Business and Government in Relation to our Economy

INTRODUCTION George E. Gathercole

MR. GATHERCOLE:

Our honoured guest is known to all of you either personally or as a favourite subject of business and political writers. He has been described as a member of Canada's power elite; a six-figure a year man; a diplomat entrepreneur; a new-fashioned man at the top; a prime specimen (no doubt Red Brand); and an Eisenhower with brains. I was puzzled by this description for Eisenhower is generally respected in our country. Then I recalled that one writer of the American political scene had observed that Roosevelt had proved that a man could be President forever; that Harry Truman had proved that anyone could be President; while Eisenhower had demonstrated that you did not need a President.

To me, Bob Winters, the son of a Lunenburg-Grand Banks schooner Captain, is a man who has tried to make of life a continuing adventure and has succeeded. While most of us go around like the worried dog who has not only lost the scent, but is afraid it is losing its sense of smell, Mr. Winters moves from one distinguished career to another with an assurance and confidence born of success.

One of my first encounters with Mr. Winters occurred many years ago. He was then Minister of Public Works and had come to Toronto with David Mansur, President of C.M.H.C., for a discussion with Premier Frost on housing. Mr. Frost had invited me to attend as well as one of the great characters of a number of years ago, Chester S. Walters, for many years Deputy Provincial Treasurer. We had gathered in the Council Chamber and were waiting for Mr. Frost. Someone asked, "I wonder if Mr. Frost knows that Mr. Winters is here?" Dr. Walters' immediate retort was, "Well if Winters come, can Frost be far behind?" and at that moment Mr. Frost walked in.

Government is not dull. It is exciting. It is challenging. It is big business. It is important. Sometimes the objectives of government become clouded over in the heat of the debate or in the struggle for a tactical advantage, and there is admittedly a need for a new perspective, a sense of proportion, a sort of detachment that might be adorned by the tale of the lady at the zoo who was watching the hippopotamus and asked the keeper, "Is that a male or a female hippopotamus?" "Madam," said the keeper, "I cannot see how that could be of interest to anyone except another hippopotamus."

There is a lesson in this for all of us. We who are not in Government as such, at least in the hot crucible of politics, should be equally on guard that we do not become captivated by eccentricities and absorbed by trivialities and thus lose sight of the great work of government that is being done by men and women across this country who are honest, sensible, hard working, conscientious and dedicated to the progress and well-being of Canada.

Such a gentleman is our speaker today--a man who has been a brilliant success in both government and private business; a man who has made his life a continuing adventure in the service of Canada and we are all the better for it.

It is a pleasure to present to you the Honourable Robert H. Winters, Minister of Trade and Commerce, who will speak to us on "Business and Government in Relation to our Economy". Mr. Winters.

MR. WINTERS:

I am grateful to you, Mr. President, for inviting me to be with you today. I remember, with pleasure, the last occasion on which I occupied this rostrum-just over a year ago. I was then a member of the Toronto business community-an experience that I found most enjoyable.

However, my circumstances are now somewhat different. I have once again become a public servant, and, even though my present experience in Government has been of short duration, I should like to talk briefly on the subject of business and Government and give you a few of my current impressions. I will then make a few remarks on the condition of our economy as I see it, including a brief reference to the Kennedy Round of tariff negotiations, which I regard as being of outstanding significance to Canada.

I believe private enterprise is the economic system best able to provide the standard of living sought by Canadians.

The revenues needed in increasing degree to support our economy, to provide basic Government services, to fight poverty and inequities, and to provide a fair level of social welfare, can best come from efficient private enterprise, operated according to sound business principles. It is because I hold these principles that I accepted an invitation to join the Government in the hope that I might, among other things, usefully reflect a businessman's approach and philosophy into the affairs and decision-making processes of the Federal Government.

Government is the business of the people, and it is very big business, indeed. But, there are fundamental differences between private enterprise, which finds its motivation in the incentive of profits and Government, which is dedicated to the service of the people. The Government, however, can discharge its responsibilities to the best advantage if, in the conduct of its affairs, it strives to obtain the best value for all of our citizens from the money it has to spend.

This demands efficiency, careful evaluation of the programmes on which it embarks, and diligent control over its expenditures.

While I believe the experience of a business executive can be useful in Government, I am more convinced than ever that it is easier for a politician to become a businessman than it is for a businessman to become a politician. Judging from a recent article in Fortune magazine, I believe Secretary Connor of the United States shares this conviction. I have long held that view, and, if I had not had previous experience in the Government, I would, I am sure, find this transition very difficult indeed.

One who has had experience as the chief executive officer of a private company would find the decision-making processes in Government to be very different. I subscribe, fully, to the principle of Cabinet solidarity--which means that, once decisions are taken, the whole Cabinet is bound to support them.

There are 26 Ministers in the Federal Government, representing diverse interests and geographic areas. They must endeavour to reconcile into national policies the many different and often complex aspects of Canadian life. Usually, common ground can be found and while the decision taken might not satisfy all, it is usually supportable.

There will undoubtedly be decisions taken by the Government, and supported by me, which will cause some concern to many of my friends. The question inevitably arises as to whether one can serve best by trying to work from within the Government, or whether he can be more effective and constructive if he has the freedom to express his private views. Every Minister undoubtedly wrestles with this conflict from time to time.

The same, of course, applies in private business, but there the balance sheet is usually the final measurement of whether the decision is right or wrong.

There is no such yardstick in the administration of public affairs, with the result that Government decisions become much more a matter of choosing the best course open in the circumstances.

Another facet of Government administration that would strike a businessman is the amount of committee work in the decision-making processes. With such a large number of departments, there are bound to be many matters that are of common interest to two or more departments, so that inter-departmental consideration is often a necessity.

I am not, at this time, offering an opinion on the merits of the structure of Government organization and administration. That can be done and indeed, has been done, by people more competent in this field than I.

I am simply giving a few examples of practices that would seem surprising to a business executive suddenly translated into the Federal Cabinet and using them to illustrate why Government is the art of "finding common ground" and is not, nor can it be expected to be, run with the crispness and decisiveness of a business which has its eye primarily on the balance sheet.

These are days of increasing complexity in corporate structures, necessitated by advancing technology, increasingly sophisticated and diversified products and production techniques.

Management must and does, spend much time, money and effort in adjusting to these changing circumstances. This is a process of constant study and change. Companies run by management that does not advance its techniques with times will lose ground.

Parliament has responsibility for the conduct of the country's public business. The scope and complexity of our public affairs and the consequent demands on Parliament are increasing enormously, but the Parliamentary machinery for enacting the legislation and handling the business of the country has not changed enough to enable it to deal with its programme expeditiously--as evidenced by the lack of progress made by Parliament in this Session to date.

The late John Bryden prepared remarks for delivery to the annual meeting of the North American Life Assurance Company. He was prevented from delivering them because of his untimely death.

He stated, "To achieve excellence we will be forced to take a hard look at our Parliamentary structure to see if it is conditioned for the jet age or merely adequate for the horse=and-buggy days. We will have to consider how the decision-making process can be sharpened up." With those remarks I concur.

Change of Parliamentary rules is resisted by some on grounds that Parliamentary traditions must be maintained. We all cherish valued traditions and don't wish to have them disregarded, but it is wrong to make tradition, as such, an excuse for preventing progress.

Each of us has our own concepts of what the appropriate procedures should be to achieve the best possible results in almost any situation. I don't know how many of us would agree with the set of rules drawn up by Mr. Harry Chapman, and which I saw recently in a copy of Think magazine, but I do know some people who seem to apply them. He says:

"Having served on various committees, I have drawn up a list of rules: Never arrive on time; this stamps you as a beginner. Don't say anything until the meeting is half over; this stamps you as being wise. Be as vague as possible; this avoids irritating the others. When in doubt, suggest that a subcommittee be appointed. Be the first to move for adjournment; this will make you popular; it's what everyone is waiting for."

I turn now, to our economy. All the indices point to a year of healthy, economic growth.

The high level of economic activity, stimulated by an extraordinarily large capital programme, and coupled with shortages of labour and the difficulty of finding sufficient funds to finance all planned undertakings, will impose inflationary pressures.

This will be one of our most pressing problems as the year advances, particularly having regard to the fact that we experienced an adverse external balance on current transactions in 1965 in excess of $1 billion, and that this figure is apt to be higher in 1966. It will be recalled that the corresponding figure in 1964 was less than one-half billion dollars ($433 million).

Although our payments on invisible account, including monies required to pay dividends abroad, and to service our foreign debt, were only slightly higher than in 1964, we had a sharp decrease in our surplus on trading account.

In part, this was due to lower wheat shipments which will increase in 1966. It is this drop in our balance of trade that must concern us seriously.

To hold our position in world trade and take advantage of opportunities to improve it, we must remain competitive on the basis of cost, delivery and service.

Taxes, of course, are an important element of costs; but it is only through the imposition of taxes that the Government can obtain the revenues it needs to carry out the programmes and provide the services required by the citizens. It is, therefore, incumbent upon all of us to use restraint in the demands made upon the Government if as a nation we are really serious about being competitive with other countries in seeking out and developing new markets for our goods.

Moreover, having in mind the lure of the dynamic economic climate to the south of us, and the tendency for our citizens to gravitate to the broad opportunities it offers, we must strive to maintain in Canada an environment that is favourable for capital investment and which will induce Canadians to remain in Canada and encourage people from other countries to come to our shores.

If we are to avoid too great a disparity between our taxes and those of other countries with whom we compete for manpower, capital and markets, the Government must be selective in its spending programme and resolute in resisting pressures to spend beyond its means. Each expenditure should be judged in terms of its return, as an investment, in material and human values.

The Government would, of course, like to expand welfare payments to all who need them. Every Government would like to do this, and this Government is no exception.

It wasn't easy for Members on our side of the House to vote against the Resolution introduced by the Opposition to increase Old Age Pensions to $100 a month. We would like to have done so. But it is estimated that this would have cost over an additional $800 million a year and having in mind that, even under conditions of unprecedented buoyancy, it is difficult to find enough revenues to cover our current rate of spending, this additional large expenditure would have imposed stresses on our economy which it would have been hard-pressed to sustain. Under these circumstances, increased social payments would bring less in additional benefits than would be anticipated.

In terms of human values, we all want to see need met wherever it is sound, but it seems to me that, if we are seeking orders of priority, it is the youth of the country who will have to carry the burdens of tomorrow that constitute one of our best investments.

I, personally, believe; to the extent that the country can afford it, we must invest more in the fitness and the education of the oncoming generations. This is why, at this stage, the Government set aside an additional $60 million this year for education, as announced in the Speech from the Throne. To revert, however, to our balance of payments, we have, so far, been able to offset our deficit on current account by capital flowing into Canada from abroad. That, of course, raises the question as to how long it is wise for a country, or a company, to continue borrowing large amounts of money. Many dynamic and expansionist companies are in the same position in this regard as is Canada itself. They approach the problem on the basis that they can continue to accumulate debt as long as they have the capacity to pay the interest and otherwise service their obligations. The same, of course, holds for the country.

But, in due course, the danger point is reached, and it is a wise company, and a wise country, that will avoid this extreme. The real crisis occurs if, suddenly, for some reason or other, borrowing sources are cut off. The equalization tax imposed by the U.S. gave us cause for concern a few years ago. That problem fortunately was solved in keeping with the mutual understanding and goodwill between the U.S. and Canada. New issues of Canadian securities were exempted from the application of the United States Interest Equalization Tax and Canadian borrowers continue to have unrestricted access to the United States new issues market.