Man-Made Remedies For A Man-Made Depression

LIEUT.-COLONEL GEORGE A. DREW, the President, introduced the speaker.

PROFESSOR JACKSON: Colonel Drew and Gentlemen of the Empire Club--I hope it will not seem ungracious on my part if I begin by correcting an all too flattering account of your humble servant, which appeared in the printed notice of this meeting. I am not the head of the Department of Political Economy in the University of Toronto. When I came here in 1911, I was the fourth senior member of the Department. Now, after twenty-one years here, I am the third senior. The real difference between the present and 1911 is that then I was the junior, in a small Department; now there are thirteen economists in the Department junior to myself. Professor Urwick is at the head of the Department: and I hope he will long remain there. As one sits in one's chair of Political Economy at the University of Toronto, one sometimes receives queer visitors. A few years ago, there came a stranger to me who said, "I hear that you are an expert on banking". I replied, "Sir, I am not an expert on banking. I am only a lecturer on banking,, which is a very different thing". He said, "Well, you are a lecturer on banking and I am an expert on banking. Shake!" So we shook.

He told me that this country suffered from a very faulty banking system. I agreed that wherever we could find possibilities of improvement we should improve it. He said that our banking system had two main faults, and that it was our proper life-work, his and mine, to correct these faults. I asked him what they were. He said it was a damned shame that our banks were allowed to take deposits and issue notes: and that if they could be prevented from taking deposits and issuing notes, all would be well in Canada.

(I notice that while the banks are still taking deposits and issuing notes, there are smaller deposits and fewer notes in circulation now, than there were when my visitor called. But I cannot see that the position of the country has improved.)

Only the other day, I had an encounter with a perfect stranger, who told me that tobacco was at the bottom of the depression. He said that sixty per cent of the children of smoking mothers died in the first two years of life. He wanted to stop everyone from smoking who was born later than 1917. I was obliged to reply to him that, whereas if his statement were true, women who smoked in this world ought obviously to burn in the next, I could not accept his statistics. Moreover, while over-indulgence in tobacco certainly poisons the system, so too does over-indulgence in roast beef.

Another man wrote to me from Kingston one April. He said (on a post card), "Sir, I shall be glad if you will tell me what will be the condition of business in Kingston, Ontario, next September, as I have a dry goods business and I want to know if I can safely leave it, to come to Toronto for the Exhibition". This last enquirer showed a touching faith in economists, which is not universally shared. Indeed" I have heard some people complain that we have had four years of depression already, and the public is still waiting for the economists to do something about it.

There is something in this criticism-but, let us add, not very much. For in Canada, the time has not yet arrived when the economists have been given a chance to do anything about the depression-except to go on studying it. Indeed, certain people are not even sure whether they approve of economists studying the depression; because every now and then some economist brings to light and publishes very disconcerting facts about it. Personally, I take the view that we need the whole of the truth about the depression; or as much of it as we can get. I believe there is no more important task at present than that of mapping out the situation, for it is only as we succeed in mapping it out that we can understand it.

There is, as it happens, one country where economists have had their innings-where they have really been asked to do something-and that is Australia. Here in Canada, the depression developed its full force very slowly. We were deep in it in Canada, before we realized our problems. By comparison, it hit Australia like a cyclone. All the brains of Australia had to be mobilized--even the brains of economists. A committee was appointed in 1931, called the Copeland Committee. It worked out a programme in detail, based upon the two central problems of sterling exchange rates and internal costs of production. Its programme is substantially the programme that has been carried out by the federal government and the central bank in Australia-and it is interesting to note today that Australia is one of the very few countries that does already show definite signs of emergence from the depression. In that respect, Australia stands in sharp contrast with the two great countries on this continent.

In my tentative, blundering way, sometimes I wonder whether in Canada the government of the day-whichever party might happen to be in power at Ottawa-would not be well advised to have at its disposal a committee of economists-not a committee to tell the government what to do-not a committee to frame a policy-but a committee which might be summoned from time to time to hear (in confidence, of course) the plans of the government. Such a committee, having listened, would not say, "The government is all right"--or, "The government is all wrong": but it might perhaps reply to the government of the day--"Gentlemen, you propose to do so and so. The consequences of such action are likely to be thus and thus. If you want to produce these consequences, you had better execute these plans: but if you do not want these consequences, you had better change your plans".

I make bold to say that most policies; of most governments, are carried out today without the remotest conception on the part of those who frame these policies, as to what their ultimate consequences will be. That is why, when they go to the polls, political parties are alternately stricken with disaster. Yet it is often possible to trace with considerable precision the consequences of a policy. What we find necessary before acting in our private affairs is surely just as necessary, where public affairs are concerned.

This notion that an economists' committee might render good service is by no means altogether fantastic. Economists, as a class, are not interested in making money. Like most scientific men, they care most for knowledge. They can keep secrets. There is abundant evidence of this. And they have as a class, little interest, or none, in party politics. It is true that the distinguished economist from Montreal who spoke here last week proclaimed himself a stout Conservative: but that is an isolated exception. In this, as in other respects, Dr. Leacock is unique. I say without hesitation that except for him, I cannot recall a single Canadian economist in my circle of acquaintance, who has any partisan affiliations.

In any case, there is no such committee today. There is little Likelihood that any Canadian government will create such a committee-still less, that it would be given serious attention. And meanwhile, here am I, charged with the task of discussing before you, "Man-Made Remedies for a Man-Made Depression". It is not the kind of task to make a man dogmatic. Before the tremendous forces that have produced, and are prolonging the depression" any man of sense is likely to speak with humility. What should be the first fruits of such humility? I suggest to you, first of all, as a duty, that we should be prepared to listen to the results of any sincere thinking, conducted in any quarter. One man believes that our great need is balanced budgets. Another believes in greater government expenditure-in bigger and better deficits. One believes in more tariffs. Another believes in the destruction of existing tariffs. One believes in a shorter working week. Another believes in harder work for less pay. One believes in reducing the gold content of the dollar. Another believes that we should altogether divorce ourselves from gold. One believes there should be less government in business. Another believes in socialism.

I say that all of these men should be given a hearing. All that we have the right to require of them is readiness to face facts, and sincerity. We harm ourselves, and we harm Canada, when we try to laugh them out of court. We harm ourselves and we harm Canada, when we decry their proposals as radicalism. In particular, when we take a reactionary stand ourselves and describe as a Red anyone that does not agree with ourselves, we help to stampede our neighbours into real radicalism.

But though we should give a hearing to the results of all sincere thought, no matter who the thinker may be, we should be very critical of these proposals. Each of them so far has appealed only to a group. None has commanded general assent. But each has been accepted by the group that now supports it, with uncritical readiness.

We should be very critical. Personally, T regret the general assumption, which underlies most of these remedies, that what we need is some trick o f economic adjustment--for that is what each of these proposals is, in reality. For underneath the belief that we can cure the depression by some trick of economic adjustment lies another belief--that this depression is the result of a fault in our economic mechanism, and not the result of faults in ourselves.

I make bold to take another view. I lay down the proposition that the root cause of the depression lies in no fault of this economic mechanism by which, we live, but in ourselves. The mechanism is not a bad mechanism: but we have shown ourselves not good enough to work it. This is not to say that the mechanism of our economic life is perfect. It is in a process of continuous change. But the main fault is in ourselves. Not till we recognize this, shall we succeed in making this mechanism function properly once more.

We have before us the picture, in our daily press, of a Russia which within the past five years has bought" or made, incredible quantities of machinery: and the picture of millions of careless and ignorant peasants ruining that machinery because, in a technical sense, they are not fit to look after it. The picture has a local application much nearer than Russia. Here is the most marvellous piece of machinery that the world has ever seen-our own economic system-more marvellous, by far, than the tractors on the Russian farm, the dynamos in the power station-but also, much more delicate. We, like those ignorant and careless peasants in Russia, have been ruining our own most precious piece of machinery: because we have not been fit to use it. That is the reason, and good reason" for speaking of this as "a man-made depression".

There has, of course, been a certain readiness on all hands to recognise this as a man-made depression. We have been ready to say that the French have done much to bring about the depression, by hoarding the world's gold. We have been ready to say that the Germans have done much to bring about the depression by borrowing more than they could possibly repay. We have been ready to say that our cousins, the Americans, have done much to bring about the depression, by their attitude on the war debts. But nobody has been particularly ready to claim for himself a personal responsibility for the depression. Nobody has yet said, "Let me confess how" I have helped to bring on the depression-or to make it',,.' worse". Nobody has yet said, "Do not bother me to take out the mote from my neighbour's eye--I am still busy with the beam in my own eye".

Nevertheless, speaking as one man who can only speak his own thoughts sincerely, I firmly believe that the depression will last till we recognize it as man-made--as due to faults in us--and until we begin with real sincerity to correct those faults. Perhaps--and here I tread upon the threshold of theology-perhaps the depression ought to last, until we recognise it as due to faults in ourselves.

We have been apt to think of the depression as, in its essence, an "Act of God." I do not think of God so meanly, as to suppose that it was launched for nothing upon an unsuspecting world. The more T think of economic problems-I do not know much about them, but I have analysed them all my life-the more strongly do I hold to the view that economics is an exemplification of the moral law. If I am right, then statesmanship has a meaning. If I am wrong, then statesmanship has none, and public life itself is meaningless.

What are these faults in ourselves, to which I have made reference? I suggest to you that they may be summed up in one word-selfishness: but that as this selfishness expresses itself in different ways, sometimes as the greed of nations, sometimes as the greed of social groups within a nation" sometimes as the greed of individuals in its various manifestations, it needs a series of labels to describe it.

Here is a machine of which all of us are parts. Each individual person is a part. Each social group within a nation is a part. Each nation is a part. The harmonious working of the machine-which could provide comfort for us all-depends upon the harmonious working of the parts-demands an all-round subordination of selfish interests to the general interest. It demands co-operation in such a measure as none of us, perhaps, has realised. Each expression of a selfish interest-each refusal to cooperate-sets up friction within the machine. If there is much friction, the machine slows down, and all suffer. If there is enough friction, the machine stops.

Today, the machine has slowed down. It is running at only half speed. Each month, it runs a little more slowly. We can, if we try, stop it altogether. All that we need do for this purpose, is to continue doing what we have been doing so successfully--to give free play to the selfish interests which attack us, as individuals, as members of the social group to which we belong and as citizens of the country to which we belong.

To work this out in detail would take a long time. To work it out in technical language, in the language of economics, and to cover the field completely, would be the work of years. Let me therefore take only two things as illustrations, since these two things are, I believe, the most important of all for our economic salvation. I refer to nationalism, and speculative greed.

Nationalism is a new birth of time. It is a product of the last four hundred years. We have fought its manifestation in other nations. We have been proud of its manifestation in ourselves. Nationalism, as manifested in ourselves, we have been all too ready to recognize as patriotism-and we have completely forgotten the dictum of that great English apostle of common-sense, Dr. Samuel Johnson" that "patriotism is the last refuge of a scoundrel." Nationalism has been the main cause of all the great wars since the star of Napoleon appeared. Nationalism was certainly the main cause of the Great War, in which all of us, each in his own degree, did suffer: from which all of us are suffering now. Today, nationalism expresses itself in armaments; and in the fatal facility with which our long-drawn-out disarmament conference today finds reasons against disarming.

But even more effective in its results than the building of tanks and submarines, is the restrictions of trade which must be recognized as another expression of nationalism. Trade is being restricted all over the world today, with an ingenuity not equalled in our pervious history. Not only by the simple method of high tariffs, but by special valuations, quotas, prohibitions of import, rationing of foreign exchange, and various other devices, trade is being destroyed, and quite deliberately destroyed, all over the world. Reckoned in volume, one-third of the world's trade had been destroyed, when the leaves turned red last Fall. Reckoned in value, three-fifths of it had been destroyed. The remaining two-thirds (reckoned in volume) or two-fifths only (reckoned in value) continues today to shrink before our eyes, and is shrinking faster today, so far as we know, than at any time since the depression began.

Now the task of preventing men from trading with one another is not difficult. It is, difficult to foster trade; to devise policies which will cause men to trade increasingly with one another. But it is easy to stop them from trading-or at least, to put trade on a bootleg basis. I do not exaggerate when I say that most of the world's political leaders, during most of the time since the War ended" have been searching for new methods of stopping men from trading across national boundaries.

Most of this has been openly done. It is an expression of national policy. Before the depression began, it was in the hope of securing some advantage for one's own nation, at another nation's expense. Since the depression began, it has been in the hope of unloading the consequences of the depression upon others.

The results of it are visible today. They may be seen, all over the world, in stagnant seaports, curtailed railway services, closed factories, impoverished farms, bread-lines, and defaulted debts.

I do not mean that the whole of the depression is to be laid at the door of these nationalist policies. God forbid! Our own action as individuals has been responsible for so much of the depression, that it would be folly to lay the whole of it at the doors of the politicians who, jointly and severally, have been destroying trade.

What have we done as individuals? Our anti-social activities, as individuals, reached their highest form in the five years of frenzied speculation, between 1925 and 1929. 1 was guilty-you were guilty-most men who could save or borrow the necessary sum of money were guilty, between 1925 and 1929.

In those years, we determined to get rich quick. We desired to live without working, on the sweat of our fellow men-and most of our fellow men, with curious perversity" decided to live on our sweat.

Vast sums of money were lent abroad. Even Canada became, for a time, an exporter of capital to other countries. The money so lent, by those countries which could export capital, to those which needed loans, financed the sale of exports by the lenders to the borrowers. Money was lent from nation to nation in such enormous quantities that the transfer of it literally dragged our goods over the rising tariff barriers of neighbouring countries--thus, to some extent, defeating or at least deferring the success of nationalist policies in strangling the world's trade.

But what happened in 1928 and 1929, in the final boiling up of the speculative pot in Wall Street? There is no mystery as to what happened. After all, Wall Street is only the St. James Street of the United States-and the whole world has access to Wall Street when it wants. In 1928 and 1929 occurred the final frenzy which has destined to shake civilization. Men were growing fabulously rich-on paper-every day. Men were growing rich, not because they had contributed to the welfare and happiness of mankind, but because they had bought International Nickel (or Noranda, or Smelters, or General Motors, or United States Steel, or any one of a hundred other stocks.) We decided to do likewise. The whole world decided to do likewise. There was such a flood of money from the channels of ordinary business into stock speculations, as the world had never seen, and, I hope, will not again see. From south, west and north, American money flowed to New York. From north and west, Canadian money flowed as fast. A great tide of European money flowed across the ocean to New York. Finally there was not enough money left in the ordinary channels of business to conduct the trade of the world; and the trade of the world broke down.

The breakdown was especially marked in the case of the borrowing countries which, having been encouraged to borrow freely, had borrowed like drunken sailors; and bad used the money to purchase the goods they needed in a large measure, American cotton and Canadian wheat. Thus, we flooded Wall Street and the stock exchanges elsewhere, to capitalise the profits of our trade; and in flooding the stock markets with our money, we denuded the trade channels of necessary cash and credit; so, first undermining, and then destroying, the trade profits that we hoped to capitalise.

If ever a generation digged a pit and fell into that pit, it is the generation to which we ourselves belong.

This description, as I confessed in advance, is all too brief. But it may succeed in bringing home at least to some who have patiently listened for the past half hour, how our selfishness-organised greed in fatal association with individual greed-made impossible a continuance of our prosperity. Yet, in the face of this record, we who belong to this generation have enough effrontery to discuss this depression as it were an "Act of God!" It is as much man-made, as this magnificent room in which we sit assembled.

And if the depression is man-made, what is to be said of the manmade remedies at present under discussion? Does it not follow what man-made remedies, to be fundamental, to remove the fundamental causes at the root of our troubles, must begin with a change of heart in us? Can we hope to keep in motion the wonderful economic mechanism by which we live, if we persist in causing the friction which is now threatening to stop it?

I think not. It is possible, of course, to take two views. The Marxian Socialist, the Communist, makes out an excellent case for believing that the present system is all wrong--that it possesses inherent defects which must logically result in breakdown--that is, whether by violence or otherwise, in revolution. He has a complete philosophy of history to back his views--a philosophy of history which many people hold unconsciously--possibly some members of this Club among them--who would be horrified if I suggested to them that they have become followers of Marx.

But that is not the view that I have put before you today. Rather, I have tried to divert your attention from proposals--currency proposals, taxation proposals and others-which I regard as essentially tricks of economic adjustment, to proposals which go deep into the heart of man, begin with his own conscience. These. I do regard as fundamental.

If, in putting forward this opinion, I am right, then it follows that if, by some trick of economic adjustment, we did succeed in "'curing" the depression, we should only gain for ourselves a respite: for the same evils in the human heart which have brought about this depression, would inevitably, sooner or later, bring on another, to complete the work of this depression, and bring down in ruins our civilization.

Coming from an economist, this is no doubt a strange doctrine. You met to hear a discussion of inflation--your attention has been directed to the Golden Rule. But I never spoke more sincerely than I speak to you this 'afternoon: never with more conviction.

Looking back on the past four years, I wonder that the realization of these things has not brought forth a new religious movement. Not a movement like that of the so-called Oxford Group, which seems to concentrate altogether on individual attitudes and individual conduct. Not a movement like Christian Socialism in its many variations, which seems to concentrate on collective attitudes and collective conduct: but a movement which recognizes the same principle as the basis of collective and personal welfare: which aims to drive out selfishness from the heart of man, and condemns the nationalist expression of selfishness in armed warfare and tariff warfare, no less than it condemns the personal expression of selfishness in all its forms.

I still think that we shall have such a movement that it is woven in the fabric of our destiny. Against the time when it arises, I commend it to you. The view that f have presented may prove, after all to have been wrong, as it will now be called, by the "practical man", unpractical. None of us is gifted with infallibility. But if these views are indeed wrong, then when the lists are cleared and all of us take sides, you and I would be better to be wrong with Jesus Christ, than right with margin speculators and the nationalist statesmen. (Applause.)