- The Empire Club of Canada Addresses (Toronto, Canada), 28 Feb 1935, p. 275-295
- Purvis, Arthur B., Speaker
- Media Type
- Item Type
- An outline of the general conditions with which we are faced in order to paint the background upon which any effort in industrial life has at this time to be superimposed. The present attack on depression problems based on a general theory that industry has overbuilt and the speaker's belief that this is a fundamentally wrong conception, that every effort should be bent towards producing that state of mind in industry as a whole which will encourage it to go forward with confidence and take risks in adapting these new scientific ideas to the needs of our population. The possibilities that are immediately before us. An examination of the depression through which we are passing. Evidence of the belief that the current difficult period is merely different from previous depression periods in degrees alone, and reasons for it with illustrative examples. The present postwar crisis. Canada's steady improvement in economic conditions and how that improvement has been made manifest. The widespread nature of this depression. The limit to what any one country can do to recover its normal comforts until the international situation rights itself. The dangerous period ahead of us in our domestic affairs. The importance now of the quality of character and mind of our people. The railway problem still to be dealt with. Canada's future. The impending election and the greater danger of following the wrong road. Lessons already available to us from Russia, Italy, Germany, the United States and the United Kingdom. The contrasting atmospheres of doubt and defeat in the United States and that of hope and confidence in the United Kingdom. The need for Canada to work through old and tried principles which from the experience of the ages we know can be depended upon in due course to bring results while in the meantime caring for the less fortunate members of society. Recognizing that the cry for reform of industry comes form the natural public reaction not only to a major depression but also to certain failings in the handling by industry of industry's problems. An emphasis of the speaker's conviction that it is vital that the economic system should maintain a continuous and automatic urge upon every individual to improve his material welfare so as to provide him with the opportunity to develop himself … through the medium of the profit incentive motive which has made possible the truly marvelous forward strides which have been achieved in the standard of living in the more civilized countries. The alternative to this system. Making more definite moves towards the provision of an ethical background similar to that which has been more successfully built up in the professions. Up to the manufacturer to define to a greater extent the principles on which he intends to work; then also up to industry to police its own system to see that those principles are maintained. Suffering today to some considerable extent from the loss of the generation missing as a result of the War. The speaker's acceptance of the implication that where manufacturers fail to pay proper regard to the public weal, we should expect and look for Government regulation, and his certainty that the extent of the Government regulation imposed upon us is, and will always be, the measure of our own failure. The four general obligations of the manufacturer: to the consumer, to the employee, to the stockholder and to the Government. The need for principles to be laid down governing such obligations. A discussion of each of these obligations follows. Accepting a reasonably full measure of publicity as to the record of the manufacturing industry.
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- 28 Feb 1935
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- Full Text
- MANUFACTURING AS A PROFESSION
AN ADDRESS BY MR. ARTHUR B. PURVIS
Thursday, February, 28, 1935
Before the guest speaker of the day, Mr. Arthur B. Purvis, was introduced, Mr. Dana Porter, the President, announced the appointment of the Nominating Committee, for the purpose of nominating the Executive to come into office for the coming year, as follows:
DR. R. N. BURNS
MR. JOHN D. SPENCE, K.C. MR. ELLIS H. WILKINSON MR. JAMES ARMSTRONG MR. BEVERLEY MATTHEWS MR. W. M. HARGRAFT
MR. DANA PORTER, the presiding President.
MR. DANA PORTER: I have today a pleasant duty to perform. We have with us today, in addition to the speaker and guest of honour, Mr. Purvis, one of our members who has come back from Montreal, Major Baxter, the Past-President of this Club.
As you probably know, Major Baxter left Toronto some little time ago to take up his residence in Montreal, in association with McConnell and Fergusson, the same company with which he has been associated in Toronto, and I wish, on behalf of the Club to express our best wishes and all the feelings we have toward him as a result of our contact with him during his period as President of this Club. We know the Club went through some very difficult years, and perhaps the most difficult financial year of the Club was the year 1933-1934, over which Major Baxter presided with skill and tact.
I wish, therefore, on your behalf to express our appreciation of Major Baxter's services to the Club and our best wishes to him during his residence in Montreal. (Applause).
MAJOR BAXTER: Mr. President, Mr. Purvis, Gentlemen: Naturally, I am greatly surprised to have this tribute paid. I, at the same time, feel highly flattered and delighted that you should remember me so kindly. The finest thing I think that can happen to any man is to occupy the Presidency of The Empire Club. The chair honours the man, not the man honouring the Chair. Thank you very much for your good wishes. (Applause).
MR. DANA PORTER:--In one of Thomas Hardy's novels there is represented a Scotchman who being a long way from home used to sing songs which reminded him of his country and one of those songs went something in this way. "For„ it's hame, and hame, and hame, I would fain be; Hame, hame, hame, to my ain countrie"-and he was so successful in his song, in arousing the emotions of his audience and rendering them so melancholy as the result of his being so far away from his own country, that one of the audience was moved to ask, "What did you come away from your own country for if it wounded you so much to do so?"
Now, we don't know why Mr. Purvis left Scotland, but perhaps we know that one of the reasons why he does stay away from it and is with us still, is because he has made himself indispensable and. we won't let him go home.
Mr. Purvis is a Scotchman by birth. He has engaged in, as the representative, leading British industries in South Africa, South America and the United States and about ten years ago came to Canada where he entered into industry here and is now, as you know, the President of Canadian Industries, Limited. But, in addition to that, he has picked up several other Directorates, and some, I have since been informed, in addition to those mentioned on the notice card. So, we have Mr. Purvis today, Director of the Bell Telephone Company of Canada, the Bank of Montreal, the Sun Life Insurance Company, The Canadian Safety Fuse Company, Limited, the Dunlop Tire and Rubber Goods Company of Canada, General Motors Corporation, and, perhaps, some other companies that have not been brought to my attention.
The subject on which Mr. Purvis proposes to speak is "Industry as a Profession," and I think I may safely say that the reason why Scotchmen do make themselves indispensable when they go away from their own country is that they have that sense of fair dealing with every person with whom they come in contact, they have that very highest standard of accuracy and they are prepared to work just a little longer than anybody else. Mr. Purvis is one who has not made business a racket, but he has made business a profession. He will now address you on the subject, "Industry as a Profession."
MR. ARTHUR B. PURVIS: Mr. Chairman and Gentlemen: The reason that I left Scotland was because Scot land couldn't support me. In making the change the only claim that I have to put on record is that I chose well in coming to Canada. I have no desire to change back even to my own country, Scotland, and when a man can say that, I think he can say no more.
"The times are out of joint" and it behooves us all to express such convictions as may be growing upon us even though, under more normal conditions, we should prefer to remain silent. I have chosen as the subject matter of my talk with you today, "Manufacturing as a Profession." However, before it is possible to reach such particular suggestions as I may have to make in that regard, it is necessary to outline the general conditions with which we are faced in order to paint the background upon which, as I see it, any effort in industrial life has at this time to be superimposed.
In the ordinary course it might be unnecessary to attach much weight to this background, and we could, instead, confine ourselves to considering strictly what manufacturers can do in their own particular field to help the situation. However, particularly in North America, the attack on depression problems at the present time seems to be based on a general theory that industry has overbuilt; has in effect, therefore, mortgaged the progress of the next decade; and that since we can, as a result, expect little revival in the near future, our main efforts, in common decency when so many are in want, should be bent not towards increasing the sum total of goods available but towards the more equitable division of those already in existence.
I believe this is a fundamentally wrong conception; that in actual fact at the present time the scientific knowledge already available to us clearly demonstrates there is a greater field of activity immediately available than at any previous time; and that, therefore, every effort should be bent towards producing that state of mind in industry as a whole which will encourage it to go forward with confidence and take risks in adapting these new scientific ideas to the needs of our population.
You may ask what are these possibilities that are immediately before us. I would say that there is available enough scientific progress in the fields of modernization of the houses in which we live and in the air-conditioning of those houses; in the modernization of railway equipment; in the field of the aeroplane and in improvements even in the automobile industry-far as it has gone in recent years-to keep us all busy for a considerable time to come. Developments along such new lines do not, however, flourish unless there is confidence in the future and we have, therefore, to make up our minds whether we do believe in that future or not. It may very well be that some few individuals have obtained a larger share than their contribution warranted, but surely that is relatively unimportant and is in any case no reason for discouraging the efforts of those who have the ability to increase the total available. "Carving never increased what is on the platter."
Apart from the necessity of settling in our minds this fundamental point, for some time past it has become increasingly evident that there is a greater and greater disposition to regard the depression through which we are now passing as something completely novel in type, involving a recognition that the system, as we have known it, must be entirely changed. And, curiously enough, this viewpoint has been established in the minds of many, simply as a result of experiences during the short period from 1930 onwards, since for some years before that time it was currently stated, and believed by many, that the economic system under which we work had achieved a new level which had emancipated mankind (so far as North America, at least, was concerned) from its old trials and tribulations. To my mind neither the boom nor the depression view portray anything but the tendency of human nature to put too great emphasis on a purely temporary position, for in the life of nations such periods as those in question are of course negligible.
The belief that the current difficult period is merely different from previous depression periods in degrees alone is borne out by reference to the history of depressions which succeeded previous great wars. The difference in degree resulted, first, from the fact that the last war embraced so large an area as to exempt no important nation the wealth of which could be drained to rehabilitate the whole; second, from the fact that the improvement in communication and transportation has led to so much greater a degree of economic interdependence amongst the nations as to bring about much more damaging repercussions from any disturbance in these relations; and, third, from the fact that the wave of post-war stock market speculation in this instance embraced, owing to the brokerage facilities available, a much wider section of the population.
As a matter of interest we can turn to the accounts available of earlier conflicts.
In the case of the American Revolutionary War, the panic of 1791 did not take place until eight years after the signing of peace. In the case of the subsequent War of 1812, it came five years after the signing of peace, namely, in 1819. The situation in the United States at that time is described by James Trusloe Adams much as follows "Hysterical legislation, commercial and financial derangement due, as post-war panics are, to the war itself, a panic coming a considerable number of years after peace was signed, wide-spread bank collapses--federal finance tinkering, government investments – stupendous--in bankrupt enterprises the world over." In the case of the Napoleonic War the Edinburgh Review in 1816 said
"During the last twelve or eighteen months, however, the country has been suffering severely in every direction; its home trade and foreign commerce. The return of peace after unexampled victories has brought no relief but has rather confirmed our apparent ruin,;and all classes of men more or less feel the effects of some hidden rottenness in our system, the causes of which no one seems able to discover, much less to remove."
Again the Bradford Observer, blaming the American Civil War, the wars between Prussia and Austria in 1866 and between France and Germany in 1870 and 1871, in 1878 described conditions as follows
"Let us summarise the causes of the complaints which are by no means confined to this country. A succession of wars, excessive armaments, and increased taxation: an unhealthy speculation subsequent to an extraordinary displacement of capital; a fictitious prosperity and exaggerated rate of wages and a spirit of extravagance pervading all classes; the reaction intensified by enormous losses on investments on Turkish, Egyptian and sundry South American bonds, no less than in joint stock undertakings at home, which all promised large dividends and ended in failures; famine in the East occuring at the same time when a fall of 20 per cent in the value of silver disorganised one of our most important markets; and lastly, the failure of banks and firms in consequence of an inflation of credit beyond all previous precedents."
Even in the case of the smaller Boer War, by December 1902 England was suffering from depressed conditions and the Saturday Review said
"At the beginning of the winter the ordinary distress which prevails amongst those whose occupations are affected by the season is likely to be intensified by the general decline in industry and trade which has been making its influence felt for some time and will in the course of the ensuing year most probably approach to something like a crisis . . . There can be no war that does not disorganise the labour market; and one of the features of the present distress which has attracted particular attention is the case of the Reservist who, even if trade had not declined, would have found themselves seeking for situations which had already been occupied. It is easy to understand how the artificial stimulus which war supplies to certain branches of industry is succeeded by the natural reaction and lethargy when it is removed. Thus in ironworks, and shipyards and dockyards trade becomes dull, almost comes to a standstill and men have to be discharged."
This seems proof enough that our present situation is far from new in type.
Coming back to the present postwar crisis, I am reminded of a talk I had with a prominent American in the middle of 1932. At that time, you will remember, elections were impending in the United States, and I had asked him as to the business outlook there. The reply--that of an older man--was somewhat illuminating. He paralleled the times they were going through with one of the more serious depressions suffered by the United States-in 1893-the conditions of which he well recollected. He stated that at that time, with the worst of the depression force spent, it became a race between quack remedies liable to be introduced to meet the popular demand for an ending of the depression, and the forces tending towards that normal recovery which it has been found can in any depression sooner or later be relied upon to assert itself. At the time Mr. William Jennings Bryan was the proponent of the most popular quack remedy, and was endeavouring to win the election on the cry of "Free-Silver." Mr. Bryan stumped the country in favour of his "Reform" of the currency. Fortunately, he could only address some 10,000 people a week, with the result that the lure of the "easy road out" did not reach sufficient numbers in sufficient time. The natural recovery set in, and, automatically, Mr. Bryan and his silver reforms were overnight forgotten. My informant--bear in mind this was in the middle of 1932--likened the position of the United States in 1932 to its position in 1893, and stated his fear was that the publicity enjoyed by the opportunist type of politician in reaching vast numbers through the medium of the radio might bring about the reverse result on this occasion, before natural recovery could be counted on to show up and head off the disaster. In the light of the situation now obtaining in the United States, the view then expressed showed unusual perspicacity.
Since that date we in Canada, avoiding in large degree the series of quack remedies introduced in the United States, have seen a steady improvement in economic conditions. This improvement manifested itself in Canada very definitely in May, 1933, and the forces of natural recovery have continued ever since. Even the durable goods industry showed appreciable improvement in 1934, though, from experience in previous depressions, we know there is generally a two years' lag in that field as compared with the secondary industries, and we cannot, therefore, expect a material change for the better in durable goods until around the middle of this year. As to whether this improvement is imminent or not, I, for one, have no doubt, for the grim, but in this case helpful, factor – obsolescence--is taking its score unseen but relentlessly, and, if confidence can be maintained in Canada, will now very quickly contribute its quota to the natural recovery.
It would be comforting to think that we can count on all being well in a comparatively short time. There is one contrary factor, however, referred to incidentally above, and that is that in this particular depression the damage has been spread over a greater world area. Unfortunately, also, the tendency as a result of war-debt burdens has been for the nations to move along more nationalistic paths in recent years, and this just at the very time when international recovery required an opposite trend in order to stimulate a freer flow of commodities between the various countries. There is a limit to what any one country can do in recovering its normal comforts until this international situation rights itself. And however well, therefore, we conduct our affairs at home it may be we shall find ourselves pausing in the upturn at some point until the barriers to restoration of trade between nations begin to break down.
Meantime, we have a dangerous period ahead of us in our domestic affairs. This arises in the main from the inevitable tendency of human nature in periods of stress, first, to find scapegoats for its sufferings,, and, second, to assume simple solutions are possible for what are really very complex problems, as a corollary favouring leaders who claim to be able, at a stroke, to cure maladies which do not yield in fact to quick treatment because they are founded in deep-laid causes.
It is exactly at this point that the quality of character and mind of our people, and of those whose duty it is to guide them, becomes most important. Should the demagogue with his quack remedies win in Canada, the standard of living will inevitably be lowered for every citizen because of the resultant lack of confidence, and of the discouragement of the constructive forces of leadership, which forces represent after all the greatest asset any people has in achieving efficiencies and, therefore, in increasing the sum total of goods available for division amongst us all.
At this point one cannot help marvelling at the cruelty towards the rank and file of the nation--unconscious cruelty in the case of the sentimentalist genuinely obsessed with the hard lot of the "under dog", and, perhaps, more conscious in the case of many of those who use the crisis to endeavour to set class against class in an effort to destroy the system-of those who raise false hopes of easy and quick cures for problems which have their seat in human failings. Such men are the opportunists in the national life, and in a movement towards opportunism, as distinct from adherence to principles, lies the present menace to the well-being of our people. To an industrialist who knows that in business ventures the path of opportunism is the path to bankruptcy, it sometimes seems that in no field is opportunism so rife as in the field of politics-that expression of the successes and failures of us all. Our need is for statesmen, not politicians, and by statesmen I mean men founded in principles.
Canada through the merits of her people, and with the help of as effective a political leadership as has been enjoyed during the depression by any nation in the world, has handled herself excellently so far, and, as can be seen from the League of Nations report, has economically done as well as, and in most cases very much better than, almost any other nation-within the limits that are within her own control and are not dependent upon the policies of other countries.
True, the voice of the people has not been insistent enough to bring about a situation where that national sore--the railway problem--has yet to be dealt with. True, also, that the policy in handling the wheat crop may well cause misgivings to those friends of the farmers who know the advantages of retaining a good market for one's product, as distinct from endeavouring to regain it after it has been lost to competitors. And, again, it is true that as a country we still suffer badly from the expenses involved in unnecessary duplication of Government. Unfortunately, in some of these respects the tendency is to avoid the arduous task of informing opinion along the lines necessary to produce in the public mind an insistence on the cure of these ills-without which cure the more thinking of us know that, sooner or later, our country must fall behind in the race to produce better conditions for its people.
Nevertheless, the record of Canadian recovery to date is impressive beyond measure. What of the future? For, with an election impending, we know we are necessarily in greater danger of following the wrong road. Here, fortunately, Canada is free from the necessity of undertaking her own experiments. Before her in the last decade, due to wax unrest, there have unrolled experiments on an unparalleled scale and of widely divergent types, and in some cases the outcome of these experiments can= be foreseen. Will Canada learn from these? Or will her people permit themselves to be used as "guinea pigs" for a large scale experiment, with all its admitted dangers of disaster to her standards of living?
What lessons are already available to us? In the first of the post-war experiments in Russia, from which many of us hoped for a real contribution to the working out of social problems, an effort to remake the world overnight without reference to human failings; an effort to undertake the control and planning of practically every human activity is, we are credibly informed, being transformed into an experiment in State, as distinct from private, capitalism, and, in the meantime, in the lust for power of a small group, has been accompanied by cruelties to whole sections of the population: worse than any charged against private capitalism by its worst enemies.
In Italy, we see a leader of unusual ability and force of character who has undertaken to re-inculcate, and has achieved a fair measure of success in re-inculcating, self-respect into a great people--in the process, however, adding enormously to the burden of public debt--and who has placed such emphasis on obedience to the State as to stake everything in the future upon the chance that there may be another leader of equal ability to guide the affairs of the nation when he disappears.
In Germany, we have the example of a war-suffering people, temporarily almost deranged by the extent of their problems, depositing those problems on the door-step of a dictator whose course of action has aroused grave misgivings in the minds of the world at large.
Coming nearer home, in the United States we have in the last two years seen the arrival of the quack remedy on a colossal scale. However sincere and well-intentioned the effort may be, the spectacle of such a great nation branching out on untried ground in an effort to take the more acceptable course from the viewpoint of the man in the street, namely, to buy back prosperity with unlimited expenditures from the public purse, is, to say the least, alarming. The effort there has included such steps as deliberate monetary manipulation in an effort to adjust the debt burden of individuals by influencing the price level, leading to the point where in the recent Supreme Court decision we saw a reprimand to Congress itself for having invalidated its own obligations; active intervention in the running of industry by the Government itself; and a rapid increase in the national debt pointing to still heavier increases in taxation in the early future to serve that debt. Further, these steps have been accompanied by a severe arraignment in the public eye of industrial and financial leadership without discrimination between good and bad leadership; and the creation of a belief on the part of labour that its interests and those of capital are irreconcilable. The result of these measures has been a rapid increase in the area of stagnation in the durable goods industries, owing to the growing lack of confidence in the future on the part of industrial leaders, and a progressive disintegration in the character of the people through the discouragement of thrift. Accompanying all these experiments, we see gradually being built up a bureaucracy which through its voting power will tend to perpetuate itself whether performing useful service or not.
How unlike this course to that of the United Kingdom. While that country had suffered as much as any other country in the World War, faced with a national emergency arising out of the war which had driven the country, off its traditional adherence to the gold standard, a national government was formed in the realization that the two-party system could no longer hope to do what was necessary to help bring about recovery at the maximum possible speed. Immediate steps were taken to balance the budget. Labour and capital were encouraged to co-operate in the common cause. Industry was also encouraged to formulate for itself--a most vital point--plans for rationalization and reorganization; with the understanding that the Government would examine those plans with the aid of the truly excellent civil service organization built up over many years with men of the highest calibre; and would then decide if and where it could support those plans by Government action; thereafter encouraging industry to put them into effect. Hence a state of confidence has been built up in the industrial life of the country which has unleashed effort and put men to work, with particularly favourable effects in the construction field, and this despite the fact that there is a possibility of a bureaucratic socialistic government in the offing. My recent visit to England, coupled with visits to the United States, brought home to me most emphatically the contrast between the atmosphere of doubt and defeat in the United States and that of hope and confidence in the United Kingdom.
The lesson from all these experiments seems to be clear, i.e., that there is no easy way out; that opportunism only postpones the evil day, and that, to survive, we in Canada must work through old and tried principles which from the experience of the ages we know can be depended upon in due course to bring results, while, in the meantime, we must care for the less fortunate members of society until those results have been achieved.
So much for the general lessons available to us as a Nation. Does this mean that there is nothing for us to do in the field of industry to see that the sufferings of this depression result in the maximum forward movement obtainable? For we must recognize that the cry for reform of industry comes from the natural public reaction, not only to a major depression in itself-the inevitable outcome of the World War-but also to certain failings in the handling by industry of industry's problems.
At this stage I should like to emphasize my conviction that, if we are to harness to the maximum extent the endeavours of human beings to solve their economic problems, it is vital that the economic system should maintain a continuous and automatic urge upon every individual to improve his material welfare so as to provide him with the opportunity to develop himself and his physical and mental enjoyments to the highest degree, and, in my belief, it has been the automatic nature of the pressure exerted on individuals through the medium of the profit incentive motive which has made possible the truly marvellous forward strides which have been achieved in the standard of living in the more civilized countries. Nearly everyone will admit that in the field of production, where it is, perhaps, easier than in the distribution field to harness the advantages provided by scientific progress, our problems are today, in the main, already solved, and this solution has been arrived at precisely as a result of that constant pressure automatically directing the effort of human individuals along the same general lines. We now have a similar task before us in the field of distribution, where the attack is not advantaged so quickly through scientific improvement. But that these distribution problems will yield to the constant pressure of self-interest under the profit incentive motive I, for one have no doubt.
What is the alternative to this system, the machinery of which is constantly lubricated 'by the profit incentive urge? To accept as a substitute theoretical planning by inexperienced reformers who, without ever having earned the right amongst their peers to be judged successful in handling the practical problems involved in human relations, expect us to accept their promises that they have such unique ability as to be able to direct the infinitely complex industrial and financial relations of individuals and communities by telling each one of us what to do at every hour of the day? Were we all "robots" this might work, but as human beings we know it will not, and certainly such national experiments as have recently been made available to us confirm the conviction that such a road is a false one. Nor is it reasonable to suppose that the passing over of our problems of governmental control will develop a breed of supermen more capable to handle these problems than the present breed.
But let us assume for the moment that in Canada at least we shall not try to swap horses in the middle of such a fast-running and treacherous portion of the stream, and that the intention will be to encourage efficiency and success where it is achieved on sound and fair lines. In that case, what can industry do to meet the legitimate side of the cry for reform, to which I have referred?
Here I must speak primarily from my experience in the manufacturing world. And my answer is that in that world we must ourselves make more definite moves towards the provision of an ethical background similar to that which has been more successfully built up in the professions. All sound growth comes from within, and the alternative of coercion from without is a poor substitute.
It is up to the manufacturer, therefore, himself to define to a greater extent the principles on which he intends to work, since once those governing principles are defined, the handling of his day-today problems becomes relatively simple. It is then also up to industry' to police its own system to see that those principles are maintained.
In this regard, we are suffering today to some considerable extent from the loss of the generation missing as a result of the War. Indeed, every generation makes its own contribution towards the improvement of standards in industry, and in my lifetime an impressive change has come over the attitude in manufacturing life. In the old days, the interests of the owners, of business were considered paramount. For many years there has been an increasing tendency on the part of the manufacturer to recognize that to justify his existence he must see that his operations redound to the benefit of the community as a whole. And most hopefully, insofar as its augury for the future is concerned, this new feeling has come about from within industry in the form of a growing conviction on the part of management that this attitude to the community also actively pays the owner interest. But, whereas a considerable amount of progress in our standards of manufacturing is evident, it is also true that, in many cases, leaders used to the outlook of earlier times have had to carry on until the gap in leadership due to the War losses closes up, and, naturally, for this reason industry has not developed so forward an outlook as otherwise would have been possible. It is all the more important, therefore, that at this time a special effort be made, no only to define and develop those standards, but to do it in such a way as to provoke the enthusiasm of the younger men now building themselves into the structure, by encouraging them to make in their turn, and as early as .possible, their contribution of suggestions for improvement in the governing principles to be observed in handling manufacturing problems, emphasizing with them, in the meantime, the necessity for adhering at all costs to such principles as are established at any given time.
I accept fully and without reservation the implication that, where as manufacturers we fail to pay proper regard to the public weal, we should expect and look for Government regulation. But of one thing I am certain--the extent of the Government regulation imposed upon us is, and will always be, the measure of our own failure.
Not but what the chief loser from industry's failings and errors has been capital itself. This fact that capital is the "goat", and not the ordinary citizen, is often overlooked-in fact, from current comment on our economic affairs, one would hardly guess that while capital spent goes at least in the proportion of eighty cents to the dollar to wages--investments in capital projects, whether good or bad, therefore resulting in good business and employment for the working man--these activities frequently represent losses to the investor. This misunderstanding is caused perhaps by the tendency to note the earnings of industry in good times only, leaving out of account the fact that, particularly in depression periods, most industrial ventures have to take into their books gigantic capital losses arising from the factor of obsolescence of equipment and processes, which offset in large measure the previous earnings.
As I see it, the more general obligations of the manufacturer are fourfold, i.e., to the consumer, to the employee, to the stockholder and to the Government, and principles should therefore be laid down governing such obligations.
The first point with which I will endeavour to deal is the attitude of the manufacturer towards the consumer. Obviously, in a very competitive situation, selling prices find a level which takes care of the consumers' interest, even if at times the result is detrimental to other sections of the community, such as the investor and the wage-earner. However, where large-scale operation is involved, and a large share of the total market is obtained with corresponding cost efficiencies, the manufacturer must accept the principle of sharing the economies from that large-scale operation with the consumer in the form of lower selling prices. Here it may be well to remark that, in my view, a so-called monopoly, held in check by its vulnerability against concerted action by consumers, can serve the public well and offer many of the advantages of free competition simultaneously with the economies of concentration.
The question of tariff then arises. Tariff protection, as I see it, is intended to accomplish two purposes
1. To enable manufacturing ventures to pass safely through their earlier stages with some measure of protection against dumping from similar industries long-established in other countries.
2. To permit manufacturing enterprises already established in a country to survive periods of unusual national stress, arising for instance, from some such a set of conditions as have obtained in the post-war period, when disturbances in the relationship of the currencies in different countries would, but for the shutting out of the flood of foreign goods, endanger the very existence of such local industries, even where these are both economically based and efficiently run.
As and when volume has been built up to the point where efficient costs of production have been achieved, and assuming that no abnormal international exchange or other situation exists, we, as manufacturers, should measure our success by the degree to which we are able to avoid using the tariff protection afforded us.
Tariff support, when accorded to the manufacturer, in my view also puts upon him the definite obligation, in considering the manufacture of new lines in Canada, to refrain from implanting these new industries unless there is a definite expectation, based on a close prior analysis of the situation, of arriving at an efficient operation within a reasonable number of years, an operation, in fact, which will not in normal times be dependent to any major degree upon tariff support.
Turning next to the' principles governing the attitude to the employee, I suggest that, in the first place, there must be a broad recognition on the part of the manufacturer that labour should be so treated as to ensure its feeling itself a partner in production, not merely a tool of production. In the establishment of wage-rates the guiding principle should be to pay not less than the prevailing wage, recognizing, however, that this wage must in any case cover a reasonable standard of living and represent fair compensations for the work done.
Apart from the question of wages, we require the acceptance of the principle that the employer should, where and when profits are available, gradually build up protection for the employee against the vicissitudes of life, many of which even the thrifty workman cannot at this stage be expected to provide against. Another principle requiring acceptance is to provide means for periodical discussion with his employees of the problems which con front them. Here Works Councils, so successfully used in the United Kingdom, can well be adapted to our needs, providing„ of course, these Works Councils operate in such a way as in the final analysis not to impair the authority of management, since on management devolves the ultimate responsibility for success or failure of the enterprise.
The third field has to do with the principles to be adopted towards the investor. This involves the necessity of recognizing the right of the investor to know that
1. The issue to which he subscribes will be backed by actual assets and will not represent so-called "watered" stock, and
2. He will be kept posted by an adequate accounting system with the real facts relating to the operation of that investment.
The obligations to the Government belong in the main in the field of taxation. Here the situation is relatively simple. Neither tax evasion nor tax avoidance, even if legally possible, should in my view play any part in the manner in which we set up in our books our investment, our profits, or our reserves to meet the contingencies inherent in the business. Our books should, in fact, show the commercial picture as we genuinely estimate it to be in the particular line of manufacture in which we are interested. If we feel we are taxed unduly, our remedy lies in other and more constitutional efforts to demon strate our beliefs to the proper authorities. By an acceptance of this principle, we shall not only be fulfilling our obligations to the Government but will, in addition, be able to count upon the efficiencies to be derived through the managing team-to whom the accounts are available in running the business-considering their problems and making their decisions on actual facts, undistorted by an accounting set-up induced by the desire to take every strictly legal means of avoiding taxes.
As an overhead principle which will provide a test of our sincerity of purpose in our relations with the consumer, the employee, the stockholder and the Government, I think we must accept a reasonably full measure of publicity as to our record. I realize, of course, that the manufacturer from time to time has forced upon him by actions outside his influence a course he would not himself choose. It is undoubtedly true that malpractices in promotion and in the field of investment banking have done serious harm to manufacturers, but here, in the final analysis, the remedy lies in the establishment of fair and proper principles by the men who work in those fields.
Whether in practice we adhere to such principles as I have outlined, and whether we will be willing to make sacrifices to achieve them, will, in the final analysis, rest upon the extent of our belief in their necessity as a requirement of our being allowed to continue to serve the community as at present, and, at the same' time, make a fair profit from the satisfaction of its wants. I do not pretend that in setting them out I am putting before you anything which is very new. In one or other way most of us are observing these principles in the conduct of our manufacturing affairs. Nevertheless, I believe they should be stated more emphatically and clarified further as we go, so that there may always stand before us a record of what we are trying to work to, a record by which our later actions can be judged by those we serve, whether consumer, employee, stockholder or the Government.
I am afraid I have taken a good deal of your time. You will pardon me, perhaps, if I have. Thank you. (Applause.)