Our Mission—Sound Public Finance

At a Luncheon Meeting of The Empire Club of Canada, in conjunction with The Canadian Club and the Toronto Board of Trade.

SIR HENRY DRAYTON was introduced by Mr. A. E. Arscott, the President of The Canadian Club.

MR. ARSCOTT: Mr. Premier, Sir Henry, and Gentlemen: There are two factors that go to make a success of a meeting of this character; first, a subject demanding general interest and one which is of immediate concern to the public; secondly, and more important, a speaker who knows his subject and who, as well, is thoroughly known. In both these instances today, our success is already assured. Sir Henry has just completed a very successful lecture tour throughout the West, accompanied by Mr. F. B. Gundy who by the way, was the first President of the Canadian Chamber of Commerce, and by Mr. W. McL. Clarke .of Montreal, the Secretary of the Canadian Chamber of Commerce.

As this is a joint meeting of the Board of Trade and the Empire Club and the Canadian Club, and as we have Mr. J. M. Macdonnell, the newly-elected President of the Board of Trade, and Mr. J. H. Brace" the Vice-President of The Empire Club at the table, I am going to ask them to participate in the formalities. I shall not indulge in any further remarks, but ask Mr. Macdonnell to introduce the speaker.

MR. MACDONNELL: Mr. Chairman, Mr. Prime Minister and Gentlemen:-It is unnecessary and it would be verging on impertinence for me to attempt to introduce Sir Henry Drayton to any Toronto audience or, indeed, to any Canadian audience, but it is not unnecessary and I hope it will riot be impertinent for me to endeavour to say a word to Sir Henry, and for you, to express the thanks of the Board of Trade and the Chamber of Commerce for what Sir Henry has undertaken and is going to do.

When the Chamber of Commerce set up a National Committee it was a primary necessity to have as the Chairman a man who by his prestige" character and ability, could command respect from coast to coast, but it was, perhaps, necessary to have something even more essential than any of those things and that was a man with a sense of public duty, without which our democratic institutions will not work at all. I think you will agree we were doubly fortunate in getting Sir Henry. We know of the work which he has done in his own church. We know that he carried to a successful conclusion there, a great restoration fund and I hope it is not fanciful or imaginary to think that his work in the other sphere, as well, may be the means of bringing certain restorations. He has returned from a most successful speaking tour in the West and I think the presence of this representative audience today is some indication of the fact that you already believe that what Sir Henry Drayton has done is well worth doing and I like to think that your presence here today -'will be an encouragement to him to know it is worth going on and carrying further the great task which he has taken up.

SIR HENRY DRAYTON: Mr. Chairman, Fellow Canadians: It is an awful thing to have a reputation. It is terribly hard to live one down; it is terribly hard to live up to one when one's friends are unduly optimistic. I have always found it difficult; I find it doubly difficult, today, coming back home among you.

Well, Gentlemen, I suppose you are all very, very interested in how we are getting along, in how the country is getting along, whether it is functioning properly or not. We have heard so many tales of woe as to the West. I am going to tell you that the West isn't half as bad as a lot of people paint it. I am going to tell you that the fact is that the West is only waiting its chance to function again. Take, for example, Vancouver; conditions in Vancouver are infinitely better this year than they were last year. Vancouver, this year, wound up its ordinary business without a deficit and with a cash balance of $60,000, and the Mayor, and the rest of them are absolutely sure that Vancouver has turned the corner and is going to show the rest of us the way back to prosperity.

Be that as it may, and I believe it to be true, there is one thing you may be sure of; that is that the spirit of the West is there. The determination of the people is there, and given anything like proper conditions, with some little help here and there from the burden of taxation, the West, instead of being a liability to Canada as some people talk of the West, will be a tremendous asset to our country.

Well, Gentlemen, what is the message now I have been talking of? I am not going to give many figures but you have to have some; you can't get along without some. I want you to have some figures in your mind, something which will show to you, as your fellow citizens know in the West, the absolute necessity for the strictest conservation of your resources, here, there and everywhere; the absolute necessity of economy, here, there and everywhere. What does economy mean? Economy isn't meanness; economy means management, but nothing else. Management in our governments, reducing all expenditures that are not absolutely and properly necessary and for expenditures that ought to be made, seeing that for each dollar spent, we get a hundred cents value.

Now, I want you to carry in your mind a few figures. Take our expenditures for the year 1930-31, municipal, provincial and Dominion; those expenditures amounted to the sum of nine hundred and twenty millions of dollars. That is the expenditure for the ordinary purposes, that is the ordinary cost of government administration. What does it mean? Take, again, the same year, 1930-31, it means this: Here we are, an agricultural country, very, very largely; yes, our future is depending upon it. Nevertheless, in that year, 1930-31, take the value of all our field crops from one side of Canada to the other, from the Pacific to the Atlantic, and you find that their total value is less than one half of the sum spent by our governments in one form or another for that year. That is the sort of thing that brings home facts and truths to the people. You can visualize that. You know what that means. You know what that sum really means in toil and effort and work; work, here, there and everywhere on every farm right over this great country.

Take another illustration: some people are saying, "Well, we have got lots of people with money in this country, why shouldn't they pay for this?", and it has been suggested that they 'be called upon to do it. Suppose that the country was to take all incomes that are assessable, and you know that the assessors get after us pretty well--the inspectors are pretty busy, they are on their job--nevertheless, all the assessable incomes for that year in all Canada only amounted to some eight hundred millions, again we are away short.

But that is not all. Those are the ordinary expenditures of that year. The government spent, altogether, one billion and fifty-two million. Extra expenditure was inescapable. That was the expense thrown upon us, as it was thrown upon practically every civilized nation in the world and certainly on every Christian nation that recognizes the want and suffering of their fellow citizens, an inescapable burden, the burden of looking after those of our own who, today, unfortunately, can not look after themselves. Yes, duties and obligations come to nations as well as to individuals. Take yourself as individuals; some relation of yours is suffering misfortune, somebody who has some right to look to you for assistance. You take it, you assume the burden, but assuming that burden as one that belonging to you, assuming that burden, what do you do? You immediately proceed to adjust your budget to cut off each and every expense that can be cut off and then you hope to carry on. You recognize the obligation but you also recognize the limitations of your income and you act accordingly.

Well, Gentlemen, there has been a lot of that sort of thing found everywhere in Canada. I have found it so in the West; I know it is so in the East. Any amount of houses today are carrying on at a very, very different scale of living than the scale which obtained before the crash. It is general; it is practically everywhere; it is invading almost every home and almost every home is carried on--yes, carried on, by the Canadian housewife. Economics--do you know where the word comes from? It comes from the old Greek word, expressing "good housekeeping," and good housekeeping, practised by our Canadian women, has enabled the homes to carry on with very, very great changing values.

Yes, times are getting better. Here, there and everywhere, times are getting better, but how and why? Simply because the same economies, the same necessity, the same urge to do without anything and everything that can be done without is observed. Yes, factories, places of business, that have been carrying on for years in the red are now black. Why? Certainly not as a result of the lessening of any burden of taxation, here, there or anywhere, but despite it! How and why? Simply because the situation has been faced, simply because inescapable economies have been put into effect, cost what it may.

One of the best things I got in the West was this: I ran across a farmer--I had known him before--and he said to me: "Why, give the West only two years of anything like decent crops and wheat at seventy cents, and in two years' time, the West will be absolutely on its feet again."

But I said, "Hold on; wait a minute. I have been here before. I have often satin with you on conferences and the old idea was to see if freight rates could not be so adjusted to leave a little more of the farmers' earnings on the farm and you always told me that the farmers' costs per bushel were in the neighbourhood of seventy cents, sometimes sixty-eight cents, sometimes seventy-one cents, but always in the neighbourhood of seventy cents. Yet, you tell me you can get the West on its feet if you get only seventy cents on an ordinary crop. It can't be done."

He said, "It can be done. You don't know what you can do until you have to do it. You don't know what economies you can make until you have to make them, and I want to tell you that the farmers of the West, recognizing the situation, have so adjusted their costs that the costs today, per bushel, instead of being seventy-cents are nearer thirty-five cents, given an ordinary harvest."

Gentlemen, think what that means in devotion, in work, in planning, to cut costs from seventy cents to thirty-five cents. Why, the efforts" the sustained efforts, the hours of work are immeasurable! Just think of the change of conditions on those farms.

What are we asking today? We are asking today that governments should do what the housewife has done, that the Canadian home may carry on; what the farmer has done that the Canadian farm may carry on; what the businessman everywhere has done that commerce and business may again be carried on in our country. That is all we are asking governments to do. (Applause.) I know that governments are starting to economize. I hope that it is only a start. I was very, very happy to see that here in Ontario the government is starting a movement of economy in cutting down members.

(Applause.) All over the West, the whole idea is this: Get rid of members. Let us have less talk and more work. (Applause.) Let us have less talk and less expense. Some people who are in favour of heavy memberships in our governments all over the country, some people say, "After all, the amount paid out in salaries and indemnities isn't very great."

Now, I have been in politics. I know a little about it. Did any of you gentlemen ever take the trouble to see how long it takes to get rid of a Speech from the Throne? Did you ever notice how, after the gentleman on the right, the Leader of the Government, makes his statement and the Leader of the Opposition makes his statement, how many times the same thing is said, over and over again in a different form, with a little different shading" but generally without a single new thought of real use to the country-repetition after repetition? Out in the West they are getting this idea: that if one man says that black isn't white, that statement is just as good as if repeated by every one of his supporters who are all going to vote for him, anyway. It runs all down, the line. As I say, I am very glad to see that a start has been made.

I will tell you another thing: In the West, whether the people will be able to do it or not-all we can do is start things-anything of any real success in a crusade like this must be done by the people for the people. They, themselves, have to do it. You can't expect the politicians to commit "felo de se." They can't do it. You can't expect them to do it. It may be of tremendous benefit to the country but you can't expect them to do it.

I will tell you about the West. They say, "Here, we have too many Provincial seats." There are twenty-three Provincial seats in Saskatchewan. They start to think this: We used to have sixty-three fellows, saying "Yes" and "No", so many times over. What did they do? They started a bit of cutting down from sixty-three to fifty-four. They have made that start. Then they said" "Well, how would it be if we were to save ourselves all the cost of the preparation of the voters lists and adopt the Dominion lists? The Dominion is there. They are doing the work; they have done it. If we adopt the 'Dominion list, instead of the fifty-four constituencies as we now have them, we would only have twenty-three and if we really seriously think that twenty-three men can't sit long enough and talk often enough, let us have two or three members for each of the constituencies and let them sit long enough." I don't know whether the people can do it but they are keen to do it.

I have had something to do with politics. I never was very much good as a politician. They used to say that I was caught too late. Perhaps I was; I dare say I was. There is one thing that you can notice everywhere; every man knows it. Costs, of course, do moat depend so much on the number of your men but on the demands made on the treasury and on the government by each and every one of the men you have got in the House. That is where it comes in. We have never got away in Canada from parochial ideas, from provincial ideas. We don't think, pet, quite nationally. If we were thinking nationally, for example" we would never have ten sets of bosses, looking after the same business as we have in lot of things. We wouldn't do it. Up to date I don't know the reason exactly, except that we are accustomed to it; perhaps we like it, I don't think we do, really, when we stop to think of it, but it goes on, here, there and everywhere. Admittedly, in Canada of all countries of the world, we are the most grotesquely over-governed and we do nothing whatever to try and stop it. I will say something about that later on.

As I say, governments are starting to economize and the whole idea of our campaign is to see that they do and help them in doing it--making it popular for governments to economize instead of to squander money. You know it is a great change in our orientation. Can we do it? I think we have to do it, but can we, will we do it?

I am representing in this campaign a lot of the chief offenders-they are all on the penitent bench. In the past the great functions of Boards of Trade has been to go down to Ottawa, and to go to the Provincial capitals with petitions that this or that work should be done which they think is going to help in their own immediate vicinity. Did you ever hear yet of a deputation) of Canadian citizens or an association going to any government, anywhere, and saying, "For Heaven's sake, stop spending money?" It is a tremendous charge for us to make. You know public expenditure has always been popular-today, here we are, spending more than a million dollars a week, simply because we indulged in that ever pleasant job, while it is going on, of living up to the Joneses and beating the Joneses out in railway business. But every government that did it was acclaimed for doing it. People never got the idea into their heads" as today we now know too sadly, that there is nothing that any politician can do for you in connection with public work or public expenditures that you don't pay for and pay for several times over because those things have been done on borrowed money. Can you change? Can you change? Let me tell you, Gentlemen, that the future of the Canadian homes, the future of the Canadian farm, the future of Canadian business, depends upon that question-Can you change? Will you change? Will you forget local interests? Will you forget everything except one thing--the general good of Canada as a whole and the burden, the pressing burden of the Canadian ratepayers? It is a big change. Can you do it?

Do you know what happens to governments? It is a very fortunate thing that it can't happen to us. It is a very fortunate thing for us that it can happen with governments. You and I, the rest of us here, live within our income or in the long run we are either with the sheriff or in the bread line. You would be in one situation or the other. You can't go on over-spending. Governments, unfortunately, can. Let me give a figure of what happens. For the last twenty years our municipalities and our provinces and the Dominion, together--we put them all together--for every hundred dollars worth of income we have received in Canada" governments in one form or another have spent, $134.00, and you .are now paying for it and you don't like it. When that was going on the going was good; we never said one word against it. What is the result? The result is this: the result is that there is a resultant capital debt for each man, woman, child, yes, and infant in Canada, a resultant capital debt of $600. Imagine! Gentlemen, we want no more public debt! (Applause.) Governments aren't balancing their budgets, when they talk about ordinary expenses and issue new bonds. It is popular among politicians today to say that the cost of interest is too high, that it must come down. Who is putting the cost of interest up in this country? What are the reasons that are freezing up credit in this country? Think--in the dear, 1933, governments in one form or another, governments took ninety-seven percent of all the money subscribed for all the bonds issued in Canada! Imagine! Imagine! Cheap money, essentially! We want expenses, everywhere, cut down. The Dominion had two very successful refunding loans, making a considerable saving. I hope the provinces will be able to make a good many more but the way for governments, as for anybody else to obtain cheap money is to balance their budgets and stop borrowing new money. It is the only way to do it.

You know that this country in lots of ways is in a fortunate position. One way is in the spirit of the people, what they are doing and will do, and there is no question about Canada carrying on. But there are others: take, for example, the position of people in this country who have provided money so the country can carry on. I refer to our depositors. In the country to the South, President Roosevelt is considering--yes, he has committed the country to the expenditure of approximately four billions of dollars. For what purpose? For what purpose? For the purpose of helping depositors whose money has gone. A very, very heavy load on the country. He is assuming the responsibility because he wants to restore purchasing power and let the poor people who, through not the slightest fault of their own, find themselves where they find themselves today. What a different picture in Canada! What a different picture! In Canada you have got deposits of $1,800,000,000,--I am using round figures-placed at the disposal of commerce and governments. Why, governments? Because governments are using it. The deposits are made by 4"600,000 people. True, they are not all Canadians. Strangers have thought very, very well of the solidity of our Constitution anal the strength of our banks. They are not all Canadians but the great mass of them are Canadians and we have an average bank deposit of $413.40. Well, there is no assistance necessary for these people from our governments. On the other hand the governments are using over seven hundred million dollars of the depositors' money, every day helping governments to carry on. The money is today represented in government bonds and securities and government loans. O, yes, we are in a very, very much better situation, in very many ways, than our friends to the south.

I said something about duplication. There was a farmer in the West and he had a chicken ranch, I think he called it, and he said, "Here, I wrote a letter to Ottawa. I had had a little difficulty about my chickens and I got back very quickly a polite letter, written very nicely, and all the rest of it, no delay at all, telling me what I should do. Just about that time I also got a publication from the Provincial Department of Agriculture, and I thought that I would get confirmation there. I wrote and T got entirely different advice. The only thing I could see that was really certain was that I, with other Canadians, was paying for both organizations, and I wondered if it were not possible for them to at least get together so they wouldn't give diversified opinions and advice."

That set me thinking and I got together a little information showing how we have duplication of activity in the one great Department of Agriculture. There are a lot of things in agriculture. You have the overlapping in the Dominion of the activities of the provinces. There are ten Ministers with the Deputies and all the rest of it. They are all paid, too! The Dominion and the nine provinces are all looking after dairying, live stock and field husbandry; the Dominion and five provinces are running horticultural services; the Dominion and four provinces look after veterinary work and experimental farms; while the Dominion and two provinces undertake to teach the farmer economics.

I have an idea, after talking to the farmers out West, if there is anybody who knows anything about farm -economics it is the Canadian farmer. If we have any proper lectures on economics, we would have on the one hand, the Canadian housewife and on the other the Canadian farmer. The departments are a little more bashful about telling the farmers how to save money-we kfiave only the Dominion and two provinces telling the farmers how to save money.

That is the overlapping in the Dominion. Let us see what is happening in the Provinces. Nova Scotia has thirteen fields of agricultural activity; New Brunswick has eleven, of which ten duplicate Nova Scotia's; Quebec has sixteen, nine of which duplicate New Bunswick's; Ontario has fifteen, twelve of which duplicate Quebec's; Manitoba has seven, six of which duplicate Ontario's; Saskatchewan has nine, five of which duplicate Manitoba's; Alberta has sixteen, seven of which duplicate Saskatchewan's; and British Columbia has twelve fields, nine of which duplicate Alberta's.

What do you think? Is there any management at all? Is there the slightest evidence of any co-operation at all?

Agriculture is our chief hope; the great thing we want, the one thing of first importance, the one object to which every effort should be strained is the obtaining and holding of proper export markets for our produce and the maintaining of proper prices.

What do you think of that? It isn't only that. I tell you that because that was given to me by the farmers. It is the same in companies. The old question of provincial rights is always raised. Translated into real terms, what does "provincial rights" mean? It simply means the right to pay additional taxes in one form or another! That is what it generally means.

It always comes down the same way. The provinces say, "Look, we are making money out of insurance regulation." They say, for example, "It is quite true that the Dominion has a magnificent department looking after insurance, but we have the absolute right to do it and make money out of it." I don't find insurance companies kicking; they are not paying for the duplication. You and I are paying for it. The insured always pays these things. There is a great provincial department down there. It is true that it costs fifty or sixty thousand dollars a year to run it and duplicate the Dominion's work, but the rates go up and the provinces are making money. Who is paying for it? The insured You!

Take another illustration, brought up in the West again the question of mortgage loans. Let us take the biggest concern we have--the Canada Permanent Mortgage Company--not many years ago the whole taxation of the Canada Permanent on the net earnings (I am not speaking of land taxation and that sort of thing) was 1.4 percent. Since governments have to look everywhere to see where they can raise another dollar on the side, quietly, without anybody knowing it, (If they can do it that way, there is a lot less trouble,) what have they done? They have multiplied the taxation of the net profits of the Canada Permanent Corporation more than fourteen times, until today the percentage is over 21 percent and you wonder why you can't get cheap money. Where does the Canada Permanent get its receipts from? From each and every one of you mortgagors in the country. You can't get away from it; it is there, everywhere.

Time is going on. There is just one thing I want to talk about. That is education. People have been going for me about education. Now and again, you have people who are real spenders, firmly entrenchedgreat is Dianas of the Ephesians. But, you know, on this crusade, for crusade it is, you can't very well worry about those sort of things. In 1913 and 1914, this country spent on education, $44,000,000. In 1930 and 1931, it spent $178,000,000. Do you see anything for it?

I remember that back in 1913 and 1914, we thought pretty well of ourselves. Illiteracy was very rare. The standing of the professional man was very good. There was only one complaint about education and that was that we could not absorb it. I remember the trouble we had in Ontario. Here we were a great expense, educating wonderful men--for whom? For the United States. That is where they were going, large percentages of them, all the time. We could not absorb them. You can't go in for nothing but race horses; this country needs work-horses today. Every man who is working is the asset of our country--not the theorists. I see they are quarreling among themselves. This morning in the press I see that Mr. Leacock, on one hand, says one thing and others say other things. I see that Mr. Leacock says that real universities are made by the souls of men and not luxurious buildings. I know very, very well that this country ,would have saved many millions if Mr. Leacock had been a little sooner in giving voice to these opinions; or that his opinions had been adopted.

It was said at the same time by these people that we were doing these things cheaply because, you see the dollar had dropped now, and if you put it in the equivalent dollars, we are really showing a saving. I never thought for one minute that the expenses of education consisted in buying things in terms of gold. It is perfectly true that the gold standard is down; we have a discount of over forty percent. But do you find the dollars any easier to get? I have not. Don't you find it just as hard to get the dollars as when at gold parity? Yes, and don't you all realize also that the one thing that has been tried, in the United States in particular by President Roosevelt, is to make that dollar of yet less value? Why? Because commodities are down, everything is down, that makes expense for education. Instead of the dollar having a depreciation for the purposes of educational costs, it is the contrary. On the contrary it has a greater purchasing power.

If you take the figures compiled by the Citizens' Research Institute, you will find that when the dollar was at par, that is the gold dollar in 1929, commodities were so high that there was no premium on the dollar in so far as purchasing purposes were concerned. In 1933, when these learned gentlemen were making their compilations, that dollar in terms of Canadian commodities, instead of being worth one dollar, has become worth $1.30.

Gentlemen, I am afraid time is up. Can I just leave one thought? It is this: no country can exist, no country does exist, decently and properly, unless it is full of happy, contented homes. After all, the home is the one real justification for all we are trying to do, so that people may live happily by their own efforts, look after their own property. Will you get into the trenches for that home? It is Canada's great asset. It is threatened here, there and everywhere by taxation in one form or the other. Can we not resolve now to think in terms Canadian, to insist on economy, to insist on reduction of representation, here, there and everywhere, to insist on proper and up-to-date amendments to the British North America Act. So far, I think the only public man who has had the courage to say that it is necessary is our own Premier, here. He just said one thing that I did not agree with. He said, "This isn't the time for doing it." I say if you don't get it done now with the scourge of necessity upon you" you will never get it done. What are you going to do when you do that? You want to try to leave industry, commerce, farming, every one of our activities subject only to one taskmaster, to only one set of people to make reports to, instead of having to send reports all over the whole country. These amendments, I am quite sure the Prime Minister would agree, would be amendments to place in the hands of the Dominion, nation wide matters, and to reserve to the provinces their right to look after, untrampelled, their own business, education, municipalities, everything local, even to the extent of taking away from the Act the old clause that I always thought a menace "that any work the Dominion Cabinet so declared should become the work of the Dominion."

Gentlemen, work for it. Will you remember that this job can only be done by you and others like you, exerting all the influence you can with your representatives. Remember, they want to do what you want them to. They all do. That is why they spent so much money in the past. They thought it was popular. If you urge the people to gather to the defence of their homes to lessen the burdens of taxation that today are oppressing and hindering that progress which is going on in spite of them, you will do a wonderful day's work for Canada. (Prolonged applause.)

MR. ARSCOTT: Gentlemen, I shall now call on Mr. Brace, Vice President of The Empire Club to make the response on our behalf.

MR. BRACE: Sir Henry, Mr. Premier, Mr. Chairman and Gentlemen: The address to which we have just listened comes to us from one who is actuated by no selfish prejudice. It comes to us from one who can speak with authority, gained from the experience of a lifetime devoted to public service. I think the message is timely. Sir Henry has developed the thoughts which should be the thoughts of all of our country. We all require relief from the burdens of taxation which are weighing so heavily upon all of us. It is essential that governments should balance their budgets, just as private businesses balance their budgets. Sir Henry has pointed out that the responsibility is ours. Unquestionably governments will act with prudence and thrift when they recognize that the citizens of the country ask for prudence and thrift. We, on our hand, must realize that with prudence and thrift we must expect only such public services as are essential. I feel that we all have a responsibility to future generations. It is unfair for us to mortgage the future. We have a responsibility to our children and our children's children.

I have much pleasure, indeed, in moving a hearty vote of thanks to Sir Henry Drayton for the inspiring message he has given us today. (Applause.)