OCTOBER 19, 1972
New Directions in Economic Policy
AN ADDRESS BY The Honourable Robert L. Stanfield,
P.C., Q.C., M.P., LL.D., LEADER OF THE PROGRESSIVE CONSERVATIVE PARTY OF CANADA AND LEADER OF THE OPPOSITION
CHAIRMAN The President,
Joseph H. Potts
One of my partners today remarked that, in his judgment at least, I was conservatively dressed. Now I hastened to assure him and I hasten to assure you that I have scrupulously observed the non-partisan tradition of this Club and the suit that I am wearing today is one and the same as I wore on a similar occasion three weeks ago.
It is my pleasure and privilege to welcome back to The Empire Club, on your behalf, a great Canadian, The Hon. Robert L. Stanfield, Leader of Her Majesty's Loyal Opposition in the House of Commons and Leader of the Progressive Conservative Party of Canada.
Sir, we are indeed honoured by your presence today, particularly in view of the fact that you have taken time out to do so in the midst of a hectic election campaign. It is not absolutely essential to have addressed The Empire Club in order to become the Prime Minister of Canada-but it certainly helps-as a reading of the history of the Club will testify.
Nine Canadians have held the high office of Prime Minister since the Club was founded almost seventy years ago. Now six of the nine addressed the Club prior to becoming Prime Minister-of the remaining three, one was already Prime Minister at the time the Club was founded so that really isn't an exception.
Now accordingly, if one is to convert these statistics into percentages, as is the custom with Gallup polls, the cost of living index, and seasonally adjusted rates of unemployment, the odds, Sir, are very much in your favour. Now according to my calculations, they come out to the startling figure of 77.78%-enough to cause extreme concern to the staunchest Liberal.
Moreover, your credentials are of the highest in this regard. You have spoken to us on two occasions as Premier of Nova Scotia.
And this is not the first occasion that we will have had the pleasure of hearing an address from you in your capacity as Leader of Her Majesty's Loyal Opposition, but it may be the last-as Leader of the Opposition. Having regard to the well recognized vagaries and vicissitudes of political life, you might well be the Prime Minister on the next occasion.
Indeed, if that event should occur after the votes are tabulated on October 30, I hasten to extend an invitation to you to speak to us again during the 1972-73 season-that would certainly be a record for the Club-two Prime Ministers in the same season!
On November 22, 1905, Mr. Robert L. Borden addressed The Empire Club. He was then the Leader of the Conservative Party in Canada and, as you know, later became the Prime Minister of Canada. He stated at that time and I quote:
"The very nature of our institutions imposes upon every citizen the duty and responsibility of active interest in public affairs, of public service to the State; the duty of sharing in the public life of this country in whatever manner he may find his activities most useful. We never can have, we never can continue to have, those high standards of public life which we are entitled to expect unless every good citizen of this country is willing at all times to contribute a little of his time, his energies and his abilities towards giving us in Canada the very highest form of representative institutions which are possible and attainable."
I find those remarks particularly appropriate today. Indeed, in reviewing our guest of honour's record of service to this country, one is entitled to conclude that Mr. Stanfield, at an early age, had taken those words to heart and had adopted them as his personal guidelines.
Mr. Stanfield was born in Truro, Nova Scotia, which is a truly delightful city. It conjures up very happy memories for me because it is not too far distant from Camp Debert and was the place in Canada where I ate my last T-bone steak prior to embarkation overseas during the Second World War.
Mr. Stanfield is blessed with a brilliant mind. He was awarded the Governor General's Gold Medal for having attained the highest academic standing at Dalhousie University.
He has had a distinguished political career dating back to 1948 when he was elected as Leader of the Nova Scotia Progressive Conservative Party.
He is a politician who does not flinch from what may appear as insurmountable odds.
At that time his party had no seats in the Legislature and the Liberals had been in power, except for a very short period, since 1882.
However, eight years later he was sworn in as Premier of Nova Scotia, a position he retained until he resigned in 1967 in order to contest and to win the Leadership of the Progressive Conservative Party of Canada.
He is a man of unquestioned integrity with a marvelous sense of humour.
One cannot help but be impressed by his dedication and sincerity and overwhelmed by his warmth and by his compassion.
Ladies and Gentlemen, The Honourable Robert L. Stanfield.
THE HONOURABLE ROBERT L. STANFIELD:
Mr. Chairman, Mr. Premier, Your Worship the Mayor, Mr. Frost, other distinguished guests, Ladies and Gentlemen.
It is clear, of course, that I have come here at very great sacrifice to speak to a few people at noontime in Toronto in the course of an election campaign. I am glad that I have overcome one of the hurdles to win the election, that is speaking here in the course of the campaign. Now all I have to do is win the election.
Well I am here today to speak to you about new directions in economic policy and I should be speaking to you without frills but with an earnest desire to present the case for such a change in directions and to describe to you some of the changes I propose to make.
There is a widespread interest in Canada today about the objectives and about the goals to be pursued by our central government and an interest also in the policies and programs presented by the parties which are designed to achieve national objectives and national goals. I want to say to you, first of all, that with respect to policy and to policy alternatives, no party is more clearly on the record with more specific policy than is the party that I lead. And I intend to make that even more clear to you today.
Over the five years that I have been the national Leader of this great party, I have insisted not only that policy formulation be a matter of major importance, but also that the members of the party have the most important part in the determination of those policies. To this end we held a policy conference at Niagara back in 1969 and a major portion of our 1971 annual meeting was also devoted to consideration of policy.
The one result of these conferences was the publication in May of this year of a book entitled Policies and Commitments which has been sent out to all of our candidates and I simply hold it up to you and if you will excuse me, I won't read it through to you here today. The policies contained in this book have been condensed into pamphlet form and these are being regularly released.
We have also prepared a summary of some of the most important policies relating to many of the major issues of this campaign and this summary brochure is available in eleven languages.
Now as to the objectives that we must achieve in this country in these years immediately ahead. . . I have already identified these, but I want to briefly review them here now. The first of these is full employment, by which I mean a rate of unemployment of between three-and-a-half and four percent and not seven percent, which is the present rate.
The second of these objectives must be the attainment of a reasonable degree of price stability, and the containment of the present continuing wage-price push on living costs.
The third objective is a more effective and rapid rate of progress toward the basic and unfulfilled promise of confederation itself and this is the alleviation of regional disparity which is a direct cause of national disunity and discontent.
The fourth objective is one which only we have begrudged ourselves and which only we deny to ourselves, and that is a strong, confident sense of Canadian identity, by which I mean the achievement of a priority of opportunities for Canadians, a priority of opportunity for Canadians in both the cultural and the economic development of their own country.
Those are the foremost objectives of any government that I would lead, and they are objectives that I am confident can be achieved through deliberate policy. These objectives can be achieved through the acceptance of federal responsibility and provided that the majority of Canadians accept for themselves an appropriate measure of responsibility which they will cheerfully do, if they are also active participants in achieving these goals. The degree to which Canadians will accept such responsibility depends on the degree in which they believe they are involved in the development of their own country, and involved in the fulfillment of national policy.
- Clearly, there are two ways of implementing national policy. The first is to assume that the prime instrument and authority will be the federal government; the second method-and the better way-is to assume that people ought to be the prime instrument of policy. If government is to do it, the citizen becomes only a taxpaying spectator. If the citizen himself is to be involved, then the government needs to provide the incentives for the involvement of the citizen.
If we have learned anything from recent experience it must be the lesson that if we want to create jobs, if we want to encourage enterprise, the least effective way to do it is to encourage the assumption that it can be done by direct government spending. We have also learned that jobs do not increase in direct proportion to the amounts of money spent by government and indeed, experience tells us that the opposite is sometimes true.
But the greatest lesson that we ought to have learned is that the larger the size and the scale of government lending and spending programs, the larger the number of people there will be who do not comprehend those programs. I suspect that if we' could infiltrate all the rhetoric of Mr. David Lewis we might find a kernel of truth which I doubt that he himself has yet seen.
And that kernel of truth is that full employment cannot be achieved simply by a conglomerate big government, big corporations, big unions and big spending. A government that is determined to rely on direct subsidy rather than on incentive to achieve its purposes will not only fail, but it will inevitably make "bums" out of all of us, corporate or otherwise, in the sense that our basic dependence will come to be upon the welfare of government rather than upon our own initiative and our own capacity.
It is characteristic of the government today that its preoccupation with its own size and power leads it to ignore those it considers to be of relative inconsequence. Attempts at tax reform, you will recall, led big government to attempt to ignore the vital interests of small business, and to attack the traditional concept of the family farm. And yet, small business in this country generates more employment, more real growth, and more tax revenue, and bears more of the cost burden of government, than does so-called big business in this country.
The fact is that Canada is still a country where there are more wage-earners who do not belong to unions and where there are more businessmen who do not work for big corporations.
It is also a fact that the economic and fiscal policies of Canada persistently ignore this reality.
Mr. Chairman, I'm not opposed to the established practices of providing incentives to corporations through the various devices of accelerated depreciation write-offs, deferred profits and the like. Indeed my experience in government persuades me that these are not only acceptable but they are, in many instances, essential. I do believe, however, that these policies must be prudently and sensibly administered, but that is an aside from my present discussion.
Because my point is this: if such incentives are productive for major corporations, why would they not also be productive for small business and for the individual entrepreneur? I am convinced that similar incentives extended throughout the Canadian economy would be at least as productive, would encourage initiative and enterprise, and would release the creative capacity of thousands of Canadians now restricted by lack of capital, by high taxation, and by high lending rates.
If full employment is to be a national priority-and it is-we must look to those elements in our economy which are less influenced by technological change, that remain labour-intensive, such as small business. Far too much of this section of our economy is presently ignored and excluded from consideration by government policy and excluded from the encouragement of fiscal incentives. We propose to change this situation with a new plan. We propose to encourage the individual to invest in the expansion of his business or in any small business, to invest in any new enterprise on his own, or in partnership with others.
To encourage the individual to do so, we propose to introduce a Canadian Investment Credit Incentive. This investment credit will be available to any Canadian citizen who makes a direct investment in the equity of a Canadian-owned small business. The credit, which will be 50% of qualified investments to a maximum of $5,000 each year, will either be offset against the individual's income tax for the year, or rebated directly to him. Qualifying investments will include new equity shares in corporations and direct participation in a proprietorship or partnership.
But in order for the credit to be granted, the business will be required to register with the Department of Industry, Trade and Commerce, since only investment in Canadian-owned small businesses will qualify. Small business will include corporations with a net worth up to $1,000,000 and annual revenue up to $10,000,000. In the case of corporations approaching the upper size limits, it will be necessary to establish that new capital requirements will in fact provide substantial additional jobs and careers in Canada.
No corporation will be able to qualify as a small business under this plan if its shares are listed on a stock exchange or if it is controlled by a corporation that does not qualify.
Certain kinds of business will not qualify for this investment credit . . . for example, oil and gas exploration and development businesses, mining businesses, and the like, will not qualify. Similarly, real estate ownership and development, leasing and financial businesses will not qualify. I give these as examples.
The advantage of the tax credit will remain with the investor so long as he continues to hold it, but will be repayable to the government if and when the investment is realized. If the investor does not recover his full investment, the amount of credit repayable to the government will be half of his recovery. No capital loss deduction will be allowed. If the investor realizes a gain, the gain will be taxable in the ordinary way.
I believe that this incentive will do more, in a single year, to stimulate private initiative, to provide more new opportunities for new jobs, and to stimulate demand for goods and services than any combination of direct government loans, concessions, and subsidies presently in effect.
Such a policy will re-involve the average Canadian in the achievement of national objectives, among them the urgent need for full employment and the need to encourage Canadian investment, Canadian participation and Canadian ownership in the development of the national economy. Such a policy will give new initiatives to our young people, many of whom today are deprived and denied opportunity to participate in the economy.
Now some of you will ask how much this will cost and I want to make three points in reply to that question that may be in your mind.
First, it will cost far far less than the billion dollars we are now spending this year on unemployment insurance payments alone to sustain an unemployment rate of seven percent.
I would expect, and indeed I would hope that the cost to the federal treasury in the first year of this program would be in the order of $300-million. I say "cost" in the sense that this amount would be lost to current federal revenue and treated as deferred personal tax.
Secondly I want to emphasize that whatever the amount is, double the amount will have been injected into the economy by way of new investment in job-intensive businesses.
Third, keep in mind that the larger the amount the larger the impact that this policy can be assumed to have in expanding job opportunities.
The risk factor in terms of possible ultimate loss is absolutely not greater either relatively or absolutely as far as overall productivity is concerned, than the risks being taken today in relation to a multitude of federal government loans and grants.
Finally, let me say that this represents the first major attempt in national policy at genuine grass-roots economic development. It represents a shared risk between the individual and his government in community and local enterprise, just as it represents a mutual benefit to both the individual and the government when these incentives produce business activity, profits, and most important substantial opportunities for employment.
Our policy represents an effort to apply the same logic, and offers comparable incentives to the individual Canadian, just as these incentives are available to the corporate community. And I point out to you again that this area of business and commerce is more job-intensive than are the resource-based industries, or for example, the high technology big corporate enterprises.
I realize that other incentive programs will also be required. I said earlier, I do not shy away from other incentive programs -deferred taxes, grants and the like, but the thoughtless application of such programs without clearly aiming the incentives at achieving realistic goals is aimless and needless waste. If there are cases where corporations have received unnecessary and over-generous grants or concessions (and I believe there are such cases) this does not refute the need for incentives. It merely indicates that the grant system concerned was ill-conceived or badly administered.
There are regions of this country that require special attention because opportunity is not equal in all parts of the country. I do not intend today to go into detail as to the exact nature of incentives that we will implement to counteract regional disparity. But we do accept as a basic premise underlying our regional development strategy that Canada is composed of differing economic regions, each with different economic potential and capacity. Our strategy also recognizes that the provinces and municipalities must be involved in the planning process and that federal incentives must not create chaos in local planning.
It is folly to encourage the establishment of a substantial plant in a community whose ratepayers lack the capacity to provide sewage, housing, schools and all of the other services necessary to support the industry unless these services can be provided in some other way.
Nor should regional development plans ignore the existing level and types of skill of the local population. In short, our programs for regional development will ensure that there is consultation and co-ordination between the federal government and the provincial, regional and municipal governments so that the maximum benefit may be obtained not only for the region but for the country as a whole.
The government I lead will mount a vigorous attack, I say this openly to you here in Toronto, a rigorous attack, on the problems of regional disparity. The programs will be costly--such programs must be costly if the attack is to be effective-but they must be more effective. And the bulk of the burden for financing this will continue to fall on the taxpayers of Ontario. I am well aware of this.
I have said elsewhere in the country, and I will repeat it to you, that the programs designed to alleviate regional disparity, if they are seen to be exercises in futility, they not only frustrate the intended beneficiaries, but they also frustrate the donors.
Believe me, I have direct experience, and I have personal knowledge of the escalating economic and social problems that are created by chronic and continuing disparity. And I will say to you quite frankly that one reason I enlisted in national politics was to make a positive and effective contribution to the fulfillment of the first obligation of Confederation, and to make a contribution to the solution of problems which I know to be the root and the national branch of all other problems of national disunity and discontent.
The government I lead will be prepared to accept that the key problem in all this complexity of problems relating to regional disparity is the problem of transportation costs.
Until some greater equity is achieved in transportation costs on a national basis, all the grants, all the loans, all the subventions, everything else, these will be in vain.
The solutions to our transportation problems are complex, but they are, nevertheless pretty obvious. Whatever the less prosperous parts of Canada produce, or manufacture, their economies will never be improved, much less made prosperous unless their products can be moved to markets at competitive costs.
The young people of our country today have a right to enjoy a sense of confidence and pride of place as Canadians, as they have the right to the anticipation of productive careers in our country. I am very well aware of the fact that many young Canadians today do not believe they have a place in our society, nor do they anticipate, as we did in my generation, a future of achievement, a future of fulfillment.
That is why I say to you, we are not in my Party working for Statistics Canada, we are not working simply to increase the size of the gross national product or to increase the size of profits after taxation. We are working for a greater sense of involvement and a greater sense of participation by all Canadians in the building of a great nation. And that is my message to you. That is what our policy is all about and it is on that basis that we are appealing to the people of Canada for support.
Mr. Stanfield was thanked on behalf of The Empire Club by Mr. Sydney Hermant, a Past President of the Club.
Mr. President, Mr. Premier, Mr. Elder Statesman and former Premier, members of The Empire Club of Canada and guests: I say to you, Honourable Sir, that while we know this was not a political speech, that while we know that this Club, like the Daily Star, has no politics, and those of you that haven't applauded when you read the noon edition you will, while our members hopefully are vitally involved and concerned with this election, as individuals, all of us being impartial today, some a little more impartial than others, I must say to you, Sir, that in the business community and as members of The Empire Club, we get the message.
I don't want to be presumptuous and add to what our distinguished President said when he so suitably introduced you, Sir, but allow me to emphasize again that the business community and all Canadians are grateful to you, a man of integrity and ability, who has come out from his own boardroom, away from his club, away from the comfortable establishment and gone into the arena. And this is what we admire and respect and appreciate.
Now, as you know, when our Right Honourable Guest today speaks usually he is recorded meticulously in Hansard. Now I wouldn't be faithful to The Empire Club if I didn't remind you all, and I know that many of you are members and have come here for that reason today and many wish to become members, that the full text of this magnificent address today will appear in the annual year book which goes to all members without further charge. Mr. President, I have discharged that obligation.
We believe absolutely that freedom and free enterprise are indivisible and we are grateful to you, Sir, for emphasizing that to us again. I would emphasize, of course, that in concluding, to be absolutely certain that nobody is under any misapprehension that, as a Club, we have no politics, but, I think we might go as far as to endorse and perhaps I would paraphrase it in the words of Gilbert and Sullivan, we would hope that every Canadian born alive is liberal or conservative. No corporate bums.
Thank you, Sir, we appreciate this interlude and may we wish you well. As the President has said-Her Majesty's Loyal Opposition and the British parliamentary system play a vital role. The Prime Minister plays perhaps even a more vital role so we are looking forward to having you back. Thank you very much.