Alternative Ways of Financing Production

Abstract

Based upon the work of C. H. Douglas, this paper explores the role of debt in the economy. In the 1920s Douglas observed the workings of financial mechanisms within the real economy, noting that they could be modified to achieve a socially and ecologically sustainable economics of sufficiency (see Hutchinson and Burkitt 1997; Hutchinson 1998). Douglas' exploration of the role of debt (loan credit) in the economy accords well with Veblen's institutional analysis (Veblen 1990), while his writing reverberates with Veblenian terminology. As an economist, Douglas is both intuitive and eclectic, and, as Mehta (1983) observes, ‘no writer in economics has made his thought so opaque to the reader.’ Nevertheless, Douglas' rejection by orthodoxy was due in no small measure to the impracticality of tailoring his theoretical observations within the constraints of neo-classical general free market equilibrium theory. Although they gave rise to a widespread popular movement, Douglas' proposals for debt-free finance of production could not be accommodated within economic orthodoxy.