Explaining “The Gap”

By Edward Minton

The acceptance of Social Credit economics as being true, unavoidably involves the acceptance that a deficiency of purchasing power in any period of time will exist to meet the full cost of consumer items available for sale at that time. We acknowledge that this “gap” may be closed by such means as increasing consumer and other indebtedness, bankruptcy, selling below cost, by excessive capital expenditures, by quantitative easing and otherwise, but the need for such is a confirmation of the continual occurrence of this gap rather than a denial of its existence. 

This gap was first diagnosed as the primary cause of disequilibrium in the economy by an engineer, C H Douglas, and his explanation of the cause of this gap was given in engineering terms.  It is undeniable in engineering terms and was accepted as existing (in approximate terms) by John Maynard Keynes, as it is by modern economists who prescribe quantitative easing, “pump priming” and other remedies. To the layman these engineering explanations are difficult to understand, and therefore their acceptance is inhibited. A simpler way for laymen to understand the gap is here attempted:

A primary cost in any and all production arises when a proper person is paid to induce him to participate in production. If we analyse the origin of the costs included in the price of a retail item it consists wholly of primary costs. These primary costs however are made up of much more than those paying the retail staff and the inducement to the retail proprietor to offer his services. They include the primary costs incurred by the wholesaler, the transport services, the manufacturer, the preparation of raw materials, the construction of the machinery used in the several stages of production, and the extraction of raw materials by the miner and the farmer etc.

Identifying the origin of every last one of the one thousand cents of the cost included in a retail item costing $10 will, in a modern economy and process of production, almost always now take us back even decades to find the origin of every last primary cost.

The income obtained from the payment of a primary cost and the generation of this cost for inclusion in future prices occurs simultaneously. The expenditure of this income occurs relatively quickly however; much is gone within a month, most in three months, and little remains of it in six months’ time. On the other hand, with the lengthening lead times involved in modern production the appearance of consumer items containing these costs, on average, occurs much later. 

'It may be called a Mother Hubbard syndrome';

when the final consumer product got there, the cupboard hoarding the means of paying for it was relatively bare. Speaking generally, this is the way it is with all modern production. The continual generation of this “gap” and the means of closing it, is what is at issue in Social Credit economics.