Facing Up to 1975

SIR ARTHUR CHETWYND:

Distinguished head table guests, ladies and gentlemen: It is said that a good story, like a good book or a good painting--or even a good motion picture! -always remains a good story and retains its value down through the years. Our special guest today falls into that category. A good and able person of talent and imagination, like good wine, he improves with age. He returns to us after a short span of four years. His speech in December, 1970 was entitled "Capital has no Nationality". Since then, much of the water of life has passed under the bridge, metaphorically speaking.

We welcome again today, Robert William Bonner, a partner in the law firm of Bonner and Fouks, Vancouver. He is one of that distant breed of Canadians which is born, and nurtures itself, in that exciting and even glorious-perhaps awe-inspiring-empire "on the other side of the Rocky Mountains" sometimes referred to as the land of the "Ogopogo", "Lotus Land", or the land of the "Susquatch"--that weird creature that is supposed to leave oversized footprints in the snows of British Columbia's beautiful mountain scenery. Perhaps the "Susquatch" is a myth-but our speaker today is no myth-and the footprints he has already left in a busy career are very real and have made a considerable contribution to Canada and to his province.

Consider the following:

- Born in 1920 in Vancouver.
- Graduated University of British Columbia, 1942.
- Served 1942 to 1945 with the Seaforth Highlanders in Canada, U.K., North Africa, Sicily and Italy. Wounded in action in Italy. Created a Major at age twenty-four.
- From 1946 to 1953 was Commanding Officer of the U.B.C. Officers' Training Corps, with the rank of Lieutenant-Colonel, at which time he was awarded the C.D. During this time he took his Bachelor of Law degree and entered the practice of law in Vancouver. On his first try, putting himself at the mercy of the voter in 1952, he was elected to the British Columbia Legislature in the first Social Credit government of that province under Premier Bennett, becoming an Attorney General at the ripe old age of thirty-two-the youngest to have been so recognized in his first try at political life. That same year, 1952, my late and revered father entered politics for the first time in his life at age 62! He was the oldest to be elected to the government party that year. My father served as a member of the first cabinet of that same government in those halcyon days and I remember him speaking of Bob Bonner with warmth and respect. Mr. Bonner held this post for sixteen years, at various times also serving as Minister of Education, Minister of Industrial Development, Trade and Commerce (seven years), and Minister of Commercial Transport (four years).
- He was six times elected to the Legislature at Victoria.
- In 1968 he retired from the government of British Columbia to join MacMillan Bloedel Limited in which he held a number of senior positions, including those of President and Chief Executive Officer and Chairman of the Board, retiring from that company on April 19, 1974.
- He has now resumed his law practice in the Vancouver firm of Bonner and Fouks. He serves on the boards of Canadian Cablesystems Ltd., International Nickel, IBM and Private Investment Company for Asia (PICA).

He is that well-rounded and somewhat rare Canadian who has had considerable experience in both the private and public sectors. He has been both a businessman and a servant of the public in his various elective offices.

I gather from our guest's recent utterances that he feels the voice of government is heard in the land--constantly--but that the voice of the businessman is not heard often enough. Bob Bonner, in his new capacity as private citizen, has called for more participation by businessmen in public affairs. He has been an outstanding example of doing just that. He believes that a corporate leader's constituency goes beyond the board room and includes the general public as well. He has always had an interest in where his country is going, and in an important way has helped to shape the direction. He has been a hard-worker and a realist, which qualifies him eminently to speak to us on "Facing Up to l 975".

With very great pleasure, I introduce to you Robert William Bonner, Q.C., of Vancouver--of British Columbia and of Canada.

MR. BONNER:

Mr. Chairman, ladies and gentlemen: After that fulsome introduction, I can only thank our Chairman most heartily for what he said, and express my appreciation for what he was discreet enough to omit.

You were very kind to refer to my province in a variety of ways. Having regard to recent developments in that province, perhaps I should commence by bringing you greetings from the People's Republic. I take it we are comrades all.

The morning paper says that Canada's oil self-sufficiency will end by 1982, and then lower down there's an article which states that the Ice Age is due soon and suddenly, and that by now Toronto, Leningrad and Glasgow should be under ice. So I'm glad I'm here while it's still possible!

But it was not on account of headlines of that sort that I speak to you today in terms of facing up to 1975. Without overdrawing the topic, I would like to begin by saying that there is now every reason to believe that 1975 will be a significant and dramatic year in our contemporary history.

It was three years ago that the United States in the course of a Presidential address announced that it was no longer willing or able to offer the world an unalterably stable reserve currency, or for that matter continue indefinitely to underwrite militarily every political frontier in the world. Even American foreign aid as a continuing institution was and has recently been placed in some question.

The significance of those remarks was the American recognition that the world was no longer the preserve of two major world powers, but rather that the future was to be shared economically, if not militarily, by hegemonies which had come into being in the shadow of the post-war Pax Americana, namely the hegemonies of the Soviet Union, the European Common Market, Japan, China and the United States of America itself.

In history the picture seldom changes abruptly. But that particular speech announced in a way the end of an era which began in 1945, and the commencement of a new world order which even now has a debatable shape and purpose.

Since August 1971, the world has had floating currencies;, fluctuating regional political stability, both in the Far and, Middle East, but surprisingly an apparently continuing east-west detente despite lack of agreement on strategic armament limitation.

We have had in this interval as well a period of considerable material prosperity joined with a period of not inconsiderable inflation.

The result has not been altogether agreeable. Today, the western world at least is contemplating recession while others among the developing nations are contemplating hunger and starvation. Famine has returned to the world.

It is psychologically a particularly difficult time for those whose adult lives have been spent working in a period premised upon uninterrupted physical expansion and evidently growing prosperity. A number of changes have occurred to bring at least temporarily to a halt or slowdown mankind's predictable upward progress. The presumption of an ever expanding annual gross national product, based on exponential increases in the consumption of raw materials and energy, upon which all western thought has been based, certainly since World War II and generally throughout this century, has suddenly come into question.

The considerations which have combined to give pause to our national and conventional thinking about material progress may be grouped under four heads.

1. The first is ecological.
2. The second is economic.
3. The third is political.
4. The fourth is sociological.

It is difficult in a few minutes to say something new about ecology.

The despoilage of nature and natural beauty in the name of progress have become an accepted abhorrence. For example, traditional pursuits of forestry and mining have become, at least in North America, activities increasingly hedged and bound by esthetic and conservationist regulatory considerations. In forestry, even managed annual tree cropping on a sustained yield basis is further complicated by the legislated need for roadside belts of green. River banks likewise demand protection. And fish in streams must be protected from logging debris. It is all very commendable and very costly.

Mining is no longer to be conducted simply where minerals arc to be found. Parks, lakes and rivers may occur in ways which prohibit a mine's beginning. Nor does anyone have a good word for strip or open pit mining as an economical technique. Esthetics and economics become swiftly opposed to one another. Once again the result is costly to the general consuming public, however, commendable on other grounds.

Nor is industry, as traditionally pursued, exempt. As the press has recorded during the last few weeks, recently discovered chemical industrial waste in otherwise biologically pure drinking water clearly indicates once again that careless industrial discharge, whether into air or water or upon the land, cannot be tolerated for practical reasons of public health.

Former habits or practices of production are being overtaken by unanticipated and unintended results which require correction.

While the land was large and people relatively few, the costs of many unthinking production practices could be ignored as being out of sight and, therefore, out of mind. But no longer. The cost of coping with ecological problems is slowly but surely entering into the cost structure of the things consumed by our society. The cost of living must surely rise accordingly as these problems are brought under control. Until control is achieved there appear to be some limits to growth.

In ecological matters it is plain that a major change is taking place and has already begun to affect our lives.

The next two points, having to do with economics and politics, are so close together in impact that at times they threaten to become one subject. Let us begin at least with these two heads of discussion examined as to one effect: inflation.

We have been waging a domestic economic war in the western world and particularly in North America during the past thirty-five years in what used to be called the free market. The free market was of course the theoretical forum in which the elements of production, land, labour and capital had interplay and combined to produce the goods and services by which we lived.

In the course of this political and economic battle, it is now clear that organized labour has gone from an essentially socialistic viewpoint to an almost entirely capitalistic approach to economics and politics, because the power struggle in the free market has become a struggle over the division of business profits.

If anyone has any doubt about how successfully this struggle over the division of profits has been waged, let him remember that wages have been constantly raised at the expense of profits and dividends, but there is no instance in recent memory of profits and dividends having been raised at the expense of wages.

With about 40% of the Canadian GNP going to three levels of government and that amount growing, the day may not be too far removed when the labour organization and the tax collector meet head on in a struggle for corporate earnings. The shareholder will be simply an interested bystander.

Much of our current inflation has come about because wage costs have repeatedly risen above market levels, which is to say above productivity levels, simply because sophisticated and determined labour organizations have achieved the political muscle to bring about this change.

Government in this circumstance has had little choice but to increase money supply to keep pace with price rises. But it also follows in these circumstances that arbitrary restrictions of money supply will not reduce inflation without causing severe unemployment. And it is now almost predictable, given the position of organized labour in the productive process, that not even severe unemployment, even if it were desirable, which it is not, will curtail wage demands--certainly not in the presence of inflation--unless we succeed in rethinking this entire problem. For the moment that effort of rethinking seems unlikely. We seem condemned to repeat the spiral of costs and prices with no one agreed on how to interrupt this undesirable chain of events. One might well ask if severe recession is the only corrective for modern inflation.

The problem of our self-induced difficulties might have been sufficient to occupy our minds even if our shaky economics had not been further complicated by the politics of the oil-producing export countries.

In a decision now too well remembered, the western economies in particular and the world in general have been forced since late last year to cope with a fourfold increase in the price of Middle East oil.

What this political decision on price means to the everyday cost of living in developed and undeveloped countries alike is being revealed from day to day. As an aside, it is worth noting that in just six months Saudi Arabia's monetary reserves have doubled and that Kingdom, thanks to political oil pricing, has become fourth among the world's wealthiest nations.

West Germany's monetary reserves currently are the largest at $32.5 billion. The United States is second with $15.71 billion. Japan is third with $13.7 billion. Saudi Arabia reserves now exceed those of either Britain, France, Italy or Canada and amount to $11.5 billion dollars.

Favourable balances of trade are everywhere disappearing. Unless redressed by massive loans or major capital movements, currencies in many countries face major revaluations. Italy is the most critical example of this problem, though Britain may not be far behind.

The implication of this change is masked by the use of the word recycling. Recycling is the expression used to describe how the billions of dollars being accumulated by the Arab countries will be spent or reinvested in the oil buying countries. Few have grasped the unprecedented nature of this problem. At present levels of production, consumption, and pricing, the OPEC countries as a group will receive more than $100 billion yearly for their oil exports. Perhaps $40 billion will be spent for goods and services. That leaves $60 billion as a surplus this year as compared to a $4 billion surplus in 1973. It is estimated that the cumulative OPEC surplus from all accounts this year will exceed $70 billion, $140 billion by 1975, and $200 billion by 1976.

These surpluses are matched by balance of payments deficits suffered by oil consumers. Developed countries are expected to have a deficit increase of $40 billion by year end. Developing countries such as India, Bangladesh and Sri Lanka will show with others a combined deficit increase of $20 billion. This current and predicted disequilibrium has enormous implications for which no easy solutions have been offered or exist.

Because of the sheer volume of the present and expected accumulation, the most likely prospect seems to be that most of these dollars will move west, eventually to North America, and be recycled in the form of capital investment. The recent false rumour of the purchase of IBM is an example of what could in fact happen to western industry on a very wide scale. Arabs might well replace Americans as important equity owners of Canadian industry. This result could come about as a result of direct investment in Canada subject to our legislation-or simply by direct investment in the U.S. in companies with ownership in Canada. Either prospect is a development to be anticipated in 1975.

No better example of the confusion to which these events give-rise can be cited than to read several headlines from pages one and two of a recent edition of The Toronto Star.

The headlines read:
"Arabs buy into Canada by the billion"
"Canadian loans to Iran called madness by M.P."
"IBM denies rumour Arab group wants to buy up firm"
"Take over U.S. firms Arabs told"

I will not pursue this line of discussion further except to note in passing that this catalogue of problems which so far has involved ecology, economics and politics, in the interests of time cannot dwell on the twin current and companion crises of food shortage and population growth which, while posing critical and for the moment almost insoluble questions, are not central to the theme on which I will conclude.

I referred earlier to the sociology of this period which concerns the fate of institutions which will guide our society through the current difficulties which I have described. Increasing attention is being paid to the crisis of democracy as an emerging problem central to our time. Some highly provocative and original thinking has been devoted to this topic by Professor Brzezinski, Lehman professor of Government and Director of the Research Institute on International Change at Columbia University. Professor Brzezinski, incidentally, is a Canadian, a McGill graduate, and is currently Director of the Trilateral Commission.

Amid a number of questions being studied, three seem immediate in the face of the discussion up to now.

1. Can democracy exist without social economic growth?
2. Can democracy endure prolonged inflation?
3. Can democracy survive without an effective international system?

The first question, "Can democracy exist without social economic growth?" recalls to mind that democracy has flourished primarily in the west and has emerged in its most vigorous form in nations associated with expansion, migration, discovery and control of enormous natural resources and until recently an apparently limitless call upon energy in all its forms.

Modern democracy has been to some extent a product of the industrial revolution. Its refinement has been a product of a more widely shared leisure. There is not much democracy in a subsistence economy.

Growth of material production particularly during the last thirty years has made it possible for democratic societies to give increasing attention to socially progressive measures having to do with health, pensions and economic security without the need to impose widespread governmental controls on how people lived and without engaging in repressive measures aimed at redistributing national wealth.

In the presence of a rapidly expanding population, slow growth or no growth, whether from ecological, economic or political factors such as we have been examining, have the implication sociologically of encouraging trends toward greater and more pervasive measures of governmental control. An alternative development is one in which social conflict, for example as between labour and management, or labour and government, would become increasingly frequent. Democracy as we now enjoy it may not survive such prospects.

The second question is whether or not democracy can endure prolonged inflation. Modern history recalls the collapse of the German Weimar republic as a result of inflation, which destroyed important social and political structures in that country. If, as many are inclined to say, inflation now rages world-wide and is beyond the control of national governments, a question could soon arise about the ability of democratic institutions to preserve the present elements of our society. That sort of question, once raised, is careless about the long-term desirability of alternatives which might appear to offer even illusory short-term relief.

We have seen, in the experience of others elsewhere in this hemisphere, that enormous national problems affecting standards of living and constant rapid inflation have not caused democracy exactly to flower.

The final question is whether democracy can survive without an effective international system.

I mentioned earlier in my remarks that President Nixon's August, 1971 speech marked to some degree the end of an era in international affairs--the Pax Americana with all that expression implies. The new international order, however, is not yet in place and its form even in outline is difficult to suggest, let alone predict.

Confining our attention for the moment to Europe, North America, Japan and the democratic countries of the Commonwealth, it is fair to observe that the fortunes of the democratic countries have become increasingly interrelated. This inter-relationship extends beyond the democracies to involve most countries and regions of the world.

A stable international system must exist to provide a reliable framework within which nations may interact without undue friction. Ecological problems, the economics of growing inflation, and the exacerbation of political groupings devoted to commodity pricing threaten to combine in the immediate future to place unprecedented strain upon the existing international system. We have already examined some of the implications of these forces.

The question of this period put differently is whether we are facing international disintegration in both the monetary and political aspects of our existing international system, and further, whether democracy can survive such events.

There have been sober and even gloomy comments about where the current of present events may lead. Germany's Willy Brandt, the new Premier of France, and in recent days Dennis Healy, the British Chancellor of the Exchequer, have each delivered themselves of opinions about democracy and the economic fate of nations calculated to seize the attention of the most indifferent listener.

Personally, I cannot abandon a lifetime of at times blind optimism about the future. But it is becoming obvious that we are confronting problems of unusual severity and we might as well face up to them in 1975.

Mr. Bonner was thanked on behalf of The Empire Club of Canada by Mr. William M. Kam, a Director of the Club.