Page:The Economics of Unemployment.djvu/128

But this is a very different explanation from that adopted by Major Douglas.

But to treat the Douglas theory without any reference to bank credit would be to leave Hamlet out of the play. For it often appears as if the main source of trouble lay in the fact that bankers had to receive from the sale of goods the advances which they made to finance their production, and that, as these sums were not available for purchasing the goods, there was a huge deficiency of consuming power. Bank credits are advanced to business men at various stages of production and are used by them to pay wages, salaries, etc., and to purchase raw materials and machinery. Are not these payments costs of production? "If these have not gone into costs, where have they gone?" says Major Douglas.^[1]

My answer is that if by 'these' be meant the advances made by the banks for financing productive operations, they do not go into costs. Only the price paid by the manufacturer or merchant to the banker for these advances goes into costs, i.e. the interest on the bank advance. I grant that if a particular business transaction, a single bank advance, be artificially severed from the continuous process to which it belongs, it may be made to appear that, as the manufacturer must repay this loan out of the only available fund, viz. the money paid him by the merchant for the goods, this money must be got out of the sale price of the goods, so figuring as a cost of their production. But business is not conducted in this way. The manufacturer engaged in