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Chapter 16 — Price Adjustment
The
Just
Price Since
products are made for the consumer, it is clear that, to reach their
end, the products must be offered to the consumer at a price which
allows the consumer to purchase them. In
other words, at all times, there must be an equilibrium between the
collective prices and the collective purchasing power of all consumers. To
establish the retail price, the producers, or the retailers, calculate
what the manufacturing of the product has cost, and add the costs of
handling, transportation, storing, and the necessary profits to the
different intermediaries. But nothing ensures that this marked price
corresponds to the consumer's purchasing power. The
marked price must be claimed by the retailer so as not to throw anyone,
between the producer and the retailer, into bankruptcy. Moreover, the
price to be paid by the buyer must be such that it corresponds to the
purchasing power in the consumers' hands. Otherwise, the products remain
unsold in front of real needs. Hence,
a necessary adjustment of prices. The
monetary technique of Social Credit provides it. In
the Social Credit vocabulary, we call the “Just Price” the price
which corresponds exactly to consumption. When
we say “Just Price”, we do not at all mean “honest price” or
“fair price”. The price marked by the retailer may be completely
honest, completely fair, but still may not at all be the exact price. So,
during the Depression, the marked prices could have been honest and
fair, but they were not exact; they did not correspond to consumption.
When the total production of things demanded exceeds total consumption,
these prices are certainly not exact, since consumption over a given
period shows, conclusively, the real expenses incurred for production
during this same period. The
honest price is a moral matter; the exact or “just” price is a
mathematical matter. The
exact price, the “Just Price” of the Social Credit system, is
achieved through an arithmetical rule. So there is no question whatever
of an arbitrary fixation of prices, or of ceilings, restrictions,
rewards, chastisements — but simply of arithmetic. The
Social Credit technique involves two figures, which are made up by the
country's people themselves, and which are not fixed arbitrarily by some
men who have a mania for imposing their will on others: 1.
The figure expressing the total sum of prices; (This is set by the
producers themselves.) 2.
The figure expressing the consumers' purchasing power. (This is set by
the consumers' wishes for spending money which they have at their
disposal.) Then,
to be able to put the equal sign (=) between these two numbers, Social
Credit lowers the first to the level of the second. Let
us explain, first by presenting a few unfamiliar ideas which bear
far-reaching consequences. The
real cost of production
The
exact price of a thing is the total sum of expenses incurred in its
production. And this is true, if one counts in dollars, ergs, man-hours,
or any other unit of measurement. Such
and such work requires four hours of time, ten ounces of sweat, a
workman's meal, the wear of a tool. If the enumeration is complete, the
exact price of this work, its real cost, is four hours of time, ten
ounces of sweat, a workman's meal, and the wear of a tool — no more,
no less. As
one is accustomed to evaluating costs in dollars in Canada, and as one
is also accustomed to evaluating work in dollars, the wear and tear, and
all the other elements which form expenses, it is possible to establish
a relation between both, in terms of dollars. If,
all in all, the material expenses, work, energy, and wear and tear,
amount to $100, the exact price, the real cost of the product, is
one-hundred dollars. But
there is the accounting price, the financial cost. During the production
of an article in a factory, an account is kept of the raw material
bought, processing costs, wages and salaries, capital costs, etc. All
these constitute the financial cost of the production of the article. Are
the accounting price and the exact price the same? Even if they
accidentally are, in certain cases, it is easy to prove that, as a
whole, they certainly are not. Take
a small country that supplies, in one year, capital goods and
consumption goods, for a total production evaluated at 100 million
dollars. If, within that time, the total expenses of the country's
inhabitants are evaluated at 80 million dollars, one will readily admit
that the country's production for that year has cost exactly $80
million, since $80 million in all was consumed by the population that
made the production. The financial cost of production has been evaluated
at $100 million, but it actually cost only $80 million in real expenses.
This is an inescapable fact: both totals are there. The
exact price of the production of $100 million has therefore been $80
million. In
other words, while $100 million in wealth was produced, $80 million in
wealth was consumed. The consumption of $80 million worth of production
is the real price of the production of $100 million worth of production. The
real price of production is consumption. Moreover,
as we have said above, if production exists for consumption, consumption
must be able to pay for production. In
the preceding example, the country deserves its production. If, by
spending $80 million, it produces $100 million worth of goods and
services, it must be able to get these $100 million worth of production
while spending $80 million. In other words, in paying $80 million, the
consumers must get the $100 million worth of production. If not, $20
million worth of production will remain for contemplation, until it
turns to destruction, in front of a deprived and exasperated people. The
increase and reduction of wealth
A
country gets richer in goods when it develops its means of production:
its machines, factories, means of transportation, etc. These are called
capital goods. A
country also gets richer in goods when it produces things for
consumption: wheat, meat, furniture, clothing, etc. These are called
consumer goods. A
country again gets richer in goods when it gets wealth from abroad. Thus
Canada becomes richer in fruits when it gets bananas, oranges, and
pineapples. This is called importation. Moreover,
a country's goods are reduced when there is destruction or wear of the
means of production: burnt factories, worn-out machines, etc. This is
called depreciation. A
country's goods are also reduced when they are consumed. Eaten food,
worn-out clothing, etc., are not available any more. This is destruction
through consumption. A
country's goods are reduced again when they leave the country: for
example, there will be less apples, butter, bacon, in Canada, if this
country sends these products to England. This is called exportation. Calculation
of the Just Price
Now
let us suppose that a year's return gives: Production
of capital goods..................$3 billion _____ Total acquisitions...............................$12 billion Moreover: Depreciation
of capital goods..............$1.8 billion _____ Total reduction....................................$9.0 billion One
will conclude: While
the country became richer with $12 billion worth of production, it used,
or consumed, or exported, $9 billion worth of production. The
real cost of the production of $12 billion is $9 billion. If it actually
cost the country $9 billion to produce $12 billion worth of goods and
services, the country must be able to enjoy its $12 billion worth of
production, while spending only $9 billion. With
$9 billion, one must be able to pay for $12 billion. To pay for 12 with
9. This requires a price adjustment: to lower the accounting price, 12,
to the level of the real price, 9, and to do it without doing violence
to anyone, without harming anyone. In
front of this return, the following conclusion is logical in an economy
where production exists for consumption: Since
the consumption of $9 billion worth of production, the wear of machines
included, allowed a production worth $12 billion, improvements included,
$9 billion is the real price of the production. In order for the country
to be able to use this production, as long as it is wanted, it must be
able to get it at its real price, $9 billion, which does not prevent the
retailers from being compelled to claim $12 billion. On
the one hand , the country's consumers must be able to buy 12 with 9.
They must be able to draw on their country's production by paying for it
at 9/12 of the marked price. On
the other hand, the retailer must recover the full amount: 12;
otherwise, he cannot meet his costs and obtain his profit, which is the
salary for his services. The
compensated discount
The
buyer will pay only 9/12 of the marked price, if he is granted a
discount of 3 on 12, or 25 percent. A
table costs $120.00; it will be sold to the buyer for $90.00. A pair of
stockings costs $4.00; it will be sold to the buyer for $3.00. Likewise,
the same type of ratio is applied to the sale of all the country's
articles, because it is a national discount decreed by the National
Credit Office, to reach the goal for which the National Credit Office
was instituted. If
all of the country's consumer goods are thus paid for at 75 percent of
their marked price, the country's consumers will be able to get all of
their production worth $12 billion with the $9 billion that they spend
for their consumption. If
they do not like some products for sale on the market, they will not buy
them, and the producers will simply stop making these products, because
they are not real wealth, since they do not answer the needs of the
consumers. The
retailers thus get from the buyers only 75 percent of their prices. They
will not be able to subsist, unless they get from another source the 25
percent that the buyer does not pay for. This
other source can only be the National Credit Office, which is charged
with putting money in relation to facts. On the presentation of
appropriated vouchers, attesting to the sale and the national discount
allowed, the retailer will get, from the National Credit Office, the
credit-money representing the missing 25 percent. The
goal will be reached. The whole of the country's consumers will have
been able to get their country's total production, answering needs. The
retailers, and through them the producers, will have obtained the
amounts which cover the costs of production and distribution. There
will be no inflation, since there is no lack of products in front of the
demand. This new money is actually created only when there is a product
wanted and purchased. Besides,
this issue does not enter into the price of the invoice, since it is
neither a wage, a salary, nor an investment: it comes after the product
is manufactured, priced, and sold. Another
way of arriving at the same result would be to make the buyer pay for
the full price. The retailer would give a receipt to the buyer,
attesting the purchase amount. On presentation of this receipt at the
branch of the National Credit Office, the buyer would get credit-money
equal to the 25 percent of the purchase amount. The
first method is a compensated discount, a discount granted by the
retailer and paid to him by the National Credit Office. The
second method is a rebate made to the buyer. The result is exactly the
same. In
any case, the price paid by the consumer must be the fraction of the
marked price expressed by the ratio of total consumption to total
production. Otherwise, the production is only partially accessible to
the consumers, for whom it is was made. The Juste Price = Retail Price X consumption _____________ production |