Prairie Freigeld: Alberta Social Credit and the Keynesian Frontier of Monetary Economic Thought in North America, 1929-1938 by Victor Short A thesis submitted in conformity with the requirements for the degree of Masters of Arts Department of Geography University of Toronto © Copyright by Victor Short 2014 Prairie Freigeld: Alberta Social Credit and the Keynesian Frontier of Monetary Economic Thought in North America, 1929-1938 Victor Short Masters of Arts Department of Geography University of Toronto 2014 Abstract This thesis examines the impact of Social Credit in North America during the Great Depression as a social philosophy and approach to government. By placing Social Credit in the context of interwar social movements for monetary reform, the events in Alberta from 1932 to 1938 are examined from the historical geographic iteration of what I call the Keynesian frontier of monetary macro-economic thought. This thesis shifts attention on this episode of Canadian history towards the lens of monetary neutrality. I argue that the Keynesian frontier was the intellectual environment for a worldwide English- speaking progressive underground which sought to find in macro-economic theory a vision of utopian society where money had no effect on material choices and interpersonal relations. During the 1930s, movements such as Social Credit transformed this underground into a collective effort to integrate the institutional channels of circulation with the mechanics of the modern monetary and fiscal state. ii Acknowledgements This project has been made possible because of the support of a number of individuals and institutions. I am thankful for the financial support of a Social Sciences and Humanities Research Council of Canada scholarship. My research has benefited enormously from the help of archivists at the University of British Columbia, the Glenbow Museum and the Provincial Archives of Alberta. Thanks to Jim Bowman for the conversations on E. S. Woodward. I am grateful to comrade Jordan Hale for the moral support. I want to thank my committee members Alana Boland and Robert Lewis for pushing me to write like a geographer. My most outstanding debts are to my supervisors, Matthew Farish and Emily Gilbert. Thank you for your invaluable patience and careful advice that helped me to tame a multi- headed hydra into a project to be proud of. I want to thank my family who have looked on from afar. Richard Miller for his encouragement to consider less than obvious connections. My mother, Rosalie Matchett, and my sister Ottilie Short, who have been a constant presence in spirit through this process. Finally, I want to thank my grandparents, Boyd and Rose Matchett, to whom this essay is dedicated. iii Table of Contents Abstract……………………………………………………………………………………………... ii Acknowledgements………………………………………………………………………………… iii Chapter 1: Alberta Social Credit and Keynesian Frontiers in North America……………………… 1 Chapter 2: Keynesian Geographies and the Riddle of Money Neutrality…………………………. 20 Chapter 3: Social Credit, Effective Demand and Interwar Monetary Heresy……………………... 42 Chapter 4: Prairie Freigeld and Alberta Credit on the Keynesian Frontier………………………... 72 Conclusion: Keynesian Geographies of Non-Neutral Circulation……………………………….... 117 Bibliography……………………………………………………………………………………...... 124 iv Chapter 1 Alberta Social Credit and Keynesian Frontiers in North America 1.1 Introduction | On August 22 1935, the world's first Social Credit government was elected into power in the Canadian province of Alberta as severe drought and debt deflation disrupted settled life across western North America. The emergence of Social Credit as a political force was an experiment triggered by the unrest of the Great Depression. But it was driven by the charismatic force of William “Bible Bill” Aberhart and his interpretation of the ideas of British professional engineer turned economic reformer C. H. “Major” Douglas. The translation of Social Credit from its English origins onto the Albertan landscape occurred at a time when disputes in the high theory in monetary economics took on new meaning as people sought to fill a void in political thought. Yet the contours of monetary reform in Alberta during the 1930s extended beyond the imaginations of either Douglas or Aberhart, and were also shaped by changing trans-Atlantic ideas about money, credit-debt, income, production, business cycles and the ontological foundations of the economy. The 1929 financial crisis had created a sudden desire among many to make sense out of the esoteric matter of money and banking, including the rise of communist and then fascist ideas that established the context of radical monetary reform as a genuine alternative to orthodox liberal political economy. The Social Credit revolt in the prairies is part of the history of a “pure credit economy” whereby all transactions are effected by means of book-keeping transfers in a double-entry accounting system.1 In this system, money is emitted as a spontaneously positive and negative charge in the respective appropriation of ownership over assets and liabilities created in the production process. Ralph Hawtrey, one of the British monetary theorists most sympathetic to Douglas's form of reasoning, employed the “fantastic hypothesis of a civilisation without money” to make a clear distinction between private 1 The term “pure credit economy” was coined by Knut Wicksell in Interest and Prices (1898) as a hypothetical future money system where all units of payment are held as nominal rights and obligations. The concept was translated into English interwar thought via Ralph Hawtrey's Currency and Credit (1919) as a metaphor to describe the inherent instability of creditor-debtor relations and role of a risk-free monetary standard as a public good (Trautwein 1997: 3-5). 1 credit-debt relations financing production and public currency as a monetary standard for stabilizing the unit of account containing these social relations (Hawtrey 1919: 14). Drawing on Douglas's ideas, Aberhart effectively reversed Hawtrey's model of the credit economy to envisage a situation where the entirety of transactions in Alberta would be conducted through an administrative system of “provincial or government credit,” which was to be operated autonomously from the Canadian institution of “bank money” (Aberhart 1933, quoted in Elliot 1991: 60). Aberhart sought to transform the monetary system based on private finance to production into a system structured around the public emission of money directly to households, who would then create and acknowledge responsibility over liabilities by effectively paying private producers to employ them as consumers of a final product on demand. Aberhart established the Alberta Social Credit League in the belief that Major Douglas had located the source behind an inherent deficiency of purchasing power in the economy. Social Credit as a particular brand of reform thinking in the 1930s has to be situated in an English-speaking avant-garde that continued late nineteenth century anarchist and free banking traditions into a general critique of the quantity theory of money known as “underconsumptionism” (Finlay 1972: 17-43; Surette 1999: 53-56). This reframing made room for understanding the role that individual consumers play in the creation of money. Faced by a large debt burden and unemployment on the margins of the world market economy, Albertans were ready to accept Aberhart's interpretation of the Douglas argument that the growing shortage of purchasing power could be remedied with social reform. The provincial election was won on the promise that a $25 a month public dividend would be given to each “bona fide Albertan” as a transmission mechanism for creating purchasing power (Aberhart 1935: 19). Social Credit in Alberta thus brought together an innovative financial experiment with an elected government. This thesis examines the initial period of Social Credit as a social philosophy and approach to government from the historical geographic iteration of what I call the Keynesian frontier of monetary economic theory. The Keynesian frontier was a confluence of civic and political-economic imaginaries, 2 centred on fundamental questions on the nature of money that emerged out of a widespread anxiety with the banking system by the late nineteenth century. The First World War set the stage for the demise of the gold standard as an anchor of world value and the assumption that banknotes and deposits represented a finite stock of money qua gold. Against this conventional notion that treated money qualitatively no different to any other valued substance, Social Credit argued that the creation and destruction of money has to be situated in a social geographic settlement institution that defines the monetary unit of account containing proprietary credit rights and debt obligations. The objective of the historical actors inhabiting the Keynesian frontier was to bring to light the foundations of money in an instituted form of social accountancy that defines these assets and liabilities in a closed system. The deep structures of money in private property, creditor-debtor relations and loan interest are historical, forming a crucial continuity between ancient and modern civilizations. 2 The Keynesian frontier is a heuristic metaphor to understand a “long struggle of escape... from [the] habitual modes of thought” ensconced in the principle of equilibrium market pricing and stock clearing for a more critical realist view of these historical institutions