Page:The Economics of Unemployment.djvu/123

According to the Douglas theory, however, as I understand it, it is economically impossible for all the commodities that could be produced to get sold, because the income to buy them all does not exist. Indeed, it goes still further, by insisting not merely that potential production is curbed by this deficiency of purchasing power, but that the market for part of the actual products is deficient for the same cause.

The least unintelligible summary of the doctrine in Major Douglas's own writings runs as follows^[1]:

1. Price cannot normally be less than cost plus profit.

2. Cost includes all expenditure on product.

3. Therefore cost involves all expenditure on consumption (food, clothes, housing, etc.) paid for out of the wages, salaries or dividends, as well as all expenditure on factory account, also representing previous consumption.

4. Since it includes this expenditure, the portion of the cost represented by this expenditure has already been paid by the recipients of wages, salaries and dividends.

5. These represent the community; therefore the only distribution of real purchasing power in respect of production over a unit period of time is the surplus wages, salaries and dividends available after all subsistence, expenditure and cost of materials consumed has been deducted. The surplus production, however, includes all this expenditure in cost, and consequently in price.

6. The only effective demand of the consumer, therefore, is a few per cent. of the price value of commodities, and is cash credit. The remainder of the home effective demand is loan credit, which is controlled by the banker, the financier, and the industrialist, in the interest of production with a financial objective, not in the interest of the ultimate consumer.

Now here the central charge is that only a small fraction of the money representing costs of production