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
Production of consumable goods..........$7 billion
Importations.......................................$2 billion


Total acquisitions...............................$12 billion


Depreciation of capital goods..............$1.8 billion
Consommation...................................$5.2 billion
Exportations.......................................$2.0 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



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