Political history

In early years of the movement, Labour Party leadership resisted pressure from Trade unionists to implement Social Credit, as hierarchical views of Fabian socialism, state-socialism, economic growth and full employment, were incompatible with the National Dividend and abolishment of wage slavery suggested by Douglas. In an effort to discredit the Social Credit movement, one leading Fabian is said to have declared that he didn’t care whether Douglas was technically correct or not – they simply did not like his policy!

In 1935 the first “Social Credit” government was elected in Alberta, Canada under the leadership of William Aberhart. A book by Maurice Colbourne entitled The Meaning of Social Credit convinced Aberhart that the theories of C.H. Douglas were essential for Alberta's recovery from the Great Depression. Having counseled the previous United Farmers of Alberta Provincial Government, Douglas became an advisor to Aberhart, but withdrew shortly after due to strategic differences. Aberhart sought orthodox counsel with respect to the Province's finances, and the strained correspondence between them was published by Douglas in his book, The Alberta Experiment.^[32]

While the Premier wanted to balance the provincial budget, Douglas argued the whole concept of a "balanced budget" was inconsistent with Social Credit principles. Douglas stated that, under existing rules of financial cost accountancy, balancing all budgets within an economy simultaneously is an arithmetic impossibility.^[33] In a letter to Aberhart, Douglas stated.^[33]:

"This seems to be a suitable occasion on which to emphasise the proposition that a Balanced Budget is quite inconsistent with the use of Social Credit (i.e., Real Credit – the ability to deliver goods and services 'as, when and where required') in the modern world, and is simply a statement in accounting figures that the progress of the country is stationary, i.e., that it consumes exactly what it produces, including capital assets. The result of the acceptance of this proposition is that all capital appreciation becomes quite automatically the property of those who create and issue of money [i.e., the banking system] and the necessary unbalancing of the Budget is covered by Debts."

Douglas sent two other expert Social Credit technical advisors from the United Kingdom, L. Denis Byrne and George F. Powell. But all attempts to pass Social Credit legislation were ruled ultra vires by the Supreme Court of Canada and Privy Council in London. Based on the monetary theories of Silvio Gesell, William Aberhart issued a currency substitute known as prosperity certificates. But these scrips actually depreciated in value the longer they were held,^[34] and Douglas openly criticized the idea:

"Gesell's theory was that the trouble with the world was that people saved money so that what you had to do was to make them spend it faster. Disappearing money is the heaviest form of continuous taxation ever devised. The theory behind this idea of Gesell's was that what is required is to stimulate trade - that you have to get people frantically buying goods - a perfectly sound idea so long as the objective of life is merely trading."^[35]

Under Ernest Manning, who succeeded Aberhart after his untimely death, the Alberta Social Credit Party gradually departed from its origins and became popularly identified as a right wing populist movement. In the Secretariat’s journal, An Act for the Better Management of the Credit of Alberta,^[36] Douglas published a critical analysis of the Social Credit movement in Alberta,^[37][38] in which he said, "The Manning administration is no more a Social Credit administration than the British government is Labour". Manning accused Douglas and his followers of anti-Semitism, and went about purging all of the so called "Douglasites" from the Party. While Social Credit governments formed in British Columbia, Canada, they had little in common with Douglas or his theories. Social Credit Parties also enjoyed some national electoral success in Canada and inNew Zealand, with support from Western Canada and more notably from Quebec.