‘Welfare for All’ or ‘Dividends for All’?

Last week the leader of the Australian Greens Party, Richard Di Natale, jumped on the ‘Universal Basic Income’ (UBI) bandwagon.

Di Natale has called for the replacement of the existing welfare system with regular and unconditional government payments to everyone, regardless of employment status. ‘Welfare for all’ is his mantra.

Now, don’t get me wrong, there definitely is a need, and a growing one at that, for a rethink of the way the financial system works in a world where technology is replacing human labour.

Beyond the high cost of living and the fact that wages and salaries tend to buy less and less of what is available (thus rendering it necessary to borrow more and more credit from the banks to make up for the difference), it has been widely predicted that, within 20 years or so, 50% of existing jobs will be automated out of existence. Machines are doing more and more of the work and are now replacing ‘workers-by-brain’ just as much as they used to replace ‘workers-by-brawn’.

We must adapt the financial, economic, and cultural systems to this new reality, or else we will be faced with an unprecedented social crisis: systemic poverty, disenfranchisement, and even revolution loom on the horizon.

However, the problem with a Universal Basic Income or UBI is that it is, in essence, a socialist and ultimately faulty solution to some real systemic problems.

Indeed, there is reason to believe that the ever-growing calls for a UBI are, like Keynesian economics before it, the latest attempt – not necessarily conscious or deliberate – to co-opt and pervert certain Social Credit proposals that had been put forward in the early part of the twentieth century.

It was C.H. Douglas, the founder of the Social Credit movement, who first proposed that everyone should be given an income – regardless of his employment status – in the form of a National Dividend.

Douglas, who was an accomplished engineer, argued that under the accountancy rules of the existing financial system, businesses were obligated to recover more money from the public than they had distributed to the public in the form of wages, salaries, and dividends. The flow of prices always exceeded the flow of incomes.

The purpose of the ‘National Dividend’ was to help fill this gap. Whereas the gap is currently filled, if it is filled, by borrowing more money into existence from the private banks, the dividend would be a ‘debt-free’ injection of credit in lieu of all of this compensatory borrowing.

In effect, this ‘national dividend’ recognises the productive work of the nation that is not adequately reflected or distributed in the current accounting methods of the financial system.

There are other vitally important differences, however, between Douglas’ proposal for a National Dividend and contemporary calls for a Universal Basic Income.

To begin with, the UBI is set at a certain level regardless of the economy’s performance. It does not rise or fall. By contrast, the National Dividend is not a guaranteed amount, but would vary as economic conditions change.

The dividend was to be indexed to productivity. If too many people withdrew their labour and elected to live on their dividend payments alone, production would decrease. This would serve as an automatic feedback loop indicating the need for additional labour if the standard of living were to be maintained.

The second major difference has to do with the methods of financing a UBI versus the methods that Douglas had proposed for funding a National Dividend.

Di Natale describes a UBI as ‘welfare for all’. And indeed, since it would be based on the redistribution of wealth via taxation and/or on increasing public indebtedness, a conventional UBI could be regarded as the universalization of socialism.

Compare this with the Social Credit proposal of ‘dividends for all’, which may be likened to the universalization of capitalism.

The Social Credit view is that we are all shareholders in our economies and heirs of society’s cultural heritage. Society’s profit, i.e., its ‘surplus’ production made possible by the overflow of prices relative to incomes, can be distributed to the shareholders of Australia Ltd., that is, to the citizens, by creating new money in the form of additional income and giving it to individuals as a periodic dividend payment.

Now, Di Natale’s additional suggestion of a People’s Bank to provide low-interest loans to first-time home buyers, amongst other services (including possibly on-line banking via Australia Post), is a better one and deserves to be looked at in greater detail. Indeed, what is ultimately needed is what Social Credit refers to as a National Credit Office. Its purpose would be to ensure that the whole financial system is effectively serving the right policy: the common good of the Australian people. Creating and distributing a National Dividend to each citizen would only be one of its main functions.


M. Oliver Heydorn, Ph.D., is the founder and director of The Clifford Hugh Douglas Institute for the Study and Promotion of Social Credit. He is also the author of Social Credit EconomicsThe Economics of Social Credit and Catholic Social Teaching, Social Credit Philosophy, and, most recently, Lives of Our Own: Social Credit, Catholicism, and a Distributist Social Order. 

To read more about Social Credit, visit www.socred.org.

Author: Oliver Heydorn

M. Oliver Heydorn, Ph.D., is the founder and director of The Clifford Hugh Douglas Institute for the Study and Promotion of Social Credit. He is also the author of 'Social Credit Economics', 'The Economics of Social Credit and Catholic Social Teaching, Social Credit Philosophy', and, most recently, 'Lives of Our Own: Social Credit, Catholicism, and a Distributist Social Order'.

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  1. Excellent and groundbreaking article! The Australian people must awaken ourselves to the fact that technological automation is making the policy of full employment no longer sustainable and that the financial system is faulty and does not serve the needs of the Australian people. We must overcome the soul destroying puritanical servile worker state imposed upon us by the corrupt and dishonest financial oligarchy and it’s various self serving politicians, false prophets and ideologues that enforce their rule.

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    • Thanks Oliver,
      Yes I agree that this medium has been exhausted.
      I appreciate your time and diligence with your replies.

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  2. What I am about to contribute here may have some fundamental errors since I have not studied “Social Credit”.

    “Social Credit” indeed, sounds much better than most forms of socialism, but as I see it, as explained in this article, there is a number of major flaws in it. These are also some of the same major flaws with the other forms of socialism.

    Psychologically, SC will not work. It is the old human factor. Humans are basically lazy unless motivated. SC’s motivation of do your bit now and if everyone else does it, the reward will be a nice dividend sometime, is not an effective motivation.

    A prime and current example is the way nations are treating the Paris targets. Australia says that it doesn’t matter what we do, we are such small fry, climate change will not be influenced by any of our actions; so why bother, especially if that bother is in anyway painful. Is is not the same for one person among 12 million?

    Any altruistic motivation is always the choice of a person or people together. We are deluded if we think the nation will be altruistic about SC.

    Theologically, SC will not work. The current popular view that mankind is basically good, is not real. We are sinners and are basically looking out for ourselves. Here in OZ there is even less of an attitude of doing the right thing. Our laws are constantly being updated to close loopholes through which the unethical people want to pass to avoid responsibility etc. We are always looking for the limits of the legality rather than making our own moral choices.

    Politically, SC will not work. Including for the above reasons. It will not work in a democracy. Democracies are having a hard enough time now, without adding a SC bidding war each election. SC will need a “benevolent dictator”, at least, for I cannot otherwise see a “social contract” being accepted where all the people are dependent.

    Economically, SC will not work. Including for the above reasons. Reward for effort and especially, immediate reward for effort, is what works. Negatively, there is nothing like an empty stomach as a motivator. A small proportion of the population are able to dream, plan, sacrifice, and build for the future, and we must let them do it. These are the employers. Let me ask a question as an illustration of reward for effort and the importance of immediacy. Lets take a guess, how many people would be putting 9%+ into their super funds if it wasn’t compulsory for employers? MMMmmm.

    SC needs either a strong compulsion legislatively, or a strong motivation individually, and immediately. The former is undesirable in a free country, and the latter is impossible I believe.

    Our welfare system in spite of any criticisms of it, is still one of the worlds best. There is an uncomfortable but still workable balance between safety net, and proper provision. If some cannot genuinely help themselves, there is never going to be enough money. For those who can and should, but do not, including for “self inflicted wounds”, there sadly is not enough motivation to get them to really help themselves.

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    • Hi Bruce Knowling,

      Thank you for your comments.

      Since you, by your own admission, have not studied Social Credit, it would be much better for you to study it seriously and in great depth first, before critiquing it. Correct understanding must precede evaluation.

      Social Credit is NOT a form of Socialism … of any kind: http://www.socred.org/s-c-action/social-credit-views/social-credit-vs-socialism/why-social-credit-is-not-socialism

      It is fully compatible with and indeed requires private ownership of the means of production, entrepreneurship, market competition, the profit-motive, consumer choice, etc., etc. A Social Credit society would actually be, in certain respects, much further to the right than any Western country is at present, because it would involve much smaller government and less regulation and much lower taxes.

      You seem to be labouring under the misapprehension that there is no personal inducement for participating in the productive process under Social Credit and that therefore a Social Credit system requires altruism. Not true. People who provide labour, to the extent that this is needed by the formal economy, would continue to receive wages or salaries in addition to their dividend payments. Similarly, companies that are successful in providing the consuming public with what they really want will enjoy profits, just as they do now. Indeed, increasing consumer purchasing power in the way that Social Credit recommends will provide a larger and more stable market for business, making the steady earning of profits financially feasible.

      Beyond that, Social Credit would reward personal effort for personal gain with the knowledge that one is simultaneously helping one’s self and other people by contributing to an economic activity on the basis of which a dividend will be distributed to all. In this way, Social Credit would transform the whole of society into a gigantic profit-sharing co-operative.

      Further, your condemnation of the lack of morality observable among your compatriots, eg:

      “Here in OZ there is even less of an attitude of doing the right thing. Our laws are constantly being updated to close loopholes through which the unethical people want to pass to avoid responsibility etc. We are always looking for the limits of the legality rather than making our own moral choices.”

      is largely due to the fact that, under the existing dishonest, dysfunctional, and exploitative financial system (and that is the prime immorality and sin with which you should be concerned), people are heavily pressured by artificial financial factors to jettison morality whenever it conflicts with economic survival. Eliminate the artificial pressure, as Social Credit recommends by making the financial system a balanced and self-liquidating system, and you will make it much easier for people to be virtuous.

      As far as ‘democracy’ is concerned, Douglas’ first book was entitled “Economic Democracy”. Social Credit is an application of certain democratic principles to the economic order. If your “democracy” cannot accommodate an application of democratic principles to the economy, then it must be a very strange sort of democracy indeed! Since the introduction of Social Credit would be in everyone’s best interest, whether capital or labour, rich or poor, it can and should be supported by everyone, regardless of partisan political loyalties.

      Finally, I find it very odd, and even supremely ironic, that you would defend a socialist welfare system ahead of the introduction of a non-Socialistic reform of the financial system which, by providing a dividend to everyone, would reduce significantly the need for a social safety net and its accompanying bureaucracies and regulations, and would also significantly reduce the general tax burden (since the dividend is financed through money creation and not through taxation).

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      • Thank you Oliver,

        Yes, I fell into the first and most obvious misunderstanding.
        I have now done some reading and listening and I must say I am a long way from being convinced yet. Indeed this is a very complicated system and it seems that there are many details to be yet worked out.

        I am not looking to argue or to even be convinced.
        Yet let me make four comments/questions.

        1. It seems to me that even in the maturity of this system there would not be smaller government, for much of the existing govt. institutions, functions and taxes would have to be retained for they would not be fully replaced by the social credit institutions and bureaucracy.

        2. The concept of “debt free money” is worrying me, for a number of reasons.
        Firstly is the amount of government control that is needed to make sure that the right amount of new money is given to any enterprise. How this interrelates with new capital for new enterprises, raised by way of loans and share floats, would be interesting to say the least.
        Secondly, the concept does not seem far enough away from so called “quantitative easing” to be of much benefit, especially since this is the source of funds for the huge volume of money needed for the whole system of price reductions and dividends.

        3. Questions; It seems to me from the economics video that, say, a 30% reduction in prices might be suitable. Who decides the prices? Each individual product would have to be priced. What does that do for market forces, competition, sales, over production sales at a discount? e.g. Will every accountant and every lawyer,and every farmer have to submit prices? Does this only apply to manufacturing, as Douglas seems to imply?
        Comment: Australia is quickly becoming less and less a manufacturing nation, and my impression is that SC is therefore becoming less relevant here.

        4. I am concerned about the politics of this. Douglas talks about referenda, and then complains that we need experts to make the choices.
        It also seems to me that SC will require the government’s intervention or at least opinion to be imposed in many a board room. It seems to me implementing SC would require some major changes to our constitution, or at least regulations. Like the Canadian experiment any Australian version will be vastly different to Douglas’ vision. That may well be good.

        Thanks for your time.

      • Hello Bruce,

        Thanks for your questions. I will try to answer as succinctly as possible, as this is not the best medium for extended discussions. I’ll just say that the Social Credit system is not as complicated as you think; indeed, it would be less complicated than the existing financial system.

        1. If you give people a dividend and they also benefit from compensated or discount prices (both measures are designed to fill the recurring gap between prices and consumer incomes and to make the financial system self-liquidating), then most of the social programmes geared to income distribution for the needy (welfare, employment insurance, government pensions) would be unnecessary. The taxes and bureaucracies and regulations needed to support them would also be unnecessary, which would save the taxpayer even more money.

        Social Credit does require a National Credit Office to determine and distribute the dividend and price rebates, but its functions could easily be taken on by a Treasury or Central Bank. Many of the needed statistics for its functions are already available in the Bureau of Statistics. With modern information technologies, the creation and distribution of the required credit necessary to balance incomes with prices in an endogenous equilibrium should be child’s play in comparison with the existing social welfare system with its means testing, reporting, evaluating, appealing, etc.

        2. Social Credit doe not say that the whole money supply should be free of debt only that the volume of money needed to balance income with prices should be issued to or on behalf of the consumer free of debt. Credit for production would still be borrowed by private producers from banks (which create the money they lend) or from other private sources. When the debt-free credit is used to purchase goods and services, it, together with the regular flow of incomes handed over in exchange for goods and services, will be used by the producer to pay down his production loans (every repayment of a bank loan destroys money) or to restore his working capital, etc. Social Credit is not in favour of the nationalization of the banking system. Private banks would continue to lend credit for production according to their own business criteria. The government or National Credit Office would only ensure that there will always be enough credit available to meet the useful productive capacity of the nation (there are to be no artificial limits on producer credit whenever there is a) a genuine unfulfilled need on the one hand and b) the resource capacity to produce what will fulfill that need on the other.) Finance must cease to be the tail wagging the dog of the real economy.

        The dividend and compensated price discounts are “quantitative easing” but for the people. The kind of quantitative easing we have now merely succeeds in driving up financial asset prices for those with assets. The Social Credit input is to be spent directly into the real economy on real goods and services and in lieu of consumer debt or other debt-based palliatives.

        3. The compensated price percentage is based on the ratio of total societal consumption (as measured in financial terms) over total societal production (as measured in financial terms). If the value of what is consumed is 70% of the value of what is produced, then the discount would be the 30%, as you mentioned. This discount would be on retail or consumer goods/services only and would apply across the board. There is no need to determine it and then apply it on a case by case basis. It is applied only after all of the normal business decisions involving costs, market forces, competition, sales etc., are taken into account in setting prices. It is not, therefore, a system of price control, but of price regulation and the regulation is not arbitrary or political but determined by the physical facts of production. The National Credit Office would create additional credit as sales are made to make the difference of the discount up to the retailer so that he is not losing money. The consumer benefits by lowering prices and hence increased purchasing power. As far as the general information required, businesses already submit detailed information in their tax documents, the info required by the price adjustment would be much simpler and, again, thanks to information technology, much of the transfer of info required, including the rebates themselves, could be done in real time over the internet.

        The discount applies to goods and services, provided they are consumer or ultimate production. Yes, Australia is becoming less and less a manufacturing nation, but that is not good. Australia should supply itself with the goods and services she so easily could while only trading her surplus for what she cannot produce or can’t produce easily.

        4. According to Douglas’ political theory, real democracy should involve giving people a say concerning policy-objectives. It is for the experts to deliver the desired results. If they fail to do so, they should be replaced by more competent personnel. As it stands, the ‘democracy’ we know often involves getting the people to debate different technical methods of achieving the same or very similar policy-objective. There is no real choice as to policy. We are going to Moscow whether we like it or not; we are merely being given a choice as to whether we want to go by bus or by train, and whether once we get there, we should be shot or boiled in oil. Needless to say, that is no real democracy at all.

        In a Social Credit society, the government would act as an umpire making sure that the correct financial parameters are maintained in the service of the correct financial policy: delivering the goods and services people need to survive and flourish with the least amount of trouble to everyone (that is, with the least amount of labour and resource consumption).

        Social Credit was never implemented in Alberta or in any Canadian province because of jurisdiction issues. According to the British North America Act, only the federal government has power over finance and banking. I am told that the situation is very different in Australia and that state governments could introduce Social Credit regardless of what the commonwealth government thinks, says, or does.

  3. I like the idea of a national dividend especially when it is NOT funded from taxation. To fund it from taxes would be to get it from a diminishing resource while jobs are replaced by robots. Imagine companies having to be taxed to a huge proportion to fund growing national dividends. They would close their doors. Funding from a National Credit office would provide benefit with no negative effect on others. What are we waiting for?

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    • This a fantastic explanation of the ‘financial mechanics’ needed to change the direction of the Australian Nation. Thank you Bernard.

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      • The Idea that anyone believes there would be taxes or interest to personal loans in Social Credit is absolutely preposterous. The Cumulative National Profit for the United States alone is several trillion dollars. That is the GDP minus external debt. That is already profit the United States could claim through honest accounting but does not. Personal loans would always be at NO Interest. Not zero. None! After all.. Your deposit is your collateral. Why is this so hard to see?

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