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Social Credit

Social Credit is an economic theory that spawned a Canadian political party and social movement that lasted from the early 1920s to early 1990s.

Economic Theory

Social Credit was originally an economic theory developed by Scottish professor Major C.H. Douglas[?]. The name Social Credit came from his desire to make the betterment of society (Social) the goal of the monetary system (Credit).

Social Credit theory proposes that because the amount of money available under capitalism is necessarily lower than the total cost of goods produced, there will always be insufficient money to pay a realistic, sustainable price. He demonstrated this fundamental flaw with his A+B theorem, which states that if A is the payments made to all the consumers in the economy (though wages, dividends, and interest paid to banks) and B is the payments made by producers that are not eventually played out to consumers (such as the overhead costs of buildings and equipment as they wear out) then the price charged for all goods must be at least A+B - an impossibility since only A is available to spend.

For such a system to sustain itself Douglas asserted that a number of things must happen:

  • People go into debt by buying on credit
  • Governments borrow and increase the national debt[?]
  • Business borrow from banks to finance expansion
  • Businesses sell below cost, and eventually go bankrupt
  • We win a trade war[?], putting foreigners in debt to us for our surplus of exports
  • We have a real war, "exporting" goods such as tanks and bombs to the enemy without ever expecting to be paid for them, financing this by government borrowing

If these things don't happen "businesses are forced to lay off workers, unemployment rises, the economy stagnates, taxes go unpaid, governments cut back services, and we have widespread poverty, when physically all of us could be living in plenty."

Douglas believed that Social Credit could fix this problem by ensuring that there was always enough money (credits) issued to buy all the goods that could be produced. His solution is outlined in three core demands:

  1. For a "National Credit Office" to calculate on a statistical basis the amount of credit that should be circulating in the economy
  2. For a price adjustment mechanism to absorb windfall profits in times of inflation, and return them to people in terms of subsidized, lower prices when the cost of goods on the market exceeds the money available to buy them
  3. For a "National Dividend" to give a basic guaranteed income to all regardless of whether or not they have a job

Many of Douglas' ideas have since been proven to be failures, but during the depression they were very popular, and seemed to provide common-sense solutions to complicated economic problems.

Political Movement

In Canada, the ideology was embraced by the Reverend William Aberhart, who formed a "Social Credit Party" based on Douglas' ideology, and was elected Premier of Alberta[?] in the 1935 provincial election. Inspired by Aberhart's success, British Columbia politician W.A.C. Bennett decided to form his own Social Credit party. In 1952 Bennett was soundly elected, and a second province fell under the rule of the Social Credit movement. After Aberhart's death in 1943 the Alberta wing of the movement was continued by Ernest Manning, a fellow clergyman who was able to successfully capture his predecessor's spirit, and rode his party to another massive electoral victory.

Manning and Bennett became close partners, and the their provincial parties formed a joint Social Credit League with the hope that such a body would help coordinate and strengthen the shared ideology of the two provinces.

As the post-war economic boom began to take effect, the Social Credit League no longer felt a need to adhere to professor Douglas' economic philosophy. Instead, the two parties began to embrace a basic conservative ideology, with a heavy focus on preserving Christian values. Both Manning and Bennett were deeply religious men, and sought to inject their faith into the political movements they had created.

The movement eventually caught on in Quebec, and although a Social Credit provincial government would never be elected, the Social Credit party soon became Quebec's majority in the federal parliament. Though B.C. and Alberta would elect a few MPs over the years, it would be Quebec that maintained the party's national presence, while the other two provinces held its base of provincial power. The Quebec wing of the movement would eventually break from the league, and form its own Quebec-only Socred party, the Ralliement des Creditistes[?].

The party's overwhelming success began to crumble in the early '70s. In British Columbia, after repeated clashes with organized labour, voters decided that the now 71-year old Bennett had overstayed his welcome. After an extremely close election in 1972, two decades of Socred rule came to an end, and the socialist New Democratic Party leader Dave Barrett[?] became the new premier. In Alberta, Manning's retirement had taken much of the air out of the party, and the new leader Harry Strom was soundly defeated by Conservative Party leader Peter Lougheed. In Quebec, parliamentary support all but dried up, with only a handful of seats going to the Socreds in the '72 and '74 general elections.

The movement seemed to be in a death spiral, but staged an inspiring recovery in British Columbia. In 1975, Bennett's son, Bill Bennett[?] inherited the party leadership from his father and soundly defeated premier Barrett, ending B.C.'s brief flirtation with socialism. Bennett Jr. presided over a general era of prosperity and progress in his province, although some whiffs of scandals began to emerge near the end of his term. Bennett's successor, William Vander Zalm[?] was a far less successful premier, and is largely regarded with the collapse of the B.C. Socreds. Vander Zalm was a flamboyant, energetic figure who held many of the traditional Socred ideologies, especially the focus on Christian values. He had a habit of making PR blunders however, and some felt his outspoken religious beliefs were overly judgemental and divisive. As the years went on Vander Zalm's government was soon revealed to be quite corrupt, and even the premier himself was accused of participating in illegal activities. Vander Zalm agreed to step aside, and his successor, Rita Johnston was soundly defeated by the New Democrats in the 1991 provincial election.

The Social Credit party's long rule had ended. Although there would be attempts to revive it, it never was again able to establish a significant political presence anywhere in Canada. The party's former supporters moved on to other things. In Alberta, Manning's son Preston founded the Canadian Reform Party[?] which captured many of his father's Socred beliefs, yet was more concerned with national politics than provincial affairs. In B.C., Socred dissidents revived the long dead B.C. Liberal Party[?] and turned it into the province's main conservative force.

Socred Leaders

William Aberhart

Ernest Manning

Harry E. Strom

Werner Schmidt[?]

British Columbia
W.A.C. Bennett

William R. Bennett

William Vander Zalm

Rita Johnston

Federal Leaders: Réal Caouette[?], Bob Thompson[?]

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