THE NOTION that all income must be earned is not just.

That’s because even earned income is a result of gifts that are unearned: natural resources and a cultural inheritance of technological innovations, law and language.

Everyone, by virtue of being human not by virtue of being a hard worker, is rightfully entitled to some monetary share of these gifts.

But how can such a thing be? Money can only be earned.

Not so. In a monetary system such as that proposed by Social Credit theorists, everyone receives some part of this communal legacy in the form of money. M. Oliver Heydorn explains it:

For ideological and no doubt political reasons, orthodox economics has tried to bury the gift, to exile it from the sphere of economics with the mantra, endlessly repeated like a form of Chinese water-torture, ‘There is no such thing as a free lunch!’

     In direct opposition to the teachings of economic orthodoxy, Social Credit theory affirms the existence of the ‘unearned increment of association’. In sober truth, the much maligned ‘free lunch’ is a reality that is operative in all spheres of activity with which we are familiar, including the act of production.

     Being, that is, reality or nature, is constructed in such a way then when two or more different elements are brought into the proper relationship or association with each, the power which these elements then have to be or to effect change in the world is greater than the mere sum of the component parts. That is, power or output can be multiplied by the apparent ‘magic’ of association, with the surplus (i.e., that which exceeds the isolated contribution of each element) supervening on the association as whole as a superabundant gift. The surplus is not the exclusive property of any one component, nor is it in any way earned by them. It is a something for nothing, or a free lunch.

     One of the simplest examples of the unearned increment of association is that of a lever. A lever is a mechanical device that consists in the association of a beam or plank with a fulcrum on which the beam may pivot. By applying force at one end of the beam, levers allow human beings to move weights on the other end with less effort than a direct application of force would require. The effort saved, or alternatively, the movement of an object that could not otherwise be achieved with the force on hand, is the unearned increment of association that accrues to the human being who is intelligent enough to make use of the lever.

     The whole of reality is pervaded by associations of various kinds and their corresponding unearned increments. Biological systems could not function without them. Society itself would have no reason for being if there were no benefit, no profit, in associating with our fellows in the pursuit of common objectives. If we learn to identify and to take advantage of these unearned increments, we are able, in some sense, to obtain something ‘more’ than what we had put into the system to begin with. Our benefits will exceed our costs.

     The economic realm is no exception. There is an unearned increment of economic association that is made possible by the conjunction of natural resources, the co-operation between individuals and groups, and the application of the cultural heritage (i.e., the discoveries and innovations of scientists, engineers, organizers, etc.) in the manufacture of real capital (machines and equipment). Under modern, industrialized conditions, the proper association of these elements renders it possible to produce all the goods and services that people can use with profit to themselves, while employing less and less human labour. This surplus of consumer goods and services that are or could be produced under industrial conditions, in comparison with what human beings would be producing if they possessed no tools whatsoever, is society’s economic profit or the economic free lunch.

     From a Social Credit perspective, the greatest problem with the existing economic order is that the conventional financial system is not designed to either recognize or to equitably distribute this free lunch. Instead, it allows the private banking system to use its current monopoly power over money-creation as a form of leverage so that access to the societal profit is only granted on asymmetrical terms. This results in the transfer of wealth, privilege, and power from the common citizenry to the financial elite. Production and consumption, the activities of the real economy, become beholden to the banking system and its operators. While many monetary reformers make the mistake of thinking that this problem is THE problem with the financial system, it is actually a secondary consideration. The more fundamental problem lies with the price system and its failure to monetize, for the full benefit of the consumer and thus on a gratuitous or debt-free basis, the unearned increment of economic association which is already a feature of the physical economy.

     As followers of this blog will have noted, the bulk of the money supply (+95%) in any developed country exists in the form of bank credit. Now this bank credit, i.e., intangible numbers, enumerated abstractions, or book-keeping money, is created by private banks and, for all intents and purposes, it is issued or injected into the economy in form of a debt of one kind or another. Whenever a bank makes a loan or purchases a security, etc., new money in the form of bank credit is created, and whenever a bank loan is paid back or a bank purchase is sold or otherwise redeemed, money in the form of bank credit is destroyed. All of the money that a bank injects into economy it will seek to recover or withdraw from the economy at one point or another. None of the money that it injects is a free gift.

     But, dear reader, where, oh where is it written that all of society’s money ought to be injected into the economy as a debt (or debt-equivalent), a debt owing to private banks? This is, for all intents and purposes, the current convention, but conventions can be changed. Indeed, if said conventions interfere with the fulfillment of the economy’s original and only authentic purpose as Social Credit claims they do, then they should be suitably altered.

     What Social Credit proposes is that in place of an all pervasive debt-based system, it is necessary (both just and expedient) for a certain proportion of the money supply, that which would represent the unearned increment of economic association, i.e, the societal profit, to be injected into the economy in the form of ‘debt-free’ credit.

     The issuance of all money as ‘debt-money’ would not have been a problem in and of itself if the circular flow functioned in the way that orthodoxy asserts. That is, if the money created and lent for production equaled a) the money received by consumers (by way of salaries, wages, and dividends) and actually spent on goods and services, which then equaled b) the costs and hence prices of that production in the market, there would have been no problem. The circular flow would have exhibited a perfect and automatic balance, with the flow of incomes derived from production being equal to the flow of prices which that same volume of production had generated.

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