberta

"A revolt against debt ... in a province politically a maverick"

W. A. IRWIN December 15 1937

Crisis in Alberta

"A revolt against debt ... in a province politically a maverick"

W. A. IRWIN December 15 1937

Crisis in Alberta

"A revolt against debt ... in a province politically a maverick"



THE SCENE is a committee room in the Legislative Building of the Province of Alberta in the City of Edmonton. The time, April 10, 1934. Around a table sit a group of men, members of the Agricultural Committee of the U. F. A.-controlled Alberta Legislature. They are questioning the world’s Number One monetary heretic, Major C. H. Douglas, of Fig Tree Court, London, England, High Priest of The New Economics otherwise known as Social Credit.

For days the diligent but baffled legislators have been seeking a clear-cut definition of Social Credit. The crucial moment is now at hand. The High Priest himself is about to unfold the mystery. Ex-Premier J. E. Brownlee is examining the witness.

“The next question is, can you sum up your definition of Social Credit in one or two sentences for us, so as clearly to indicate just what you mean by Social Credit?”

Major Douglas: “I think I can do that very shortly. Social Credit, in its essence, is a correct estimate of the productive capacity of a given unit, based upon that which is the real social c; edit of the unit. You have something which we call financial credit, which can also be made to be the reflection of this real social credit, and that, I should say, can be defined as the power of monetizing, to any extent desirable, the real wealth of the unit so it can be freely exchanged.”

So spoke the High Priest. The King’s Printer for Alberta records it so, and the King’s Printer is seldom wrong.

It is three weeks earlier in the same committee room. >Villiam Aberhart, Calgary school principal, radio evangelist, Douglas disciple, is on the stand. Says he:

“I say to you again. Major Douglas has peculiar knowledge and goes into it with higher mathematics, but the ordinary man cannot understand that.”

Later he was asked what he would do if he were given the responsibility of launching a Social Credit scheme in Alberta. He replied:

“The first step would be to ask permission to engage Major Douglas to come here and organize it, and he would do the work.”

A year and five months later, Hon. William Aberhart, Premier of Alberta by grace of the largest vote in the history of the province, was cabling the High Priest: “Victorious, when can you come?”

Add to the sequence the fact that since that call was issued the High Priest has steadfastly refused to come, and you have in epitome the story of Social Credit in Alberta.

Douglas has penned many a shrewd sentence, but under pressure he displays a gift for verbal obscurity which at times approaches a positive genius for making himself unintelligible.

Aberhart, the “converted” prophet-disciple, never did achieve intellectual understanding of what Douglas means by Social Credit—Douglas himself confirms this.

Alberta accepted both on faith, believing the dawn of a new era was at hand; and yet the official record reveals that more than three years ago Douglas himself declared it was impossible finally to achieve Social Credit in Alberta under present conditions. To quote his own words:

“I believe the final steps are at present impossible; but to realize what you are up against, to really formulate your objective and begin to move in that direction, I believe is possible even in Alberta, but certainly not the final steps.” (Page 123. Evidence Taken by the Agricultural Committee of the Alberta Legislature, 1934.)

All of which goes a long way toward explaining why Alberta’s Social Credit movement has spent the last two years and four months running around in circles.

What is Social Credit?

CONFUSION aside, however, what is Social Credit?

Basically, it is a method of financing consumption through the issue by the State of debt-free credit; that is, created credit carrying no interest and not repayable.

The Douglasite contends that the most important characteristic of contemporary Western civilization is the displacement of man power by machine power. Man, he says, is now living in the Power Age, an age in which both industry and agriculture are able progressively to turn out more and more goods, using less and less human energy per unit of production. And yet, despite constant increase in the flow of goods, many men are still in want. The reason for this paradox of poverty in the midst of potential plenty, he argues, is simply the failure of the existing financial system to distribute sufficient purchasing power to enable consumers to consume what the production machine is able to produce.

Hitherto, he continues, purchasing power has been distributed mainly through payments for the expenditure of human energy. Now that the human-energy content in the stream of goods is progressively diminishing, and the machine-energy content is increasing, some supplementary method of distributing purchasing power has to be devised.

Moreover — and this is where the famous “A plus B” theorem comes in — there is a chronic lag in the orthodox

distribution of purchasing power, which is concealed only so long as the world goes on piling up debt for the accumulation of capital goods; that is, machines, factories, railroads and the like. Once the rate of accumulation of capital goods sags, the supply of purchasing power becomes inadequate, prices fall, and the burden of debt becomes intolerable.

Furthermore, the gentleman points out that the vehicle for the distribution of purchasing power is money; also that money in the modern world is mainly bank-cheque money based on debt-creating credit. The essential backing for this credit is not gold but the natural resources, the productive capacity, the skill and character of a people; in other words, it is social credit. At present, he continues, the volume of credit is determined by the financial system on the basis of its own self-interest. This, he contends, is wrong. The volume of credit, he says, should be controlled by the State on the basis of the social interest. Also, for the technological reasons already stated, the consumer must share in the distribution of credit if society is to consume all that machine-power production can produce.

To achieve this end and so “equate consumption with production,” the Douglasite makes three technical proposals. These are:

1. Socialization of the issue of credit, either through State control of the existing banking system, or the setting up of a State banking system which would issue debt-free credit.

2. Financing of consumption through the issue of a consumer dividend, intended to make up the deficiency in total purchasing power due to the displacement of man power by machine power.

3. Institution ot the Just or Compensated Price. Issue of a consumer dividend without a compensating check, would defeat its own end by causing an inflationary rise in prices. To keep prices down, therefore, the retailer would be required to sell goods at a percentage below cost determined by the relation between total consumption and total production. If, for instance, consumption of a given commodity in a Social Credit area were nine tenths of the production of that community, the price to the consumer would be reduced by one tenth; and that tenth would be made up to the retailer in new credit.

Such are the bare bones of the Douglas scheme of Social Credit. It is vehemently attacked by orthodox economists at one extreme, and by Socialist economists at the other. Orthodoxy denies that any permanent shortage of purchasing power exists, and maintains that the scheme would result in uncontrolled inflation. The Socialists agree that it is inflationary, but also argue that the scheme is bound to go haywire anyway on the ground that no amount of monkeying with the monetary machinery will achieve economic stability unless production, as well as money, is controlled by the State.

“The Crowning Irony”

AS WAS indicated in a previous article, nothing approximating this concept of Social Credit as yet has developed in Alberta.

The reasons for this are various. One is the revolutionary character and the complexity of the concept itself, together with the obscurity which characterizes Douglas’ presentation. Another is the personality of William Aberhart. Still more important is the fact that no one in the Douglas camp has been able to show the Albertan how he can achieve Social Credit in Alberta alone, without changes in the Canadian constitution so drastic as to be equivalent to taking the province out of Confederation. And while there are many Albertans who will holler about the sins of the East, the tariff, the Big Shots, the banks, the creditor who insists on his pound of interest, you will not find many who are willing to contemplate the finality of actual secession.

The crowning irony of the whole picture, however, is the fact that Alberta’s economy doesn’t fit the premise of a highly industrialized, machine-powered economy on which the Douglas analysis is based. Alberta has no machines capable of turning out 700,000 cigarettes an hour, no machines sewing 1,000 pairs of boots a day. no machines spewing out 400,000 milk bottles a week; no plants producing 10,000 motor-car chassis a day, utilizing the labor of only 210 men. It is primarily an agricultural community, with supplementary sources of income in coal and oil. Secondary industry is relatively undevelo])ed.

This means that the province is essentially an exporter of raw materials and an importer of finished goods. And many of the basic factors governing the terms on which it acquires its finished goods —the world price of wheat, for instance—are not

capable of internal control by the province itself. Which makes it extremely awkward for Brother Douglas and company.

Douglas himself, as a matter of fact, has admitted the dilemma inherent in a relatively low degree of technological development. “A plan might be suitable for highly industrialized countries like Great Britain, and might not be so suitable for a province like Alberta,” he told the Legislature’s committee in 1934. Aberhart vaguely sensed the same difficulty when he talked about persuading new industries to locate in the province. John Hargrave, one of the self-styled “experts,” tried to hurdle the same obstacle early this year when he made the fantastic proposal that under a Social Credit regime, segregated areas should be set aside in the province for “exploitation” by outside non-Social-Credit capital.

“The Maverick Province”

TI)UT IF all this be true, protests the ■L) reader, why did Alberta plump for Social Credit?

The answer is: history, debt and a personality.

We haven’t the space here to go into the historical background other than to recall that monetary reform of one brand or another has been a live issue in the foothills country since Populists from the American Middle West swarmed over the border in the early 1900’s with Bryan’s cry. “Crucified on a cross of gold,” still ringing in their ears. Later came the Non Partisan Leaguers, with ideas about local autonomous banks. Then in 1921, Henry Wise Wood’s idea of group government broke the hold of the old-line parties, and Alberta, politically speaking, became a maverick province. By the time Mr. Aberhart was ready to lead his cohorts to the polls, the province had behind it fourteen years of government by a purely provincial party. To the Albertan, therefore, there was nothing unusual in plumping for another party of the same type.

Aberhart’s strongest allies, however, were the weather and the near-catastrophic decline in world cereal prices. Thanks to these two factors, Alberta’s revenue from wheat fell from $168,000,000 in 1927 to $46,000,000 in 1933. The economic and social effects of this decline in income on a people which, individually and collectively, had gone head over heels into debt, created an almost perfect setting for a radical crusade. Add to all this, sex scandals involving figureheads in an old government, the normal agrarian antipathy to “the interests,” the Albertan’s traditional willingness to take a chance, a religious mysticism which believed in economic salvation by faith, and a promise of jxisitive remedial action from a political spellbinder who is a master of the art of radio propaganda, and you have in broad outline the reasons for Alberta’s acceptance of Social Credit.

Essentially the movement was—and still is—an agrarian revolt against debt, upon which was grafted a theory of monetary reform whose implications w'ere never thoroughly understood either by the leaders of the movement or their followers.

“Nothing But Excitement”

THIS LACK of understanding, together with the constitutional and technical difficulties already indicated, explains much of the subsequent incoherence of so-called Social Credit policy. Prime factor was the fact that Aberhart himself, although converted, never managed to get the Douglas dogma straight. In some particulars the famous “Blue Manual,” which stated his election platform, bears no more resemblance to Douglas Social Credit than the Calgary telephone directory does.

The monthly dividend of S25, involving issue of $120,000,000 of new credit annually in a province whose total income in 1934 was $256,000,000, never had any relation to Alberta’s productive capacity. Twentyfive dollars was a purely arbitrary round figure which slipped glibly off the tongue. And by the time Mr. Aberhart was through with the Just Price, it had become a device for reducing price spreads, a concept which had nothing to do with the original idea. He did see the danger of inflation, so he conceived a new theoretical gadget of his own which he called the unearned-increment levy. In ordinary economic terms, this was simply a processing tax intended to recall the credit issued through the dividend. In practice, all that developed was a two per cent sales tax, now abandoned.

Once elected, the Prophet encountered his first obstacle in an empty treasury. He needed money and needed it quickly. Being a practical man despite his visions, he sidetracked prophetic economics for the moment and called in an orthodox financial doctor, R. J. Magor, Montreal industrialist and a director of the Bank of Canada. Mr. Magor prescribed orthodox remedies— less spending, more taxes. I íe also advised the Social Credit Government to go into Ottawa’s loan council scheme, which would have given the Dominion control over Alberta’s borrowing.

In the meantime, the new Premier kept on pleading with Major Douglas to come on over. But Brother Douglas, seeing orthodoxy in control, refused to come. Worried by this rebuff, the Premier balked at a loan council, defaulted on a bond issue, and set sail on the uncharted Social Credit sea with himself as navigator.

At his first session of the Legislature, he brought down an orthodox budget with an omnibus Social Credit bill. The former increased taxes; the latter produced nothing but excitement. At the next session— August, 1936—a bill appeared authorizing the setting up of State credit houses and the registration of producers, manufacturers, dealers and all individuals qualified to participate in the dividend. Social Credit was to become a fact “within a few weeks.” Three hundred and twenty thousand Albertans signed Social Credit covenants, but again nothing tangible developed.

Instead of producing Social Créait, the versatile navigator turned economistmagician and concocted a new trick, the disappearing dollar. This was dollar-scrip, which, to remain negotiable, had to carry a stamp tax of one cent a week. It was issued to Government employees, and the stamps, of course, were sold by the Government, which meant that for each dollar ssued, at the end of two years the State would have $1.04 in cash, plus a dollar’s worth of work. Any schoolboy economist could have told its originator that the scheme was sheer monetary lunacy. This project, too, collapsed after $248,000 in scrip had been issued.

Meanwhile, the realities of the debt problem remained. A harassed Legislature, therefore, passed a law cancelling further interest payments on private debts, and providing for payment of principal only over a period of ten years. This collided with the constitutional obstacle and the statute was declared ultra vires. Followed a series of further statutes reducing interest on Alberta’s funded debt by fifty per cent. Some of these were declared unconstitutional, but the province is still paying only fifty per cent of contract interest rates on a take-it-or-leave-it basis, and payment of debts owing by individuals to companies has been stayed under a moratorium.

The Parade of the Experts

COINCIDENT with ail this abortive

manoeuvring, mere developed a peculiar Social Credit phenomenon which might properly be termed the Parade of the Experts. Experts and near-experts came hurrying to Alberta from all points of the compass, bent on assisting in the piloting of this strange ship of State. But one by one they departed, some in sorrow, some in anger. For a time early this year there was jubilation in the Social Credit camp at the

prospect of approval of a course laid out by John Hargrave, leader of the Social Credit Party of Great Britain, a rival to Douglas incidentally. But in the end Mr. Hargrave also departed to the accompaniment of a blast which nearly blew the Prophet from the bridge.

“I still feel,” Hargrave reports in his diary, now published, “that the first Social Credit Government in the world is not yet publicly committed to the principles of Social Credit . . . that it lacks technical knowledge, and as a consequence has, over the past sixteen months, groped its way like a man stumbling along on a pitchblack night.

“. . . not only was it necessary to deal with a preacher-schoolmaster personality, abnormally resentful of criticism, but one that could not accept and act upon any proposition without taking it to pieces and putting it together wrongly.

“Having done my utmost to help, I am leaving Alberta because I find it impossible to co-operate with a Government which I consider a mere vacillating machine which operates in starts, stops and reversals.”

This was too much for a long-suffering crew. Early this spring, the Douglasites in the Social Credit group revolted, and refused to vote supply until a new bill setting up an all-powerful Social Credit board was enacted. Glen McLachlan, one of the insurgents, was made chairman and dispatched posthaste to London to summon Douglas himself to the rescue. Privately, some of the insurgent leaders expected that Douglas would again refuse to co-operate unless the Premier were relieved of his command—which was what they wanted. But Douglas upset all calculations by dispatching to Alberta two of his “experts,” G. F. Powell and L. D. Byrne. Mr. Aberhart beamed a welcome, peace was patched up, and an outwardly united party, shorn of four of its more conservative ministers, sailed on into the constitutional tempest described in a previous article.

The expert, Mr. Powell, emerged from the storm with a six-month jail sentence and a recommendation by an Alberta court that he be deported. Together with J. H. Unwin, Government Whip, he was found guilty of the defamatory libel charges arising out of publication of the “Bankers’ Toadies—Exterminate Them” leaflet, and sentences of six and three months, respectively, were imposed. Appeals were pending at the time of writing.

Major Douglas on Mr. Aberhart

AND WHAT does Major Douglas think - of all this? Now that he’s functioning as remote-control dictator, one would suppose that he would refrain from public criticism of Brother Aberhart. But no; not the Major. In a book published only a few weeks ago—mistitled “The Alberta Experiment,” since there has been no Social Credit experiment in Alberta—he says:

“In order to appreciate the somewhat unfortunate policy adopted by Mr. Aberhart after election, it is necessary to recall the peculiar combination of schoolmaster-preacher grafted upon an unusually ambitious temperament, lacking either political experience or social sophistication, together with a popularity as the prophet of a new world, both temporal and spiritual, almost impossible of belief to those who had not witnessed it . . .

“It would not be possible to claim that at any time the technical basis of Social Credit was understood by him, and, in fact, his own writings on the subject are defective both in theory and practicability ...”

Such is Major Douglas’ opinion of Mr. Aberhart.

What Mr. Aberhart thinks of the dictator has never been adequately reported.

What Mr. Aberhart does to economics, however, is well illustrated by one of his own platform parables:

Pat and Mike had a keg of beer and one five-cent piece. They decided to go into the business of selling beer by the roadside. No customers appeared, the day was hot, so Pat and Mike decided to develop a self-contained economy by buying and selling to one another. Pat handed over the nickel and got in exchange a glass of beer. Mike passed back the nickel and got a glass of beer. The double exchange was repeated until the keg was empty. A fine example of what a high-money velocity would do for business turnover. All that turnover, and only one nickel !

“That’s all very well,” protested a voice from the audience, “but what I want to know is how Pat and Mike got the keg refilled with only one nickel?”

For a moment the velocity convert was stumped. Then, in a stage whisper from behind cupped hand:

“Home brew.”

Gone was the problem on a gale of laughter.

There in a nutshell you have Aberhartian platform technique at its best, and Aberhartian economics at their worst.

“They Almost Tore the Hide Off Me”

POLITICALLY the current situation in Alberta is almost as confusing as Aberhartian economics. The Government forces, outwardly united, are actually divided into two camps— the Loyalists who are Aberhart men, and the Insurgents who are we-want-results men led by a group of dyed-in-the-wool Douglasites. The Premier is still Premier by virtue of his control over his popular following. The Insurgents tried to oust him last summer but failed. “They almost tore the hide off me when I took the stump against him,” admitted one Insurgent leader. “So far as the House was concerned we could have shoved him out, but his personal following was still too strong to be ignored.”

The Premier still controls the provincewide Social Credit League organization, and there is every evidence of an effort to turn the Civil Service into a political machine. The latter, as a matter of fact, was one of the reasons for the ousting of Hon. W. N. Chant from the Ministry of Agriculture. Mr. Chant protested against orders to fire certain senior officials and replace them with men whom he regarded as incompetent. So Mr. Chant was fired.

Government policy is dictated by Douglas through his “experts,” but the actual course of events is determined neither by Douglas nor by the Cabinet but by the caucus. Thus far the caucus, though it wants results and writhes at frustration, has shown no indication of a willingness to accept the consequences of Douglas dictation, as witness the reversal of attitude on the disallowance issue.

Douglas dictation, in itself, is something to wonder at. The Major, it seems, is a gentleman who believes he can poke his fingers in the fire without burning them. He knows it is impossible to realize Social Credit in Alberta under present conditions. Alberta, therefore, must endure the phase of tactics and propaganda, the period of “what you might call politics or military strategy rather than technique,” to use his own words. The theory is, of course, that if you raise the devil with sufficient energy you may force changes which would remove some of the obstacles to introducing Social Credit in Alberta; but in any case you attract attention and sell books; and you may realize Social Credit in Timbuktu. Meanwhile, by staying out of Alberta and telling the world that the province’s Social Credit premier doesn’t understand Social Credit, you build up a plausible alibi against the probable collapse of the Alberta campaign.

Whether the alibi will stick is a question which only the future can answer.

In the meantime, there is evidence to

indicate that Social Credit sentiment in Alberta, though waning, is still a potent force. The movement has suffered major losses in the cities It has also lost some ground in the larger towns and in the goodcrop rural districts, but most observers believe it is still the controlling factor in a majority of the rural constituencies. “Without a united Opposition we wouldn’t have a chance of beating Aberhart in an immediate election,” said one of the bestinformed newspaper editors in the province. “With a united Opposition we might win, but I wouldn’t bet a nickel on the result.”

W’hite hope of the Opposition, is E. L. Gray, of Brooks, Liberal leader, recently elected in a by-election in Edmonton. But Mr. Gray, too, is having his troubles. Hon. James G. Gardiner, Ottawa’s Minister of Agriculture—“that apostolic Grit.” as one of his admirers calls him—sees in the reaction to Aberhartism Liberalism's golden opportunity to reclaim the maverick province, and has steadfastly opi>osed any unity plan which would submerge the provincial Liberal Party in a coalition Opposition. Mr. Gray believes that cooperation of all Opposition parties is essential if Social Credit is to be defeated, and he ran in Edmonton with the joint support of Liberals, Conservatives and United Farmers. The Liberal newspaper in Edmonton gave him no support, and it is generally admitted that the provincial Liberal machine is split on the unity issue. The writer’s own observation is that the Liberal rank and file doesn’t much care what tag it votes under, so long as it thinks it has a chance of beating Social Credit.

The United Farmers’ organization, once all powerful, is also divided. Some of its leaders have been campaigning on behalf of the unity movement, but the Left Wing wobbles uncertainly toward the C. C. F. The C. C. F. itself, sadly wilted, is also torn by internal strife. One of the leaders in Edmonton plumped for a united Opposition, but his followers protested and he was forced to recant.

Chief factor in the campaign for a coalition Opposition is The People’s League -Mr. Aberhart calls it “The People’s Slavery League”—a nonpartisan organization whose central executive is drawn largely from the business and financial communities of Calgary and Edmonton. During recent months it has sponsored a series of mass meetings in the larger centres of the province, at which vociferous audiences have demanded the immediate resignation of the Social Credit Government. Its leaders deny any intention of creating a new political party and thus far it has functioned mainly as a bridge between the two old-line parties and an agency for organizing anti-Social-Credit sentiment. What its ultimate status will be remains uncertain.

Central figure in the kaleidoscope remains Premier Aberhart himself—enigmatic, ambitious, nimble-witted, incoherent, shrewd within the limitations of his own peculiar temperament, an egocentric who revels in the spotlight. What will he do next? Thus far he has demonstrated remarkable agility in leaping from crisis to crisis without falling into the abyss of dethronement. Ultimately, of course, the day of reckoning will come, but in the meantime watch out for a drastic program of debt reduction.

The existing moratorium on private debts in Alberta expires March 1, 1938. Before that date, if the Government is to satisfv its followers, something will have to be done about the debt problem. A straight reduction of fifty per cent in the principal of all debts would probably satisfy Aberhart himself, but his Left Wing followers are pressing for a cut of seventy-five per cent.

And in Social Credit Alberta, the Left Wing is still a force to be reckoned with.