The Riddle of the Depression

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

PROFESSOR LEACOCK : Colonel Drew, Members of the Club: When I look around at this gathering and understand that there are more in the background and still more on the air, I wonder that I made it six and not five days. Six is the figure it will take in Montreal, the time is short; in the words of an ancient sun dial, "it may be later than you think". And it is not by an easy optimism that we shall consider our present difficulties but by looking them squarely in the face and fighting against them, because we have got to say 'Goodby' to that conspiracy of hope which was our first line of defence against adversity and which is now broken through. It is no good, Mr. Chairman, to say that things are getting better. They are not. It might be that if we left this depression alone it would cure itself with tears, with hunger, with suffering. It might wear itself out as others depressions have done, or it might not. And if I recommend to you remedies which seem to carry losses and sacrifices, they are only meant as the remedies of a national emergency to which we have resort when other things have failed. And so I take my stand from the point that this is a dangerous moment; this is a crisis. The time has come to think. The time has come to act.

What we are seeing around us, Gentlemen, has never been paralleled in the world before. There is no use of our talking of the depressions of the seventies or the nineties. They were never like this. This depression is more worldwide, more class-wide, more universal, and it is eating into society as a plague eats into a living body, or as a fire eats into a living city. So you must fight it as you would a plague or a fire and you must not count the cost. You have got, from now on, to do something! I wouldn't be here if I did not think it were possible to do something. If I magnify the danger on one hand, I magnify the resistance on the other. The depression must be conquered, and when I say that it should be relieved in six days, I mean it. I will have it relieved before we end lunch. (Laughter.) Why. Colonel Drew, with such an audience as this, who couldn't relieve a depression? With the men I see around this table, with the records they, themselves, have in peace and in war, the service they have already given to their country, why, Sir" we could pick up the depression and carry it away with us if we only would try. I want to show you how, in my opinion, we can relieve the depression in a few days and how we can, almost within six months, remove it, and what is a much more difficult task, eradicate it and prevent its recurrence. This will take years. In that" perhaps, you are less interested as citizens of the moment, but if you look toward the future, this is the supreme task how to eradicate it--because that would involve the removal of the fundamental causes of what is around us.

When you ask the ordinary person what has caused the depression, you get a great number of answers. In the current press and in the current speech, you read and hear, perhaps, that it is caused by the gold standard, by the currency, by the collapse of the monetary system. I don't think so. Some people say that MacKenzie King did it. (Laughter.) Sir, I am a stout Conservative, but I do not believe that it is among the sins for which MacKenzie King will some day have to answer. No single person, Liberal or Conservative, caused it. No currency, no tariffs caused it; not even national exclusiveness, the sin of our time, caused it. There is a peculiar flaw in the mechanism of the life we live; there is a peculiar defect in our wonderful apparatus of production; there is; there is a peculiar power in our sudden inheritance of how to produce goods without a corresponding knowledge of how to organize society to use it. Sir, there would have been a depression if you had had world free trade; there would have been a depression if we had had no war; there would have been a depression if we had had a universal gold standard; and there would have been a depression even if we had had universal goodwill. Those things have not caused it.

There is a man abroad, called the Technocrat, many of whose speeches and sayings are foolish in the extreme. He has made what he calls "an energy survey of the world" mostly seen from Greenwich villages and the speakeasies. (Laughter.) The Technocrat has told us all kinds of silly things about abandoning our customary standard of values and substituting the scientific standard which is usually measured by an "erg" or an "umph". But like many false prophets, they may be showing the way to the true believer, and along side of the question of the power of humanity to produce and the capacity of humanity to organize lies the fundamental problem of our present organization and along that line will be found the ultimate solution some day. But what we have to think about more immediately is the solution for now; how to get things going now; how to beg a reprieve from the sentence of industrial death under which we stand; how to ask for the time, so valuable now, so despised a few years ago, to set our house in order. We see the "Mene, Mene, Tekel, Upharson"; the time is advancing on us now and we must look first to the immediate measures, and hope that afterward we may be spared some time for the fundamental resinewing of society which alone can make the permanent cure of all depressions.

Now, Sir turn your mind back and look over history. You know, professors invite you to look back into history and they never come to the surface again. The typical professor, Dr. Cody--no, not "the typical professor Dr. Cody"; I said, "The typical professor, comma, Dr. Cody," (Laughter)--if you ask him to explain something, takes a deep dive underneath the waters of history and never comes up. You don't wait to see him emerge, but I propose a shorter restrospect than that. I only want to ask you in the very broadest way to look back a hundred years, if some of you can remember that long. Look back over a hundred years of our system. They call it now "the profit system". It's an awful thing. It is not the p-r-o-f-i-t-s system--I saw some of you prick up your ears when I said "profit"--I don't mean that. It is the profit system that has had a number of ugly words used for it--the system we have used ever since we came out of the Garden of Eden. After all, what do they mean?--that every man works for himself, that the economic interests of the individual is the basis of society; that you and I work first and foremost for ourselves and those near and dear to us and not for someone else's grandma is, and will continue to be the system--I take it and stand on it. I tell you that no other system has worked to knock out unfairness, modified if you like, to shorten the power of those who have too much. Fundamentally, my property is mine, my work is mine, and the fruits of my work, the result of the efforts of my brain and my industry--that is mine and there is no other system of running society and there never will be--none, none, none! (Applause.)

What, Mr. Chairman, are the alternatives? Socialism? What do you mean by that? It is the government of impossible people by impossible leaders. It is an iridescent soap bubble floating in the air--a soap bubble of the good wishes of transcendental human beings governing other good, transcendental human beings. That is Socialism. And take it, if you like. We have a large party gathering now. I don't want to talk politics and'; I mustn't name them, because I never can quite remember their name. (Laughter.) It is called the Co-Operative--something, and if there are any members here remember that it is not your particular co-operative, but, all co-operatives, and as I understand that new movement, all kinds of people--farmers, householders, lawyers, clerks and intellectuals--are all coming into it, but each one has the idea that he is going to socialize the other--not himself!

There are farmers in this movement. Do they mean to socialize their farms? Are they going to give over; the management of their fifty acres in York Township;; to a pack of bosses sitting with their feet on the table, and collecting their money as they do in Russia? Not, on your life--they will drop dead in the furrows first. And then there are the householders. Do they mean that they will turn over their houses to a group of bosses to assign away their rooms to this one and that? No, they would die first! Then there are the young fellows the bright intellectuals in your colleges and mine who are joining this new movement, and they own nothing except the pants they wear. (Laughter.) Are they going to socialize their pants?

So, leave all that out. When I talk social reconstruction I do not mean those wild dreams, those foolish ideas, admirable in theory though they may be, which are the iridescent extremes of socialism. Nor, do I mean, what is worse, that hideous thing which we know today--that cup of blood pressed to the lips of the Russian people, that crown of thorns being crushed to the heads of a Buffering people. No, we do not want that. Then, wake up and we will do something first and T will show you how.

Our social system has worked and it is the only one that ever would work. With all its faults, its tyrannies, and its shortcomings, it has worked. It reached in the nineteenth century, the age of machinery, and production became wonderfully easy. Then it began to develop a strong tendency not only to work but to overwork. Beginning with a hundred years ago we had that alternation of crises; we had the speeding up of work and the accumulation of products. At the time even the wisest people did not read the writing on the wall. The Adam Smiths and the John Stuart Mills and all the rest of them were so engrossed in the total of production being attained and in the possibilities of the power that man wielded" that they never saw that it carried with it the strange dislocation of the machine--that the machine would rush fast and then break. Looking back--retrospect--is easy. We can see that within every ten years or so the machine did break. There came a time when work stopped; there was too much goods, and the poor suffered. It is a sad and pathetic fact that we paid so little attention to those depressions because they hit, mainly, the poor. It is only when they begin to hit the rich that we feel that they cannot go on.

Notice the flaw about it. We had the time when too much was produced and then, by the sheer lowering of wages, the forcing of people to work longer hours under harder working conditions, we slowly crawled back. There is no remedy in lowered wages. You must look to something else than that. The ultimate result is only accelerated death. The remedy of the Massacre of Peterloo of 1819, or the remedy used in saving Germany a hundred years ago are here to use if we want to use them. Those having political power could use that. But we must find some other method than that. Those depressions went on. Each was worse than the last--still, luckily, confined mainly to the working class, and mainly to one or two or three countries and still always relieved automatically by the recurrence of prosperity.

Then, came the circumstance of the War and every precipitating cause was multiplied tenfold. The War brought those things which caused the eventual crisis, but it was only the speeding up of the mechanism already started. Currency alone did not do it but the breaking down of the world currency led to accentuation of it. The word 'tariff' alone, the exclusion of foreign goods wouldn't do it. But it helped to make it worse. The national exclusiveness, the shutting out of immigrants, would not do it, but it helped to make it worse. And then the high power production speed of the War finished--it ran out--its momentum ceased and precipitated us in the crisis we have now. What we are witnessing now is actually the logical economic outcome of the circumstances of the War which for the moment speeded up production, absorbing everything that could be made There was a market for everything that could be produced and we were hurled headlong over the abyss of over-plenty.

If we could look down from above, like the gods, what a commentary we could have of our high flown race! Shipwrecked in sight of port! Human beings starving when we have the mechanism to produce everything the world could dream of--and we cannot learn to use it! Let us see if it is possible, painfully and with difficulty to drag us out--and I think it is. Notice what happened in all the other crises. There came presently, an accidental rise of prices and that brought an accidental increase of business and each increase stimulated every other, just as, now" every decrease accentuates every other; and just as, now, every man out of work throws out those who have been accustomed to supplying him with goods. So the opposite process can be set up in which, with a rise of prices for the moment, everybody who produces and sells is a little better off. Therefore, I am one of the many thousands of people who call themselves economists, and who say that the first temporary remedy is to set up a rise of prices. At once you shudder at the thought of inflation of paper money and you think of the wild and reckless disorder the world has seen through the over issue of paper money. I admit it. We have all been brought up to know something of the history of that, to know something of the disaster it has brought.

But can we not operate a rise of prices without inflation--inflation being a dangerous use of paper money, uncheckable and uncontrollable? Can we not operate a rise in prices? I think that we can. But notice that the effect is temporary only. It will be a rise in prices to a certain degree that will act like the first draught of cordial to a dying person--it will be the beginning of something that will mean health and we can do that. In a word, I propose that we charge our dollar, and here we drop into the depths of real economics" from the 23 grains of gold it has now dropped to 17 grains. That sounds as simple as a druggist's prescription, doesn't it? But a druggist's prescription sometimes means the path that leads from death to life and health. If you will change the American and the Canadian dollar at the same time luckily for us, the same scheme is recommended therefrom 23 grains to 17 grains--just that. The government could issue paper money and they may, if they like, coin some. People like to see the visible signs of what they think. We are not all professors who deal in abstracts, so we coin some. The effect would be immediate. I am only afraid that there might be too, rapid a rise in prices because the moment you tell anybody who has a stock of anything that the monetary standard is going to shift and the price is going up, he will be keen to buy anything he can. If you change the dollar, therefore, to alter automatically, the price scale, there would be a great rush to buy things which would clear off the accumulated stocks.

But notice that this is temporary, only. If that were all the prices would come back and we would be back where we were. The rise in prices would clear off accumulated stocks in every business. But salaries and wages would lag behind. If you go to the worker and say, "I am going to cut your wages by one-half or onequarter", then he would be up in arms. But does he know that when prices go up, his salary or wage is automatically cut? No. We witnessed in the War the rise of prices from three to one, and yet we had social harm only. It is possible to have painless increase. See how easy it is.

We are a gold producing country. We produce, annually, $60,000,000 of gold, in terms of our 23 grain dollars$80,000,000 in terms of the new dollar. The $80,000,000 could be used for paper money. The three for one is a safe percentage; one third goes to pay the miners and the rest is issued by the government as paper money--and paper money, redeemable cent for cent and dollar for dollar--and redeemable, not as now--you carry around your Canadian money--try to redeem it! You can't! I am not proposing inflation. I say redeemable money and I mean redeemable, down to the last cent.

You have heard of Old Mother Hubbard who went to the cupboard, to get her poor dog a bone, and when she got there the cupboard was bare, and so, very reasonably, the poor dog got none. We might say that Old Mother Hubbard went to the cupboard to get her poor dog a bone, but when she got there she found only the reserves of bones and therefore she didn't give any to the dog! That is our Canadian system.

Now, you would tell me,, because some of you know this ground as well as I do, that that change would affect our international relations--that every country that has a contract to pay interest in American dollars would be that much worse off by the shrinkage of the;Canadian dollar and the automatic rise of the American premium. That is right. It would be unless the United States does the same thing with us at the same time. If they don't, and the American premium humps, I tell you here, candidly, we have to part company with the payment of our interest in the terms of foreign currency. Our Constitution knows no such legal limitations as might happen the United States. We have the supreme authority and when the contract was made in terms of American dollars there was the underlying meaning that every Canadian dollar bill was cashable in gold--that every Canadian obligation was cashable in gold. Who would have made the fool contract with New York unless it was understood that the contract was payable in gold in Canada? We have to cut loose from this strangulation string that we alone must pay in the money for another country. England has already done it. In England a law was passed 115 years ago--it was passed in 1816 and it said that a sovereign is 113 grains of pure gold and the public debt is payable in sovereigns of 113 grains of pure gold. And in October 1931, the English government said, "We can't pay in sovereigns, we will pay in English paper money for what it is worth and every American holder and every foreign holder of the English debt lost one-quarter of his money; it was not because the English wanted him to lose it but from the extreme necessity of the occasion, we have got to come to that unless the Americans, as I hope and pray thev will, will join us in the 17 grain dollar that will make the rise in prices of which I speak.

But even if you had that quickened prosperity, that would not be enough in itself. You would have to have something that would bring about, not in the course of weeks, but months, a real revival of business. I think that that is possible. We could take advantage of the first stimulus from the cheapened dollar to make a real increase in rural arid urban business. And in this, I have the honour of sharing the views of Franklin Roosevelt--and I can express for you here, how glad we all are that that dastardly and brutal attempt on the life of the President of the United States was unsuccessful. (Applause.) I hope that that good man will be spared to carry out some of those magnificent schemes he is proposing for the carrying out of a vast program of public works in the interests of the working classes of the United States. And I understand that the government is going on this plan: when the work is carried out, it will be self supporting--self-liquidating, as they call it. The Americans like words. Self-liquidating--that word, Dr. Cody, we wouldn't have dared to use as undergraduates, yet the meaning is clear--something that pays its way as it goes.

And I think that we in Canada could adopt a plan for a program of public works that would pay their way as they go. I will take only one example: Suppose that the government were to take over the rebuilding of the cities--not of the beautiful parts like this, which need no rebuilding, but the slum areas, the forgotten districts, the lost, waste places of the city which often should have been the best and now are the worst. They command the lowest value where they should command the highest.

I think of my own ctiy of Montreal; it is a more conspicuous example, by far, than your "Town" of Toronto. (Laughter.) I am afraid that these haughty little superiorities will out! Did I call you a town? Why not? It's a better word. We are too apt to use the high sounding words. I well remember when my own College of McGill got the notion that it had to call itself a University. So if I call you a town, it is a word of praise. You are a town! But never mind that. We have in Montreal a great part of the city in which the real estate is of no value--it is not one bit of good without the rest of the city. Let us imagine--the cities have the power extended (sometimes they have too much or all the power) to take a quarter of a mile of that slum area and expropriate it at honest prices--nothing crooked about it. The buildings would be demolished and offered for sale. That is only capitalizing on the expropriating power of the city. The value is there but nobody can touch it. Only the city could expropriate this property; it is not interfering with private enterprise. It could not be carried out by an individual; one recalcitrant seller would prevent the carrying on of the plan. Like Ali Baba at the opening of the treasure cave, the city has the "Open sesame". No one else can touch it. The city can wipe out all this slum district--the old rookeries and crookeries--turn it into expropriated property and say to the individuals: "Come on and buy it." The city can make the contracts for expropriation and the demolishing of the building, and resell every one of them before they spend a dollar except for the clerical expenses in connection with the contracts. And if you had a chance to rebuild half a square mile of this district in Montreal, you would be converting this property which should have been of wonderful value, into what God meant it to be and there is profit in it. And you invoke,, as you should invoke everywhere in social things, the principle of private gain and private advantage. That is the mainspring of our life--as natural as the air we breathe and the circulation of the blood in our veins. We are all out for ourselves. Our race has grown on that.

In this way a market is created for the real estate of the great cities; the contractors are busy and there are calls for thousands of men--the kind of thing we haven't seen since the war. There would be bread and work for everybody--and there would be bread and work and hope for the speculator and the stock exchanges would be busy all day. Did I ever say a word against the stock exchanges? I take it back! I want to hear that ticker busy--busy all day. If we do start that kind of public work we could deal with the international question. W e can't now; when immigrants are excluded and everyone wants to sell and no one wants to buy, you cannot make international contracts.

But picture Canada busy with construction work in which supplies are needed and labour is wanted and we can make those international contracts which are essential for ideal trade between the nations. We can start again that flood tide of immigration that was and is and has to be the fundamental basis of the prosperity of this country. All those things are not only possible, we are standing on the brink of the possibility of it. We are here in our dark hour, but it is only just before the daylight if we but wake up to welcome it, the daylight is bound to come.

But if we had all that, Colonel Drew, the question still remains--"would the depression come back?" Yes, the threat of depression, like the spectre behind one's sins like the evil memory of a wicked life, would come back. It would haunt civilization still because, fast though we go, it is inevitable that that super power would break us down some day. But we shall have a respite of eight or ten years, perhaps, more, to set our house in order and it is a warning that the humblest can read. We must set it in order because there will never, never, never, be another depression after this one that would pass away of itself. This one, we trust, will go anyway--I hope so though we are not sure but the next one, NO. After this one we are under irrevocable sentence of industrial death. There are forces at work that we cannot control--a mechanism that we can not adjust if we leave things alone, but we will have for that task a respite of perhaps a generation and in that time we will look forward to finding a means by which the production of goods and their consumption can be harmonized--not by the fool remedies of Socialism or the brute remedy of Communism, but by introducing new rules to the game. Every British people today is under rules and understandings and gentlemen's agreements and therefore we have modified individualism in. a hundred different ways. We have modified the rights of property; we have modified the hours of labour; we have modified the terms of contracts in a hundred ways and we can go further still as long as we know the goal to which we are reaching and the goal is that we will come out some day into an industrial commonwealth where we don't work as hard as we do now--where the ordinary day of toil is over as easily as the labour of a university President. (Laughter.) No, I won't say that, but I will explain its attractiveness by saying that every one will be doing a life work and never know he is working--just as Dr. Cody doesn't know he is working. We can imagine a commonwealth in which, as Julian Huxley says, two hours a day is enough for everybody to work.

The Technocrat is right. We work too much and we work too long. We even invent new things to work at. We don't need to do that. But life will come out somewhere. Some of you will be alive to see it on a more harmonious basis in which this dissatisfaction and want will be beaten and killed. Humanity is not licked yet. When I look around at this group of human beings, I feel that we in Canada with the heritage that we have, can face this kind of task and we can win out and conquer it and achieve, not only the cure of this depression but the fundamental cure that will bring us to the real welfare of human society.

I will say one word more--it is a little out of my line, but I will say it. If we want to do that we will have to spread abroad a spirit--I won't say of religion but a spirit of purpose--that high animating spirit that marked the wartime; that record of devotion that many men here carry to their honour to the rest of their lives--you have to bring that to the path of peace. You will have to put in this new problem the same resolute earnestness and forgetfulness of self that showed so conspicuously in our British people in the days of the War. If you get that spirit of animation and religion to guide us, Gentlemen, the depression is over right now. (Applause.)