Politics and Government in Ontario
The Empire Club of Canada Addresses (Toronto, Canada), 8 Apr 1976, p. 384-395

Smith, Dr. Stuart L., Speaker
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Comments on the Ontario budget, presented two days previous. Concern over the deficit, municipal cutbacks, and increases in OHIP premiums. A review of Dr. Smith's fundamental concerns about the Canadian and Ontario economies, the increase in our balance of trade deficit regarding manufactured goods, and the pending energy trade deficit. The lack of education of economics for the average Canadian. Suggestions for remedies. The speaker's role as a political leader.
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8 Apr 1976
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Full Text
APRIL 8, 1976
Politics and Government in Ontario
CHAIRMAN The President, H. Allan Leal, Q.C.


Ladies and gentlemen: We bid you a cordial welcome to this luncheon meeting of The Empire Club of Canada. I would like you to meet and recognize the distinguished guests who are with us at the head table today. I would ask that you not feel discomfitted if you see red as the political affiliations of some of them are made known to you; the rest, of course, have guilt by association.

In a letter from the office of the Leader of the Liberal Party informing us of the title of Dr. Smith's address, we were forewarned that his remarks might vary depending on the outcome of the non-confidence votes in the Legislature. You will appreciate that these events were not entirely irrelevant to my task today and this introduction represents a second look.

In a world and an era characterized by fast moving events, it is increasingly possible, it seems, for some people to accomplish a great deal in a relatively short space of time. Dr. Smith is in the best tradition of this new breed of Canadian politician and, as John Fisher has pointed out, in choosing our political leaders for the '70's and beyond, we are not averse to skipping a generation or two. In saying this, I am not to be taken as making any aspersions on my own generation, much less the Prime Minister of Canada, for in psychiatric terms, at least, the young include the young at heart.

Dr. Smith was educated in Montreal and had an outstanding academic record as a medical undergraduate at McGill University. More importantly, as events have unfolded, he had, for a medical student, an uncommon and pervasive passion for politics. He was President of the Student Society, a representative of Canada in international debates, in a student exchange visit to the Soviet Union in 1961 and in the World University Service studying culture and government in the West Indies. I think it also noteworthy that he set himself against the policies of Quebec Premier Maurice Duplessis at a time when to do so might result in a protracted period of unemployment.

It is not at all surprising that Dr. Smith should have been attracted to the new Faculty of Health Sciences, McMaster University, with its innovative curriculum and program under the guiding hand and spirit of Dr. John Evans. It also made us, in Ontario, the happy beneficiaries of Dr. Smith's energies and abilities. His outstanding work and community involvement in the Hamilton area justifiably led to his election as the Liberal member for Hamilton West constituency in September, 1975.

As Liberal critic on health and a member of the Caucus Committees on Urban Affairs and the Environment, his reputation was established and his worth appreciated to the extent that he was elected Leader of the Liberal Party in January, 1976 about four months after he entered the House.

We welcome him here today, wish him well, and invite him to address us.


Mr. President, ladies and gentlemen: I am delighted to have this opportunity to meet with you at a time when most of our thinking is dominated by economic matters. There rages considerable debate on our system of economic management and the values which underpin this economic system.

Here in Ontario, we have just had presented the government's budget estimates for the coming year. I would like to spend a few moments to reflect upon this budget, and then I would like to share with you some thoughts about the general concerns which pertain to the economy of our province and our country as we enter the final quarter of the 20th century.

What about the budget itself, as presented two days ago? As you know, the budget calls for the second largest deficit in Ontario's history, about a billion and a quarter dollars. Even that estimated deficit may well prove to be very much on the low side, since it is dependent upon a real growth in the Ontario economy of 5.3%, and a growth in exports alone of 20%.

Both of these expectations seem optimistic in the extreme, and although I certainly hope that matters do improve to that extent, I fully expect that the Treasurer will be back asking for supplementary estimates, as he has done every year recently. You may remember that he asked for $500 million two years ago, and an additional $200 million last year. In addition, we have to keep in mind that the Treasurer has forced municipalities to increase property tax across the province, both for municipal purposes and for the support of school boards. Although he has permitted provincial spending to grow at a rate of 10.4% and, in fact, at a rate of some 13.2% excluding transfer payments, municipalities are expected to live within a 7.8% ceiling. This may turn out to be a very poor place to economize.

Most citizens believe, and I think correctly, that they get the best value for their tax dollar at 'the municipal level. I am very concerned when I see that municipalities are considering cutting back on garbage collection and on such programs as "Elmer the Safety Elephant" in the schools. Clean, safe streets are something that we have come to cherish and to value in Canadian society, standing in very sharp contrast with some of the experiences below the border. The appearance of friendly policemen in schools as advocates of safety and good citizenship is beyond calculation in its importance to our society. What price can be put on having our younger generation grow up with a good feeling about the police, rather than regarding law officers as enemies?

I worry about the municipal cutbacks, especially in view of the fact that there still seems to be room for a lot more restraint at the provincial level. Without going into great detail and without becoming excessively partisan, permit me to just refer to the so-called Super Ministries, the enormous administrative apparatus in all the educational systems (frequently despite lower enrolments in the actual schools themselves), the burgeoning of the Premier's own office staff, the fact that 19,000 contract casual and part-time employees are on the payroll in addition to those admitted to as civil servants in the budget, and the excessive bureaucracies in Regional Government.

The increase in OHIP premiums will be a very difficult blow for many working men and women in our society. In addition, there are many small businesses that pay OHIP premiums for the employees, in whole or in part, and OHIP will now be yet a more burdensome payroll tax, added to the already almost intolerable list of such taxes, including Unemployment Insurance payments, Canada Pension payments and Workmen's Compensation Board premiums. The reduction in tax for small businesses is welcome, but in many instances may be offset by the OHIP premium increase. This also burdens municipalities which pay the premiums in full for 90% of their employees. There is no doubt that more revenue is needed for health, but an argument could be made for this to come out of general revenues so that the burden would be distributed according to ability to pay.

In summary, the budget is still an example of overspending and is probably excessively optimistic in its forecasts. We are glad to see some movement in the direction of restraint, however, and we agree that additional revenue was needed, although we may disagree as to the means of raising it. We are very concerned about the impact on municipalities.

Leaving the budget, it might be appropriate to discuss some of the fundamental concerns which I have in studying the Canadian economy and the economy of our province at this time. The major concern that I would mention is the frightening decline in productivity per dollar of wages.

Ten years ago productivity in Canada was at 71% of the United States level, and wages were at about 75% of the level in the U.S.A. Now productivity is about 78%2% of that in the United States, a slight improvement over ten years, but wages are at 108% of the American level. This bodes ill for any possibilities of export trade in which the use of labour would be at all important.

This leads directly into a second key concern, the enormous increase in our balance of trade deficit regarding manufactured goods. This deficit in 1975 was 6.5 billion dollars. The only reason the country has been able to sustain even the moderate prosperity we have at present is due to the fact that we have a positive balance of $4 billion in trade in primary products. Yet do we truly see our future simply as hewers of wood and drawers of water? And what are the implications of this for Ontario, the centre of Canadian manufacturing?

And the third very frightening indicator looming just on the horizon is the pending energy trade deficit which will shortly run into an amount approximating $5 billion.

All these indicators are giving us cause for serious concern at a time when our society has seen a serious decline in the work ethic, an increase in popular expectations and feelings of entitlement, and the adoption of protest tactics and group confrontations as a substitute for self-sacrifice and self-discipline. Unfortunately, politicians have been only too happy to foster this expectation of endless affluence by election-time largesse and by promoting the welfare state, irrespective of whether the country's economy at any given time truly permitted new programs to be affordable.

Interestingly, our educational system generally makes no provision for the teaching of the fundamentals of our economic system to our citizens, and I worry lest they fall prey to the simplistic "explanations" offered by those who would eventually have the state control everything. It surely must stand as one of our great failings that those of us who believe so strongly in the benefits of a system which permits private initiative and private enterprise have failed somehow to make this part of the educational experience of every Canadian. It is only in an atmosphere of ignorance that words like "profit" and "dividend" could become dirty words.

What can we possibly do about the situation? There ate a number of remedies which should be seriously considered and which should be presented honestly to the people of this province.

Agriculture must be fostered as a potential export industry toward the latter part of this century. This requires an immediate, genuine policy for land use and a full inventory of Ontario's lands. It will also probably mean marketing boards and higher food prices, along with some regulation of the food processing and packaging industries, so as to be certain that any higher prices paid for food in fact find their way to the farm gate.

We must utilize the enormous investment we have already made in education. We have always felt that it is worthwhile to educate Canadians to a very high level, and we referred to this as a form of "social capital". The time has come to draw on this capital and to make it productive, but we can only do so if we encourage in Canada an attitude of innovation and the development of technology and design. We must move heavily into education-intensive industries, and to do this will require much increased investment in research and development.

Unfortunately, at this time, the private manufacturing sector refuses to spend significant amounts of money on research and development, mostly because of the fact that the majority of those interests are branch plants of foreign enterprises. We require crash government programs such as that of Atomic Energy of Canada which developed the CANDU Reactor, or perhaps we can use a form of partnership between governments and private Canadian corporations.

The lead times for such developments are usually between ten and twenty years, so I suggest we simply cannot afford to wait. We must start immediately.

There are many good areas of research for Canadians, including pollution control, water quality maintenance, the development of solar energy devices and the design of homes heated by renewable forms of energy. It is shocking that right now, we spend less than a million dollars annually on research into solar energy, and less than two million into all forms of research in the area of renewable energy sources. This is disgraceful compared to the enormous investment which the Americans and the Japanese are making. We will have no one but ourselves to blame when, some years from now, we are totally dependent upon importing the technology for solar energy, and when we find that Canadians have absolutely no industry related to this new technology.

We have plenty of educated Canadians and many excellent scientists who are crying out for money to carry on their work in this area. We have put all our money into the nuclear basket and we are apparently too shortsighted to have a genuine long-term energy policy in this country or in this province.

It seems that we must now foster the mentality of conservation rather than simply continuing the emphasis on exploitation of resources. We have an opportunity to take a lead in the area of recycling and in the fields of home renovation and reconstruction.

It is vital that we move in this direction, not merely because our resources clearly are limited and our environment simply cannot continue to be polluted at the present rate but, more importantly, I suggest, in order to get away from the mentality that we have unlimited resources. We must create an atmosphere where people begin to realize the true costs of the demands we make: the true costs in terms of environmental impact and in terms of the squandering of precious resources. Recycling and conservation programs help people to focus on the need to make do with what one has, rather than on the constant escalation of one's feelings of entitlement.

We have a job of retraining to do at the family and at the school level in terms of re-instituting a certain amount of self-discipline among our children, particularly so that they can have the true measure of the value and meaning of work.

I have suggested elsewhere a scheme whereby our youngsters in high school would be permitted six months credit for volunteer work they would do outside the school. I call it "Service to Ontario", working with the elderly, the infirm, assisting police, etc., so that they could come to understand that they have a real contribution to make and that the work they do is genuinely required by others in our society.

It is terribly important that we stop encouraging our young people in the system of working a few weeks and collecting unemployment insurance. I am certainly no redneck about this, and I believe, as you do, that unemployment insurance is a tremendous boon to our country. The fact is, however, that too many people have devalued work. They have come to prefer collecting such insurance to working at jobs which are not entirely pleasant.

We must do everything we can to make the jobs in our society more satisfying and less dehumanizing. But permitting the general psychology to emerge that certain types of jobs are simply not worth doing will be of enormous harm to us in the long run. Very few of the jobs that now go begging are really all that demeaning.

Parenthetically at this point I might mention that a recent study has shown that the United States has a much higher proportion of interesting jobs than we do in Canada. This is presumably because the design and the development aspects of most industries are located in that country. Dr. Myron Gordon at the University of Toronto points out, "The better paid and more interesting jobs required to produce Canadian manufactures are located abroad and are not open to Canadians." He says that, "In 1970 the number of salaried employees per hundred production workers was 23°/o higher in the United States than in Canada." It is interesting that he relates this to the productivity gap between the two countries to which I referred earlier. He feels that the United States employee on the average contributes value added at a rate 45% higher than the Canadian worker.

In any event, the value of work and the importance of it to the development of feelings of self-worth must be stressed. We must not permit the psychology to take hold which says that work is a thing of the past, and that we must simply train ourselves to do without it. Such a training, even if it were possible, is simply not affordable in this country at this time.

Somewhat related to the topic of work, it seems to me that we must foster the spirit of voluntarism in our society. It's incredible that this province, whose people have a long tradition of helping one another, particularly in rural areas, should now have become so dependent upon government initiative to get things done. We have, fortunately, still a thriving group of service clubs and still some dedicated individuals who give of themselves to assist others. Unfortunately, they are the exception rather than the rule today. If the government grant is not forthcoming, so many groups seem to feel that there is no way that they can proceed and I find this a very disappointing turn of events. One of the good things to come from restraint just might be that we begin to look at ourselves and our roles in society.

It seems to me that we have to give full support to the federal government's anti-inflation program as the only viable method of keeping wage settlements down until (a) productivity begins to catch up, and (b) attitudes and expectations are brought in line with what we can afford.

I am not overly enthusiastic about government interference because we naturally run the risk of interfering with the motivation of the private sector, and that would be fatal. Nonetheless, I have not yet heard a single constructive suggestion for reversing the disastrous wage-to-productivity ratio, apart from the anti-inflation program at present in effect. When the country is, as a whole, poorer, then we all have to expect to be somewhat poorer ourselves. That, it seems to me, is what the AntiInflation Board is all about.

All these suggestions, like remedies in general, may not be too popular. We have seen a few of the more shortsighted union leaders and some socialist-leaning politicians insist vehemently upon further rapid redistribution of the national wealth. We have to be prepared to stand up and explain our case against this at this time. Unfortunately the job is all the more difficult since people in Ontario have been misled by successive governments over several years to believe that our resources were endless and that all our wants could be met by government largesse.

Ladies and gentlemen, I suggest to you that the task before everyone in this room is no different from the task that is before me in my role as a political leader. Every one of us must go among our friends, among our families and among our business acquaintances. We must instill an understanding of the need for a land use and agricultural policy, investment in knowledge-intensive industries, an energy and a conservation policy which truly faces the future, a re-establishment of the ethics of work and voluntarism in our society and genuine, possibly painful restraint in wages and profits until productivity has in fact shown necessary improvement in keeping with our trade competitors.

Every citizen must be made aware of the real meaning of the disastrous decline in productivity, the menacing increase in our trade deficit, and the real impact of high energy prices on this country. We, as Canadians, have managed to face up to difficult times in the past. We can do so again, but it requires leadership and government that will be honest, active and courageous.

Our distinguished speaker was thanked by Mr. Joseph H. Potts, Q.C., C.D., a Past President of The Empire Club of Canada.

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Politics and Government in Ontario

Comments on the Ontario budget, presented two days previous. Concern over the deficit, municipal cutbacks, and increases in OHIP premiums. A review of Dr. Smith's fundamental concerns about the Canadian and Ontario economies, the increase in our balance of trade deficit regarding manufactured goods, and the pending energy trade deficit. The lack of education of economics for the average Canadian. Suggestions for remedies. The speaker's role as a political leader.