Frontiers of the Future

MR. GRIFFIN: Members and Guests of The Empire Club of Canada: On a cold and wintry day in February, 1947, a large group of officials, newspapermen and others stood in a snow-covered field in northern Alberta and saw history made. When Imperial Leduc well No. 1 blew in a new era was opened for Canada and her people. With the proof that she had immense reserves of oil within her borders Canada had taken another long step on her inexorable march to greatness. Much of the credit for this epoch-making discovery must go to our speaker and his associates who, for almost two generations, had shown the courage and foresight to spend millions of dollars in oil exploration in Western Canada.

In speaking of Imperial Oil Limited-and incidentally, Sir, I hope you will never feel compelled to drop the name "Imperial" and of the men who direct it the magazine, "Business Week" had this to say a year ago: "The leader of the team-like the company--is an old hand. George L. Stewart joined Imperial in 1916, came up through the refinery end of the business, was named board Chairman in 1947, moved up (by Imperial's ranking) into the president's slot two years later."

Stewart, in his early sixties, was born in Winnipeg, took an engineering degree at McGill University. After graduation, he stayed on for a time as an instructor. He still likes education work, keeps alive a company tradition of frequent bullsessions with college seniors and their professors. He's mildmannered and conservative-no junketing supersalesman type, forever dashing off to view Imperial's vast domain. His associates figure he gets a lot more done-in a less spectacular manner-burning the midnight oil at Imperial's Toronto headquarters. Stewart is modest, not shy; progressive and aggressive in a quiet way.

One Imperial official put it this way: "Guess you'd call him a 'solid citizen.' The kind of a fellow you'd want to talk to if you had a deep personal problem."

I wish to add only one thing to that. Mr. Stewart enjoys one singular and unique distinction not mentioned. He is the only man in Canada who can drive into 10,000 separate business establishments and say to himself, "Here I feel at home."

MR. STEWART: It was very kind of you to ask me to speak to you at the present time. Seldom has there been a period when subject matter came more readily to hand. There are scores of things relating to Canada and the Commonwealth which demand attention and discussion.

However, I do not intend to discuss all the things that we might talk about! Instead, I would like to mention a few aspects of the Canadian oil development which may be of interest, and then go on to some matters of more general national interest.

The oil industry in Canada has, as you know, become something of a "glamour" industry since the war. In greatly increased numbers we have donned ten-gallon hats and roamed the prairies, looking for crude oil. For the first time in this century, Canada faces the prospect of becoming self-sufficient in oil. New pipe lines have nearly spanned the continent and the tanks and towers of new gathering plants and of modern refineries have risen at many points.

All this activity has given the industry a large share of the limelight. Along with aluminum in British Columbia and iron in Labrador, western oil will probably continue through history to rank among the major new frontiers opened up in Canada's mid-century expansion.

Oil is important in its own right, as in any other industry. But I feel that its role as an opener of frontiers is the feature of the industry that appeals to Canadians today. In the long record of Canada's development there has' been a succession of frontier industries--the cod fishing off the Atlantic coast, the fur trade, timber, railways, grain, mining and electrical power. All of them have opened new horizons, have led to new industries and increased population.

Most Canadians, even those of us who have only a sketchy knowledge of history, are thoroughly aware of the importance of expanding our industrial frontiers. We know that Kitimat, Labrador and Leduc are not important solely for the aluminum, iron and oil that will come from these developments, but for the other industries that will almost certainly follow on their heels. We know that you cannot electrify northern British Columbia, build railroads across Labrador or produce millions of barrels of petroleum energy on the prairies without making profound changes in the opportunities that these regions present. It was so with the fishery that opened up our coasts, with the beaver trade that opened the interior-with every major frontier industry in our history.

Western oil has developed to the point where it is possible to see some of the secondary effects. It is now nearly six years since the discovery at Leduc in February, 1947. That is much too short a period to appraise the ultimate effects of the development, but some of the initial results are becoming apparent.

The oil industry itself has brought the investment of nearly a billion and a half dollars since the end of the war. About three-quarters of that money has been spent in the west. Some of it, like the money spent on pipe lines and refineries, is not necessarily of a recurring nature; but it is surprising how many "nonrecurring" items do, in fact recur time and again. On the other hand, certain expenditures, gathering lines, separators and storage tanks are continuous and increasing as the fields grow in extent. Something upwards of $300 million is currently being spent on this sort of work and we can expect this rate of investment to continue.

It's worth remembering that this investment began to flow at a time when the prairies were losing population. Farm mechanization had grown rapidly during the thirties and early forties. There was not the same need for men on the land, while the need for men in the cities-chiefly cities outside the prairies-was very great.

This temporary movement away from the prairies was, as it turned out, no real cause for alarm. It simply reflected the fact that prairie farming was in transition to a more efficient, more prosperous condition. But at the time it caused serious misgivings, especially to people like myself who were born and brought up in the West.

Under the circumstances, the discovery of oil could not have come at a more auspicious time. It meant a billion dollars or so worth of new opportunity in an area which badly needed it.

Before touching on the response that this stimulus has evoked in Alberta, I should perhaps make it clear that the oil industry does not claim all the credit. Credit for this progress belongs to a vigorous people, and the role played by the oil industry has been that of expeditor or accelerator.

How rapid the progress has been can be measured by some of the figures from the census of 1951 and the prairie census of 1946. In the earlier year, before the discovery of oil at Leduc, Alberta ranked second in population, with 30,000 fewer people than Saskatchewan. Five years later it had reached top position, with a lead of 107,000 over its eastern neighbour. Not only has Alberta grown more rapidly than the other prairie provinces, but it has outpaced Canada as a whole, rising 17% against Canada's 14%.

Rather more interesting than the gain in Alberta's total population are the changes in occupations during the five years. For example, 26% more people found jobs n manufacturing and the mechanical trades. There was a one-third rise in the number of people managing or owning businesses. This is, broadly, what one would expect in such a period of expansion-a growth in manufacturing and the establishment of new businesses.

But the growth in professional and clerical groups was more pronounced and, I imagine, still more pleasing to the West. There was a 50% increase in both the professional and clerical categories. Those of us who recall the time when many young westerners felt that they must go east to make a career will be interested in the change that came in five years of progress in Alberta.

In such circumstances, one expects to find an increase in the number of engineers, and the fact that their number more than doubled is not surprising. But to find increases of roughly two-thirds in the number of writers, artists and librarians was something of an eye-opener. It would make an interesting study to find out what connection, if any, existed between the growth of these cultural occupations and the opening of a new industrial frontier.

There does, however, seem to be a close connection between the oil development and the growth of manufacturing in the provinces. From 1946 to 1951, investment in manufacturing in Alberta showed nearly five times the rate of increase of Canada as a whole. No other province equalled Alberta's rate of growth for manufacturing investment.

While this manufacturing investment does not include any of the capital expended for oil development, I suspect that much of the manufacturing was fairly closely linked with oil. More and more of the supplies needed for exploration and development are coming from prairie sources. Now a second kind of industry is coming to the fore, the petro-chemical industry, based in part on the increase in the number and throughput of refineries. Since 1946 the capacity of western refineries has increased threefold. At that time, you could in some cases supply gasoline more cheaply to consumers by importing it, rather than importing crude oil and doing the processing in the prairies. After Leduc, the reverse became true, and today domestically-produced gasoline at Edmonton is about 10c a gallon cheaper than imports would be.

Aside from cheaper gasoline, these refineries added an important new industrial resource to the prairies-refinery gases. These cracked gases have similar heating value with natural gas, but substantially different chemical properties. In a nutshell, they are essential in the manufacture of rubber and a wide variety of other petro-chemicals. It now appears that the refinery gases may prove a major missing link in the prairie industrial chain.

These are only a few samples of what is going on in Western Canada as a result of what I have called a billion dollars' worth of opportunity. One could go on indefinitely-for there is not an individual or family in the prairies-no nor in all of Canada-whose horizons have not in some way been broadened by the opportunities that have been created by the flow of investment into Western Canada.

Now it is not my intention to recite a long list of the benefits that flow from an oil development. What I do wish to stress is the benefits that accrue from any industrial development that opens new frontiers and opportunities. Aluminum and iron will have basically similar effects and so will many other industries large and small. The development of such industries provides the dynamic element in our economic life. They create the new opportunities which alone can bring productive full employment and social security. They enable the immigrant to build a new home and the native son to hew out a career.

The billion and a half dollars that has been invested in Canadian oil alone is 11/a % of the total value of Canada's output of goods and services for the postwar period. If all the capital had been raised at home, it would be equal to about five days' effort each year from everyone. The capital raised for oil is equal to about one-half of the value of new passenger automobiles on the highways, or a third of the new homes we have built since the war.

Perhaps these comparisons belittle the 1 1/2 billion dollars that the oil industry has spent. Even today a billion is quite a substantial sum-especially when you have to raise part of it! But the contrast between the 1 1/4 % or so of national product required to finance these frontier industries and the potential benefits that Canada will ultimately draw from them is very marked. That 1 1/4 spells the difference between a dynamic and a static economy, between expansion and contraction, between progress and decay. One can view these dynamic factors as a socialist and see them building a broader base for social welfare. One can view them as a capitalist and see them building a broader base for investment and industry. Or one can view them as a neutral and see both goals being achieved simultaneously. It does not matter what stand you take, man's physical well-being seems to coincide with man's ability to push into new fields.

A consideration of these points brings us squarely up against the world's greatest problem today. If an expanding economy is the solution to most of our economic and social problems-and if the capital required for an expanding economy is so small relative to the total productive effort-why is it that large areas of the world do not enjoy this sort of expansion? Why is it that some countries are regarded as underdeveloped and chronically in need of aid?

I think we can find the answer by looking a little more closely at our expanding economy. After all, Canada too is an "underdeveloped country". We are by no means fully developed, nor is the United States for that matter. The difference between our own country and those less fortunate is that expansion is taking place at a satisfactory rate in Canada. Why?

Part of the answer lies in our national attitude towards expansion and its reflection in our laws governing the development of resources. In this country, we recognize that a certain minimum of controls is necessary. We recognize that the individual has certain responsibilities to the community and that industry has responsibilities to the country. Such controls and responsibilities are defined by custom and by law in the general interest, and go no further than is necessary for their purpose. They permit individual enterprise to function freely to maximize development and prosperity. I can perhaps best indicate our national attitude to resource development by contrasting it with that of some other countries.

Some countries have made development of their resources a government monopoly while some others restrict it to the native-born. In either cases, an effective barrier is set up against the importation of new capital and new ideas.

Some parts of the world permit outsiders and outside capital to develop resources, but make the developer's title so insecure that capital and prospectors shun the area.

Still other parts of the world have extended a sort of legal welcome in the form of progressive legislation, but have chilled the welcome by excessive and discriminatory taxation.

Most of the countries which have adopted this nationalistic, anti-foreign attitude have suffered for it. And this is not surprising, since the very fact that an industry is new to a country indicates that there may be a deficiency of domestic capital and personnel to get it going. Certainly, Canada's ability to combine patriotic interests with international tolerance is one of the basic reasons for our country's progress and prosperity.

Those of us who wish to maintain and improve the contribution of competitive free enterprise are sometimes inclined to stress the need for good legislation and leave it at that. Give us, we say, fair laws which promote competition but which leave the prospector or developer reasonable security of tenure, freedom to market his product, freedom from capricious changes in the rules of the game, and the freedom to retain a reasonable proportion of his earnings.

All those things are necessary, but they're not the whole story. For example, no conceivable legislation on the part of what is now Canada could have led to the development of one of our earliest industries, the fur trade. That trade arose because Europeans wanted beaver furs and beaver hats. The conditions that brought about that early frontier industry were far removed from Canada. Similar considerations apply to the frontier industries of today. The most important single factor in launching today's drive for petroleum, iron and aluminum is not anything nearby or very recent. It was the automobile, whose own development began to take shape some 60 years ago.

The relation between the motor car of 1900 and Canadian prosperity in the 1950s may appear somewhat remote, but it is none the less real. For example, it would have been foolish to look for oil in the Canadian prairies if those provinces had not been well-stocked with automobiles, trucks and tractors. If it had not been for the local need for petroleum, the search would have been for oil to export, and there are a great many areas of the world where exportation of oil appeared easier than from our prairie region.

If one concedes that the horseless carriages gave a push that helped to open Canadian frontiers fifty years later, one is led to ask: "What things are developing today that will open up new frontier industries a half-century hence?"

That is, of course, a very difficult question to answer. We may be sure that posterity will value things differently from the way we do. But another way of asking the question is "What could have developed in the past ten years or so that would vitally affect future prosperity?" That question becomes very pointed when you try to imagine what would have happened if the automobile had come on the market in 1939 instead of when it did. That is, that the auto age had dawned in a period of economic controls and planning. Suppose the horseless carriage had been subjected to the scrutiny of a foreign exchange control, steel control or rationing authority!

Could such an article be classed as an essential? On the contrary, the first automobiles were the toys of the idle rich. They were not regarded seriously from the transportation viewpoint.

Did the automobile have a large industry behind it? Or, to put it bluntly, did it represent many votes? Again the answer is no, for in those early days, the production of automobiles was pretty much a back-shed proposition, not very far advanced beyond the bicycle repair shop era.

Did the automobile have strong financial recommendations? No again. In those early days there were very few investors who looked kindly on the noisy, unreliable horseless carriage. As a group, investors were not interested.

These things remind us that many of the genuinely new products of industry are born into a hostile world. Sensible people were, for the most part, unfriendly to the early motor cars, an attitude which is still reflected in the oppressive taxation to which autos-and the fuel they use-are subjected.

The natural coolness to innovation, sales resistance, if you like, is something that a good product or idea can overcome in time. But not if this attitude is crystallized into the form of an official control or priority scheme. Then, the mere fact that we have been getting along without something indicates that it is non-essential, hence not entitled to an official priority. In the planned, controlled economy, only the established consumer goods are likely to get approval and the genuinely new article is likely to be killed at birth.

This is, I think, the chief reason we should oppose superfluous controls-not only for what they can do to the established trades in which most of us earn our livings, but for what they can do to industries in the formative period, industries that are so new that no one could present a brief on their behalf!

These new and growing industries are the source to which we must look for the frontier industries of tomorrow. We are still, perhaps, inclined to take too short a view in our economic thinking, to take measures to solve an exchange problem or a material shortage without realizing the effects on industries which appear of secondary importance.

It appears to me that the one most essential feature of a healthy free enterprise system is that its rulers must take the very long view. Day-today extemporaneous planning is bound to kill off some of the new growth that is so necessary for continued vitality.

And this is something we cannot afford to do. The prosperity and expansion of the 1950's must be followed by other developments that will bring further benefits to the country. But this will only be achieved, we may be sure, if we can maintain the fertility of our economic life, Only in a community free to experiment, to take some chances and to do the unorthodox will those movements develop which will open new frontiers fifty years from now.

THANKS OF THE MEETING were expressed by Mr. Tracy Lloyd.