The Next Five Years in Canada

MR. H. C. BOURLIER: Gentlemen: Your Executive take great pleasure in bringing to you today a gentleman who is very well known, indeed, and I should say, really needs no introduction whatsoever. However, there are certain things concerning his past which perhaps you may not be familiar with and I' am going to take the liberty of referring to one or two just in passing by.

We first made his aquaintance at an early age in Orillia, where he lived and received his early education. Subsequently, after engaging in various pursuits, a little grocery business and banking, and finally after reporting on two newspapers, we find him with The Financial Post. Then, eleven years ago, if his biographer be correct, he assumed the position of Editor.

Mr. Chalmers has always been a keen student of economics and is greatly interested in the promotion of good and stable government. He is a patron of the arts, Vice, Chairman of the Board of Governors of the Toronto Conservatory of Music, and also Vice-Chairman of the Canadian Society of International Affairs. He is a member of our own Empire Club for which we are very proud indeed andin justice to our sister club, the Canadian Club, may I say, he is a past President of that organization.

Mr. Chalmers’ topic today is "The Next Five Years in Canada," and I hope he may have good news for us and that he may be a dependable prophet. I take pleasure in introducing to you, Mr. Floyd Chalmers.

MR. FLOYD S. CHALMERS: Mr. Chairman, Fellow Members of the Empire Club of Canada: I feel it is a very great honour for a humble member of this Club to be invited to speak. It makes of this gathering something of a family party; as I look around the room and see so many of my own personal friends here, I feel very much at home.

Before I enter into a discussion of my subject, I should dike to extend my congratulations to Major Gordon Balfour, who was last week elected President of this Club. (Applause.) I think, too, I should extend my congratulations to the Club upon the election of Major Balfour. I am certain that the Club is destined to have a very busy and fruitful year under his direction.

Now, to my subject. First, let us look over the current scene a little bit. I think it 'is fair to say Canada is making, at the moment, reasonable progress toward recovery and enjoying almost what we might call creeping prosperity. At what point recovery ends and prosperity begins, I, for one, am hardly qualified to say. You know, we here in Canada have not quite outgrown our boomster instincts. We think of Canada as a young country and we claim for Canada the privilege of indulging in the enthusiasms of youth. We don't seem to think the pot is boiling normally until the lid is in danger of being blown off. Just about the time our bank presidents and life insurance companies general managers are beginning to throw out cautionary and restraining hints of possible trouble ahead, the average business man may be induced to admit that business is getting to be "pretty good."

In my title, "The Next Five Years in Canada," the word five is rather arbitrarily chosen. I don't know how I got it - perhaps from the recent book, "The Next Five Years" published in Great Britain. Perhaps I was influenced by the fact that Mr. Thomas Bradshaw spoke recently on a similar subject. I have taken the figure five very arbitrarily and I do not intend to attempt to fix the date either of the next boom or of the next collapse. I do think, at the moment, that it is not unreasonable for us to speak in terms of optimistic 'forwardness. The major evil we have to guard against, of course, is war, and there is little we can do in that respect. Barring war - which would indeed be a major evil for Canada-present portents are favourable for at least another five years of continued progress in reconstruction, a period of reconstruction which would lead, may we pray and hope, to the threshold of a new era of population growth, of capital development, of enhanced standards of living for all the people. Thus, the pressure of the crisis has been lifting, is lifting and promises to continue to lift. This enables us to explore the possibilities of introducing a little more of the spirit of purposeful direction into our recovery so we shall be in a better position to face whatever is going to be our future.

As a result of these upward struggles of the last few years we have been brought out of the deepest pit of the depression. But haven't we reason to think furiously on the type of recovery we are having? We still have one and a third millions of people on relief. The first provincial bond default of history has come, not in 1931 or '32, but in 1936, the fourth year of recovery. Our railway losses are continuing almost at peak level. Taxes are at a new high and public budgets generally are not in balance.

Such depression symptoms persist and we must recognize them. But I do not think they need to stir in us a feeling of futility and disappointment, for there is another side to the medal.

In Canada we have very little love or regard for force or fascism. We rate very highly our privilege of representative government and individual liberty and the opportunity for self-realization under a form of representative government. Yet, as we treasure the advantages that we enjoy under Democracy, we have to be very realistic about its shortcomings. Not the least of these shortcomings is the hesitancy of any democratic form of government to take direct action to meet what the schooled or tutored mind seems to recognize as very clear cut situations. Throughout the years of depression practically all the democratic governments of the world, Canada not excepted, have temporized with their economic and social problems. They have wasted precious days in the pursuit of political phantoms. We have seen in Canada whole masses of people ranging themselves behind crusading demagogues who carry aloft the torch of economic lunacy.

The depression came first to Great Britain. Great Britain, too, as if to demonstrate that it was a true democracy, failed for a number of years to come to grips with its problems. Eventually public opinion discovered and insisted upon the unpleasant but essential, "first things first," and Britain was quickly on the way out.

I think, as we look around this country, we can see some evidence that the period of dodging the essential tasks, of shifting, of indecision, of pursuing the fallacies instead of the facts, is beginning to pass.

To me the really encouraging news we read in the papers from day to day is not the news that another mill has been opened here, or a factory has taken on more hands there, or a dividend has been raised, or that the business index has climbed another point or two. Rather, to me, the really encouraging news is that type which we are now seeing increasingly, such as this: That Ottawa has set itself a two-year programme of budget balancing. That the Ontario Government has decided it must peg its debt at the present level. Or that Toronto as 'it did the other day, has taken steps t6 take several hundred racketeers off the relief roll.

The other day, there was actually one member of Parliament who supported the closing of a customs office in his town, and moreover went into his constituency and justified his action on the ground of economy. I should mention his name, it was R. J. Deachman. It was a very courageous thing to do.

These things are straws in the wind and they do present evidence that representative government, that Democracy, in Canada is beginning to buckle down to business, to look at its problems with intellectual candour and political honesty.

Now, the only kind of recovery we should be satisfied with, that means anything at all, is a recovery which is going to see long strides made toward the solution of our underlying political and economic problems. A recovery that merely covered them up would be dangerous and ultimately very costly. We have had in the past periods of great expansion which simply served to gloss over growing evils in our structure.

Take, for instance, the problem of social dependency. Ever since the beginning of the century we have been 'faced in Canada with a rising tide of social dependency. Our population, it would seem, is getting older, and the fact we have to face is that no recovery we are likely to enjoy is going to remove all of the present relief recipients from a position of dependence upon the public purse. Yet the problem is not one that is solely the pro duct of the recent depression. It is one that has been developing for many years and one we have been most happy to ignore. We have refused to plan in a scientific manner our attack upon it. We have given very little serious public study in Canada to, for instance, the contributory principle in social insurance; to distinguishing between those who cannot work and those who will not work; to what social legislation we cannot afford and what social legislation we cannot afford to do without. Paternalism has grown in this country and the worst feature is this: it has grown haphazardly as well as expensively.

Similarly, it seems, with the railway problem. The railway problem we cannot honestly regard as a product of the 1929-1931 economic collapse. The railway problem has been developing in this country all throughout my lifetime, at least. The railway problem, f suppose, was born in contractors' rackets before the war, it was nursed on war-time temporizing, weaned to the more solid food of post-war politics and raised to full stature in the unthinking twenties, when we all pretended that our real problem was not too much railway investment, but too little.

Another era of prosperity, taken by itself, will not automatically solve the railway problem. In fact, if we pursue the same policies we have in the past, prosperity will only make the railway problem greater and much more difficult.

We have had booms in the past, booms of different sorts, and we have seldom used them consciously to clean up our major economic problems. At this moment we are looking forward to a few years of steadily improving trade and of expanding national revenues, of re-employment and of some relief from relief and public deficits. We ought to ask ourselves this question: How wisely are we going to plan our way through, In short, are the next five years in Canada going to be years of bickering drift to recovery or of shrewdly directed attack upon our major problems?

Now, what are some of the problems to which I refer? problems that demand the consideration of a well-informed public? Well, they are manifold. You could name a dozen, or twenty. In a short address such as this it is possible to make reference to only two or three of them, and very inadequate, brief reference to each of those.

Now, the first problem I should like to discuss is that of Re-employment. Sustenance is the pivot around which human life revolves and;, that being so, I feel that few of you will question that our primary objective must be to re-employ productively all our citizens who are capable of producing. I referred a moment ago to the permanent load of social dependency we must continue to carry in Canada. It is gratifying that Ottawa is beginning to face up to the facts of unemployment and to make some attempt to divide the relief rolls into those who only need jobs and those who will always need assistance.

How are we going to put scores of men and women, scores of thousands of men and women, back to work? Here is a country that still boasts virgin resources and opportunities. It would take many more workers and potential workers than we have in this country to keep even our present producing plant running at full capacity and it would require a greatly increased machine of production to supply the possible reasonable demands of our people.

So it seems to me the point to start from in any discussion of this subject of re-employment is this: that it is possible to find jobs for all employable citizens in Canada. It seems to me there could be no idea more absurd than the idea that there is not enough work to go around.

The second consideration I would like to keep in mind in discussing the subject of re-employment is this: we want this country to remain, and develop further, as a country of high living standards for all classes of producers and workers. But it is ridiculous to think any nation can maintain high living standards when a large percentage of its population is not producing. I ask that both of those thoughts be kept in mind in anything I say.

In a state controlled by a political dictator, it is not very difficult to solve the problem of unemployment by direct action. Wages can be fixed and relative prices can be set, jobs can be created for one class of people in the community at the expense of another class of people in the country. A war can be fought, if necessary, or heavy armaments built to make work. In a Democracy„ quick, direct control of employment is, we must admit, much more difficult. But what a Democracy can and must do, and about the only thing it can do, is to create the conditions under which production and employment will develop naturally and rapidly. To the extent that we can control it ourselves, apart from external influences, rapid re-employment of our citizens in Canada must, in my opinion, be largely the product of restored confidence, of individual initiative seeking adventure and reward, and of substantial freedom for enterprise from the dictation of either the visionary or the bureaucratic mind.

A major cure for much of unemployment is, of course, to re-establish the traditional incentives to work and to reaffirm our faith in reasonable rewards for the adventuresome enterprise that creates employment. Then, having ensured that incentives to effort are not absent, it becomes largely a question of stimulating the exchange of labour through putting buyer and seller on a swapping basis.

So, we have to ask ourselves these question: can the consumer in Canada and abroad exchange what he has to offer for the products of our labour, Are certain costs too high, Are some groups grasping at the shadow of a higher standard of living and losing the substance of it? Are there inequalities and rigidities in the price structure, in wages, in freight rates, in tariffs, 'in taxes, that set up very serious obstacles to re-employment and the exchange of goods?

As we chart our way to busier factories and fuller dinner pails, we should endeavour to remove some of these obstacles instead of thinking of ways and means of adding new ones. Industrial codes, public works programmes, government regulations of one kind and another, if they are not skillfully devised, may have the opposite effect of that intended by their sponsors, actually setting up barriers to further employment, rather than stimulating it.

Many of the plans for re-employment that have been offered contain one basic fallacy - at least to me it is a basic fallacy - that they ask some one group in the community to pay for ensuring some other group a job or a certain minimum income. It would be far better for us to seek the policies that will increase the net total of production and exchange of goods and services. To rob Peter to pay Paul does not give Paul a job and does not make both men wealthier. You can't have a community in which you are spoon-feeding everyone. There must be some one out rustling for his own keep.

Those are my general comments on the subject of reemployment and I have set down what I considered to be the basic principles. I have given no panacea, not even an attempt at offering a palliative, but it seems to me that is the blue-print we must follow in solving the unemployment problem.

Now, if the first of our tasks is to turn idleness into productivesness, I don't think we can put further down on the list than, second the problem of public debt. We are all aware that chains and burdens of public debt manacle and bind us and restrict our freedom to handle other problems. They add further rigidities to our economic life. Constantly growing fixed charges add very greatly to the competitive production costs of Canadian producers and make trade more difficult than it should be.

I refer to debt because debt is the core of the whole problem of public finance. Our public debts have actually, in my opinion, passed a reasonably supportable level in this country. If you accept this then you must accept my next statement, that our course is clear and it must be to peg our public debt - that is to say, to check the rise of debt - and, secondly, to take steps to reduce the total. Any economic panacea or political programme for recovery that does not plan for an ultimate reduction, rather than an increase in our public debt should be regarded with suspicion, because ultimately, it is likely to prove un sound and destructive. Most of the palliatives and panaceas offered do suffer from that defect. They have been compounded with one fundamental thought: their acceptance and application implies more public borrowing when most of us in this room know that the desperate need is to put a stop to unproductive public borrowing. Our public debt amounts approximately to $3,000 on every home in the country. The existence of this very large mortgage on our farms and firesides is the chief reason why the annual cost of government in Canada has risen to $10. a week for every home in Canada.

As a matter of fact, we have not yet felt the full impact of the rapid increase in debt in the post-war years. The chief reason is that as our debts have risen, interest rates have been going down so that the burden of interest has not grown as rapidly as the burden of debt itself.

We have come to the point where it is reasonable to assume, and we have the best economic advice to this effect, that basic interest rates are about at the bottom. The Dominion Government is not likely to be able to borrow at very much below the interest rates it is now paying. In fact, the evil consequences of a further decline in interest levels might more than offset the assumed advantages. For instance, the solvency of billions of dollars of life insurance assets and liabilities in this country would be measurably affected by any further radical reduction in the basic rate of interest. I am not referring, of course, to the borrowers not yet able to take advantage of the very low rates which have been extended to the Dominion Government. What they are able to do depends less on what happens to interest rates than upon their own efforts and upon their policy in maintaining, in re-establishing and strengthening their own credit. Some of these days the tide of money rates is bound to turn. It always has in the past, it will again. That turn may come early, it may come late. When it does come, when the maturing bonds have to be paid off at higher rates of interest rather than lower rates, then we are going to feel a rapidly increasing weight of financial burden from the present large public debt. We can avoid that only if each government, each public borrowing body in Canada, will pursue a definite fixed programme of debt repayment. Debts have to be cleared off the books ultimately. Mr. Aberhart spoke the other day of converting Alberta's bonds into permanent debt. It is very difficult for me to imagine the basis of such a policy-why any man wants to go to the taxpayers and tell them that the policy of their province is to keep the burden of public debt on their shoulders forever, making no effort to repay. Our present population in Canada cannot continue to support the present burden of debt permanently, except at the cost of a reduced standard of living.

When a government borrows we know what happens. The citizens get the immediate advantage, of course, but ultimately some one must pay. It isn't a question of "human rights versus property rights," either when the money is borrowed or when it is due for repayment. If the debtor - a group of human beings - does not meet the debt, then the creditor - another group of human beings must meet the debt. Debts have to be paid ultimately and we should recognize that fact.

Our society is organized so much upon the basis of credit that debts ought to be treated with reasonable respect. A debt, as you know, is merely the complement df the credit. In public debts, as in private debts, the debtor should make a fair and honest effort to justify the trust imposed in it when it pledged its word and its faith, and the natural complement of a fair and honest attitude on the part of the borrower is a willingness on the part of the creditor to make an equitable settlement with a distressed but conscientious borrower.

Because of the significance of the burden of public debt, I want to suggest that in the programme of all public bodies in Canada for the next five years there should be a determination to stop piling up public debt in our present improvident manner. The elements in such a determination might reasonably be these

First, to peg public debts at present levels.

Second, to cut out of 'spending programmes, for a definite period of years, all developments which do not give assurance of being completely self-supporting.

Third, to budget, not only for balanced revenues and expenses, but for a debt retiring surplus, sufficient let us say, to retire present public debts over, approximately, the next generation.

In the attainment of these three objectives, the Loan Council plan of refinancing and control, so summarily dismissed by Alberta, could be a gallant and effective ally.

While I have no politics and this Club has no politics, I would like to pay my personal tribute to Mr. Dunning in presenting that plan to the Province of Alberta. It was a reasonable plan which would have solved the problem of Alberta had they been willing to accept it.

And the fourth point in a debt programme should be to increase the productive income of Canada, out of which debt charges must be paid, first, through immigration (which must ultimately be accepted as a national policy) and then through other policies designed to speed up the development of our natural resources by providing markets for the finished products made from them.

Unfortunately, we are up against this fact: that there is a curious thought, very widely prevalent, that the money that governments spend represents a net addition to wealth. Few people bother to wonder where governments do get the money they spend. I suppose if you ask the average man on the street he will say they take it out of the accumulated wealth of the idle rich or out of the earnings of the future, "the future" being a concept of somebody who is going to have plenty of money to look after his own needs and to pay the bills for what we spend today. A great many people think the money the government spends is simply created by putting the name of the Bank of Canada on the back of a piece of paper. Now these stupid notions will persist and the great mass of the people will continue to believe that the money the Dominion and provincial governments spend is of little concern to them until we can find a way to bring home to the people the very certain truth that they do pay these taxes.

There are more than 60 taxes wrapped up in every loaf of bread. How simple it would be to overthrow the mad demon of waste in government if everyone realized facts like that! Suppose each loaf of bread had to be delivered with 60 separate stickers, each one indicating the amount of the tax it represented and what the money was used for. There would be a white sticker labelled "Railway Deficit," and a red sticker labelled "Abattoir Losses," and a blue sticker labelled "Merchant Marine," and so on. If we could make people conscious of the truth that they pay the taxes we would make substantial progress toward the solution of our financial problems.

I must hasten on and come to the third major group of problems which is going to call for serious decisions in the next five years. They fall under the general heading of transportation.

The most obvious problem, the one we talk about most, is the surplus railway mileage and the heavy cost of maintaining it. The most patent evidence of the existence of that problem is the annual deficit of the Canadian National Railways, but even the losses of the C.N.R. represent but part of our larger transportation problem.

It is so difficult to get agreement in. Canada on any measure designed to solve or alleviate in any way our railway problem. We all know from speeches we have heard from our bigwig politicians that they speak of the "political suicide" involved in any major effort at a solution. We have our political leaders competing publicly for the privilege of maintaining the integrity of the Canadian National Railways as a publicly-owned institution, when they could better devote their energies to maintaining the integrity of the taxpayers purse. (Applause) Unfortunately there is a tendency, which we must recognize, on the part of men highly placed in political parties in this country to say one thing in public about the railway problem and another in private. I recall one Cabinet Minister-I will not say„ for obvious reasons, to which government he belonged - who said to me: "The only reason our railway policy is what it is and not what we know it ought to be is that we are terrorized by the railway vote."

Now, if craven fear is to influence our railway policies the problem is not going to be brought quickly to a solution, except through the pressure, ultimately, of an informed public opinion. There is no question in Canada which requires more courage in its solution than the railway problem but the courage should be there. We have never faced up to that problem. I don't think the Duff Report faced up to it courageously. I don't think the present Trustee Board have faced up courageously to the responsibility imposed upon them and certainly I go so far as to say I don't regard our present railway policies as an evidence of very much public courage.

There are other problems pressing on us, too, in regard to transportation. There is the problem of obsolescence. We have two of the finest railway systems in the world but the engineering staffs of either of those railways could design roads and equipment that would be much more modern, more efficient and more economical. To modernize the railways; both as to lines and equipment, is going to cost us hundreds of millions of dollars in the next decade. How are we going to raise the money?

Likewise we are lagging behind in other forms of transport. More freight is carried by air in Canada than in any other country in the world, but it is almost all being carried in the pioneering fringe of the country. We have no transcontinental air mail, no transcontinental passenger service. We must have it, we must plan for it in the next five years or our commerce is going to lag behind and we are going to lose our position as the shortest link between Europe and the Orient.

Transportation is the amalgam of nationhood in Canada. Whether by land, water or air, it is so important a factor in our nation-building that the manner in which we answer its major challenges in the next five years will have a great influence on our future 'development. There are a great many other problems I should like to have had time to discuss. I haven't referred to the desperate need for a simpler form of government, for a revision of, our Constitution. I could enlarge upon immigration, land settlement, capital development. I could urge an independent and scientific study of the tariff and subsidy system 'in the hope we might end some of the bickering between different sections of the country in regard to tariffs, subsidies, and bonuses, but I have to leave these subjects to much more competent authorities than I am to discuss.

Whatever we do in Canada to blue-print and erect a bridge to our challenging but yet uncharted future, our decisions must be those of a Democracy, they must be decisions of representative government and the decisions must reflect the opinions of Democracy's masses. Therefore it is important that no opportunity be missed for honestly informing and moulding public opinion to first, an interest in and, second, an understanding of our basic problems. That is the splendid contribution a Club of this character does provide, an opportunity for discussion by people, usually independently minded, of our major national problems.

Everything I have said today presumes the continuance in Canada of faith in the democratic system and individualism as a way of life. If we depart from those concepts, then very little of what I have said will have any application to our problems in Canada. I trust that Canada is not prepared to accept a system of dictatorship or the concept of a totalitarian state, even when a dictatorship has the power to plan, to decide and to act. Dictatorship has won most of Europe and threatens to capture the largest remaining stronghold of Democracy on the Continent. If it does that, it will threaten the United States, it will threaten Great Britain and it will threaten Canada.

We may continue to argue about our problems, we may continue to temporize, to postpone the facing of realities. We may lull ourselves with fantastic doctrines of economic and social novelty. We may continue to do the wrong thing. That is one of the privileges of Democracy, but it is rather too generously exercised. It would be dangerous for us to presume too much upon that privilege, in the next five years, That is why I am glad to see these straws in the wind, this slight evidence that we are gradually beginning to face up to the major problems of the country. The next five years are going to see the battle lines drawn very closely between representative government and dictatorship through most of the world. The efficiency of those two types of government in achieving results will have a great deal to do with the world's final acceptance of one or the other form. All of us here in the room, we who believe in personal liberty under the democratic system, are presented with the challenge of demonstrating that our system, too, is capable of action-and of effective action. (Applause.)

MR. H. C. BOURLIER : Gentlemen: In his all too brief address, Mr. Chalmers has covered a great many very interesting points today, points that cannot be solved at once but which the people of this country are doing their best to deal with and in which we hope, from Mr. Chalmer's remarks, they may be ultimately successful. As far as the railway problem is concerned, if Mr. Chalmers will organize his government and make me his Minister of Transport, I will promise him we will arrive at some very pleasant solution within a very short space of time. We are not permitted though to debate those things from the Chair. I think, Mr. Chalmers, I am quite safe in saying we convey to you our most sincere thanks for a very interesting and instructive address.