APRIL 14, 1966
A New Look At Foreign Aid
AN ADDRESS BY Hon. S. J. Randall,
MINISTER OF ECONOMICS AND DEVELOPMENT PROVINCE OF ONTARIO
CHAIRMAN The President,
Lt. Col. E. A. Royce, E.D.
Mr. Jackson, Reverend Sir, honoured guests, gentlemen
A number of interesting things happened today--first, the hotel raised the price of the tickets by thirty cents, or roughly 10%, which no doubt reflects the 2% increase in sales tax recently arranged by the Government of which our speaker today is a distinguished member; second, to the horror and astonishment of every member of the Club, the pianist played "The Road to the Isles" when the head table was entering instead of the traditional "Land of Hope and Glory"-any suggestion that the Empire Club feels that hope and glory have departed from Britain with the advent of the Labour Party is entirely erroneous and I wish to set the records straight!
Our speaker today is responsible for the Department of Economics and Development. Economics is, of course, our old friend, political economy, and Stanley Jevins, in his theory of political economy, says "The theory is entirely based on a calculus of pleasure and pain and the object of economics is to maximize happiness by purchasing pleasure, as it were, at the lowest cost of pain." According to pure economy, any price and any wage is just if it has been determined by the interplay of supply and demand under conditions of unrestricted competition; Adam Smith, whose work An Enquiry into the Nature and Causes of the Wealth of Nations, produced the most influential argument ever formulated for unimpeded trade neither hampered nor coddled by Government-written in 1776, it shows how the apparent chaos of competition, the whole business of buying and selling resolves into an orderly system of economic co-operation by means of which under individual freedom in contrast with central or government direction, the communities' wants are supplied and its wealth increased. Indeed, our system of competition and free enterprise has never been better explained and the success of our system--which is now, of course, a blend of private enterprise and Government regulations--speaks for itself. When we observe the difficulties encountered by the Communist countries and their gradual return to the profit motive, we realize that, despite its present imperfections, the economic system existing in Ontario today has achieved a very great deal. No one suggests that it is perfect and indeed some highly vocal segments of our society-strangely enough the most highly protected and subsidized of all-are far from satisfied with their lot. Nevertheless, in this Province of Ontario, which produces so much of the nation's goods and pays so much of the nation's taxes, the system under which we live and work continues to provide our people with the highest standards of living in Canada and the climate created by our Government and specifically by the Department of Economics and Development makes Ontario the natural and logical choice when new industries are considering Canada as a field for expansion.
The word economy comes from two greek roots referring to the management of a household or estate. The household or estate for which our speaker today is responsible is this great province. Ontario has been described as the heart of Canada and while in some of our bleaker and more discouraged moments, we may be tempted to consider the wretched prospect of a Canada without Quebec or even a Canada without that brash and beautiful Province of British Columbia, it is quite impossible for anyone to imagine Canada without Ontario, loyal to the traditions of the past which her sons have defended on many battlefields yet ever ready to welcome and care for the stranger from abroad, the record of this province in the post-war era is one of which we can all be proud. Ontario House in London, England, is as well known as Canada House and your Agent General, Jim Armstrong, and his charming wife have a contribution to Ontario and to Canada generally which is quite outstanding by any standards.
However, while we may be proud of the past and particularly our post-war achievements, Ontario cannot rest on her laurels and in our speaker today we have a man superbly equipped to see that her position is further enhanced in the years to come. Born in Toronto and educated here, our speaker came up through the ranks of industry until in 1958 he became President and General Manager of General Steelwares Limited. In 1963 he resigned as President of General Steelwares and Chairman of the Council to accept the Progressive Conservative nomination for Don Mills. During his business career he was active in the Canadian Manufacturers Association and had indeed been Vice-Chairman of that Body. He had served as a Member of the Advisory Council of the Export Credits Insurance Corporation, Ottawa. No one could have been better prepared and equipped for the important portfolio which he assumed on entering the Government and the results speak for themselves. Under his guidance in the past few years, his Department has helped to bring to Ontario 341 new branch plants and 218 new manufacturing arrangements, has exhibited products at 14 international fairs and brought to Ontario over 185 incoming buyers and agents, his sales missions abroad brought back over $1,000,000 in export orders. The assistance of small business, the provisions of additional housing units and, last of all, the $100,000,000 Sheridan Park Research Community are merely some of the things for which our speaker's Department must care. The search for skilled immigrants continues and due in part to the farsighted policy put into effect immediately after the war, 50% of Canada's immigrants still come to Ontario. Finally, Ontario's Pavilion at Expo '67-another responsibility of our speaker-is on schedule and will rank among the largest and most tastefully designed of the 130 pavilions which will make up the Exposition.
Gentlemen--a native of Toronto, a highly-successful business executive and now a public servant, combining experience, drive and vision, it my privilege to present to you the Honourable Stanley Randall, Minister of Economics and Development of the Province of Ontario.
It is always a pleasure to be invited to speak to the Empire Club. And it is a particular pleasure today, because it is the Easter season.
In our hectic society, we rarely have enough time to reflect on life's overall purpose and mankind's goals. It is only at a season such as Easter that we pause momentarily and lift our eyes from the ledger.
Now in case you are worried, I do not propose today to bring you a sermon from the mount. But I do intend to speak on a topic of great interest in which concern for our fellow man is dominant.
Canada spends about $400 million on foreign aid each year. And each year the question is asked:
"Are we getting our money's worth?"
I don't mean in terms of monetary benefits to us as Canadians, but in terms of human betterment for those we want to help.
Those who cry, "Canada first" and "Charity begins at home," never come to grips with either the reason or true purpose of foreign aid. Are we getting our money's worth? Why do we give away 400 million dollars? Does it do any good? Should it be more? Should it be less? Just what is the objective?
Let me clarify these points by citing some recent events we are all familiar with.
When you total all the aid given by the "haves" to the "have-nots" . . . multiply it by the years given . . . and examine the results-you get some answers to many of these questions I have posed.
Eleven of the so-called emerging nations have undergone political upheavals in the past two years. Revolution and civil war appear a constant way of life. Revolutions and wars take money--lots of money. Should we not ask ourselves:
"Is our money being used to further political unrest and to purchase arms for aggression?"
Is our money used to build the leaders' palaces and fatten their bank accounts? If so, why should I, the farmer from Renfrew, the labourer from Toronto, pay for this?
I submit that these are indeed valid questions and should be answered. They must be answered, if Canada is to gain the confidence and respect of people . . . people who tomorrow will become consumers of the goods and services we produce in such abundance.
Today, we're preparing to put a man on the moon. Surely, we can direct as much foresight to our foreign aid.
Problems of great magnitude exist, but I maintain they are not insurmountable.
I believe that Canada, because of its unique qualities, can lead the way toward a constructive development programme for the developing nations.
Not too many Canadians realize that Canada ranks among the world's industrial giants. We are a leader in exporting agricultural produce and raw materials. In each of the past two years, we have passed the $1 billion mark in exports of manufactured goods -a figure thought impossible only a few short years ago. And now, we are well on our way toward two billion dollars in annual manufactured exports.
Gentlemen, we are in the big league of industrialized nations. We have the know-how and the economic strength to compete with the United States and the game they excell at--manufacturing.
Our Auto Pact should certainly convince us of our ability. Think back eight months to the headlines that read: "Auto Pact may cripple us." Compare these with today's headlines: "Automotive exports double." And in 1965 alone, the automotive agreement accounted for 13,000 new jobs and $150 million of increased investment in Ontario.
Look at the economic development in Ontario alone in the past five years.
Currently, Ontario is undergoing a record growth rate--our G.P.P. is over $20 billion. And by 1970, the total value of Ontario's goods and services should reach $30 billion.
Ontario has 34% of Canada's population-almost 6,800,000 people. Expected to hit 7,600,000 by 1970.
In 1965, Ontario accounted for 42% of all wages and salaries paid in Canada. Ontario's personal income was estimated at $15 billion. This means Ontario now has a per capita earned personal income 33 % higher than the average for the other nine provinces.
In recent months, the unemployment level in Ontario has been around 2% -lowest since 1953.
In 1965, retail sales in Ontario were over $8 billion.
To repeat, in 1964 and 1965, Canada's secondary manufactured exports were over $1 billion each year. In these two years, Canada's manufactured exports rose by 67% reaching two thirds of Canada's goal for 1970, as outlined by the Economic Council of Canada.
In the past five years, Ontario's non-durable manufacturing goods have risen 34.8 % . In the same period, total durables have gone up 75.4%. Ontario's total manufacturing during the same period was up 54.9%.
We're proud of our progress. But to continue to prosper, we cannot take prosperity for granted. Nor can we assume Canadians are God's chosen people . . . and that the world is obliged to beat a path to our door. Despite our fast successes, there is no room for complacency.
You probably read in the paper recently that a United Kingdom survey proved Canada to be the most affluent nation in the world . . . measured in terms of central heating, refrigerators, cars, telephones, washing machines, television sets. Canada led the world. And per capita, we in Ontario have more than anybody else in the world, including the U.S.A.
That's why I think it is pertinent Ontario should urge a new look at foreign aid . . . and encourage the rest of Canada to take a look at this new look.
Canada's Favourable Image Abroad
We have the three M's: Money . . . Manpower . . . Manufacturing. These are essential in any foreign undertaking.
But more important is Canada's image abroad.
Today, Canada enjoys an image of bountiful resources; democratic, hard-working people; industrial skills; and a willingness to co-operate and share. Canada has made very few, if any, enemies. Canada is welcomed around the globe.
We must exploit this favourable image-this goodwill and acceptance-to the advantage of everyone.
When people in emerging nations think of Canada, they think of Utopia. And you have only to step into their world to realize the admiration they hold for our standard of living.
We cannot leave these people to adopt other ideologies -ideologies of suspicion and mistrust. If we continue to neglect these people, we do so at our peril.
Our mutual aid should help build strong, free societies, which are nurtured until they can stand on their own. Currently, we give dollars and technical aid and wrap them up with good intentions. This is not the kind of package that will do the job.
Of course, there is an ulterior motive behind my proposition. Call it enlightened self-interest, if you will.
Canada can progress only through increased exports. To date, we have concentrated our export business mainly in three countries: United States, Great Britain and Japan. Some 74% of our exports go to these three countries--56.8% to the U.S.A.; 13.8% to Great Britain; and 3.7% to Japan. We have been confined mainly to our domestic markets . . . and to those countries that can afford to purchase our manufactured goods or raw materials. In turn, these countries have to fabricate and ship finished goods back to us if they are to earn sufficient dollars to trade with us. This is one reason why Canada today ranks among the greatest importers of manufactured goods. Another reason: our high growth rate and high employment rate have meant a high growth rate of demand for imports. This calls for a higher growth rate of exports.
The U.S.A. is the toughest and most competitive market to sell to. But we can sell them . . . we have to sell them . . . and are selling them.
The U.K. is wide open for Canadians to exploit, as I know from personal experience. But the U.K. is plagued with internal and balance of payment problems that call for restrictive measures from time to time.
Japan is one of our best customers of raw materials and food products. But owing to its highly developed industrial economy, it has to sell increasing amounts of manufactured goods to us.
Money Can Buy Poverty!
I've briefly outlined some of the opportunities and problems facing Canada's export future.
And by exporting to developing nations . . . helping them to develop themselves . . . we make new friends. By creating consumers, vast, untapped markets are opened. By opening new markets, our exports (agricultural products, raw materials, and manufactured goods) will flourish. I sincerely believe it is as simple as that.
Since we have not been successful to date in helping these developing nations with our present methods of foreign aid, it is time we asked why?
It is time we found the right answer.
Money alone is not the answer to those complicated problems of human relations.
It has been said: "One thing money cannot buy--poverty!"
My friends, I have visited countries in many parts of the world, where our foreign-aid money is buying poverty. Why? Because it is placed in the hands of those who spend it foolishly to build monuments . . . monuments to their vanities and colossal stupidity.
And while this is happening, the gulf of poverty grows wider between the masses who are in need and leaders who pursue greed. This is the old story of how money buys and perpetuates poverty.
I believe the following proposal is a practical method of channelling foreign aid dollars.
The Ghana Technical School, put up by the Canadians, cost $3 million. It turns out students with little or no opportunity to use their hard-earned knowledge in their own country. In discussing the matter with Mr. Nkrumah, the Prime Minister now deposed, he talked very glibly about the schools, hospitals, universities, the ball stadiums, and boulevards, but not about secondary industry to provide operating revenues.
The First Step
The foreign aid formula I will outline would create the economic base necessary to sustain all requirements of a modern society. Without the base we cannot hope to succeed.
(1) Canada would agree to build, equip, and tool-up new plants; design the product, supply staff, provide engineering and research and development programmes; supply marketing procedures, accounting and management knowhow.
(2) Canadian content requirement is not necessarily the first requisite. We should use local labour, material, and equipment if available. If it's not available, we could export it to them from Canada on a competitive basis. The initial return to Canada would be:
(a) a profit on our goods, services, or labour, or
(b) a management fee as the prime contractor.
(3) The end result is to provide the most modern facilities and to produce the highest quality products for the lowest possible cost. These plants must employ the least number of people, so they can not only compete against imports in their own domestic market, but participate in exports to earn foreign dollars.
Many of these nations have existed for centuries and will continue to do so. Their political philosophy most of the time is based on expediency. But though the people go on forever, the political climate changes like the weather. And a prime example of weathering the storm is the precarious but profitable career of the Brazilian Light and Power Company -a Canadian enterprise that is living proof that a soundly based Company making a worthy contribution to society can survive political change.
What I propose is to invest our foreign aid dollars in needy developing countries through the direction and management of private enterprise . . . not from politician to politician or government agency to government agency.
"The Ontario Plan"
Let me simplify what I would like to term "The Ontario Plan" for long term industrial development in underdeveloped foreign markets.
(a) Assuming 50% of our contribution to foreign aid is cash, it should be offered as an investment objective to Canadian businessmen who will produce a complete facility or package plant in any designated foreign area.
(b) To build a facility or package plant, the receiving country would have to provide guaranteed Government bonds or debentures, at a rate of interest in keeping with the risk involved.
(c) Special agreements would also be made for payments of technological and management fees, mutually agreed upon on an annual basis with the participating company. This would assure continuity of sound management and the opportunity for the new venture to keep abreast of new research and development for future growth.
(d) When bonds or debentures are received in payment (to be redeemed over 20 to 35 years, if found necessary), they would be lodged for cash with a consortium of banks and guaranteed by the Federal Government. Even if defaulted, they would be covered by a guarantee similar to those given by the Ontario Development Corporation . . . requiring no substantial sums set aside for contingencies. In this instance, Federal Government guarantees would be provided by the original amount already consigned to be spent as foreign aid. Should the country default any one year, owing to political or economic change, then the foreign aid dollars originally designated are utilized to meet the defaulting country's obligation-or a Crown Company called "Foreign Aid Incorporated" could act as banker or underwriter for the indebtedness. And foreign aid dollars allotted each year would become the working capital funds for Canadian industry to exploit for the purposes outlined.
(e) Should a country default, this immediately serves notice on all suppliers and creditors that adverse political or economic change is taking place. And until the delinquent country has corrected its position, few countries, if any, would extend further credit. Today, many developing countries jump one foreign aid programme to another by running up whichever flag will lure the prize. The end result is a financial sinkhole with no bottom.
(f) This plan would be welcomed by all Government people I have discussed it with is many countries. They have tried it the other way . . . most of the time, with disastrous results. "The Ontario Plan" is at least practical and workable.
What It Would Do--For them
In summary: what the plan could do:
(a) Invest foreign aid dollars soundly and efficiently.
(b) Serve the people rather than create police states.
(c) Develop skills and know-how to produce products for profit in these developing countries.
(d) Remove the stigma of financial handouts and let the recipients participate in the growth and investment in their own industries.
(e) Separate the political despots from patriotic men who want to pay their way and earn the respect of other nations for their integrity and industry.
(f) Create the most important ingredient for stabilizing a developing economy by producing wage earners who can buy goods and pay taxes to support, as we do in Canada, the needs of their people, without selling out their sovereignty to secure foreign aid at any cost.
What It Would Do--For Us
As Canadians, what do we gain through the plan?
(i) We make a more worthy contribution with tangible results to our fellow men.
(ii) We build, through this effort, respect and confidence with the people of many nations who today are suspicious and fearful of our good intentions.
(iii) We create consumers for tomorrow. By shipping capital goods and services today, we increase our standard of living.
(iv) We take full advantage of the wonderful image Canadians now enjoy-an image that was never brighter.
In very real terms, we do not have an alternative. Our present haphazard approach is not working and has cost billions of dollars.
In closing, may I emphasize that the good will held towards Canada in many foreign countries has been created primarily because we are the most affluent nation in the world and have no colonial ambitions.
And, rightly or wrongly, many of these people feel we have secured our independence, first, from the British . . . and second, from the Americans.
They feel this way and would like to emulate our success and independence. In my travels, I have been told time and time again:" We want to be just like you."
We can visit and work in these countries without their citizens' having any suspicion of ulterior motives. They know we aren't there for anything but business.
And by helping economic development abroad--creating jobs and raising living standards-we become an even better liked and beneficial ambassador. This is the thing that is hardest to achieve!
Remember: those who have received the greatest material blessings from Great Britain and the United States are now "anti" in their attitude.
I believe if we move forward with our foreign aid channelled through business-backed by technological and administrative advice--the opportunities for Canada and emerging nations are unlimited. I know it. I feel it. I see it--every time I travel.
In my business life, I learned long ago I was my brother's keeper. And in my political life, this belief has been confirmed again and again. Today we cannot--even if we wish to--live life unto ourselves. This is the jet age. The world sits on our doorstep. The globe has become a neighbourhood.
People of all races, colours, and creeds, in the countries I have visited, ask me why doesn't Canada join us in our efforts to live like Canadians? They ask me in effect:
"Why do you not take advantage of the trust, respect, and good will your image has created?
Why not, indeed?
We will be successful only when all Canadians . . . at all levels of business and Government . . . realize the full value of Canada's image abroad today.
And that, gentlemen, has been my Easter message to you. A message that I hope will encourage a new look at Canada's foreign aid programme . . . a programme to help us spend our dollars more wisely in the interests of the people we want to help, because these people could become our consumers of tomorrow.
By creating consumers, we raise the living standards of all people to new heights.
It is a challenge of great magnitude. But answering the challenge will bring unlimited benefits, if we pursue our major objective-helping others to help themselves!
Thanks of this meeting were expressed by Major A. J. Langley