Why Not Apply Tomorrow's Disciplines Today?

MR. GORE:

Among the traditional signs of the festive season just drawing to a close, is an abundance of colourful illumination. From our streets, our buildings, our houses, and our high-rise apartments, this seasonal luminiscence shines and glows--this year symbolically expressing our joys and hopes as we leave our first century as a nation and embark upon the second.

Illuminating our environment, heating our dwellings, and turning the wheels of our industry and transport--these are but a few of the major benefits man has derived from the harnessing of one of the great forces of nature: electricity.

Other manifold applications of this tremendous force are apparent in nearly every aspect of our existence. I will not begin to enumerate them, for they are familiar to each of us. I will observe, however, that the continuous flow of electric power through the lifelines of our province is of vital importance to the functioning of our modern, technological society.

With these thoughts in mind, I would like to direct your attention to our speaker- a man with the responsibility for harnessing and distributing electric power in this province--I refer to Mr. George Gathercole, Chairman of the Hydro-Electric Power Commission of Ontario. He was born in Hamilton 56 years ago. He has a B.A. degree from McMaster University, an M.A. degree in economics from the University of Toronto, and an LL.D. degree from York University.

Our speaker was a prominent athlete in his university days, having been captain of both the football and hockey teams at McMaster.

Upon completion of his university education in Canada, he went to England to undertake post-graduate work. On his return to Canada, late in 1939, he was named Economic Executive Assistant in the Hydro-Electric Power Commission of Ontario.

During the war he served with the Royal Canadian Navy, in the Operations Division and in the Operational Intelligence Service.

At the beginning of 1945, he accepted a position with the Government of the Province of Ontario as its first practising economist. For the ensuing 171/2 years he held a number of posts, functioning as the government's chief economist during a period of unprecedented industrial expansion in this province.

Mr. Gathercole was engaged in the formulation of the Ontario Hospital Services Insurance programme, in the development of the Metropolitan Toronto plan for the formulation of our present form of municipal government, and in the Ontario Pensions Benefits plan. He played an important role in Ontario submissions to five Royal Commissions and he led technical discussions dealing with federal-provincial fiscal arrangements. Latterly, he was the Ontario Prime Minister's representative on the Federal-Provincial Continuing Committee on Fiscal and Economic Matters.

Our speaker was appointed First Vice-Chairman of the Hydro-Electric Power Commission of Ontario on December 1st, 1961, and became Its Chairman on April 1st, 1966. In addition to his duties with Ontario Hydro, he is a member of the Ontario Advisory Committee on University Affairs and the Ontario Advisory Committee on Confederation. He is also Vice-Chairman of the Sheridan Park Corporation and a Director of the Royal Botanical Gardens, Hamilton. He was the distinguished President of The Canadian Club during the 1965-66 Club year.

Gentlemen--it is my pleasure to call upon Mr. George E. Gathercole to address us on the topic "Why Not Apply Tomorrow's Disciplines Today?" Mr. Gathercole.

MR. GATHERCOLE:

As your Immediate Past President noted at the beginning of the 1966-67 season, The Empire Club of Canada has enjoyed a long and illustrious career going back to the twilight of Victorian grandeur 65 years ago.

Those of us who have gathered our impressions of that era from authors and historians think of it as an age in which there was a strong sense of personal and national rectitude, propriety and discipline. Today one might well ask whether with the passing years we have lost some measure of those traits once considered so essential and vital to survival.

I grant that in these days, when the accent seems to be so much on permissiveness, anyone who speaks of discipline is likely to be thought of as out of date as a gas lamplighter, but history carries some telling lessons of the revenge visited on nations and individuals who were thoughtless enough to neglect it.

Discipline, of course, is not an end in itself. In one way, I suppose, it is a response to one's conscience. In another it is the means by which unity and action are harnessed to work in the interests of the whole community. In a third sense, discipline is the process by which in return for giving up a lollipop today, we can look forward to getting the deed to the candy store tomorrow. It is on this general theme that I speak to you today.

In a democratic society, where opinions, wants and needs vary greatly and individual freedom and independence are so much prized, it is not always easy to persuade an individual that there can be a higher interest than his own.

Individual liberty is treasured as our most precious possession, but the development of an urban society has made us increasingly interdependent. Each part of our society, whether it be government, industry, labour or management, can operate effectively only within the context of our total environment. The untrammelled, unilateral extension of any one, endangers the progress of the others. These considerations create a responsibility to think in terms of broad economic and social objectives which promote the well-being of the whole community.

Unfortunately, it is easier to establish objectives than it is to attain them. You cannot set them up and then demand that someone else make them come true. Humans have a disturbing disposition for self-delusion. As John Deutsch has affirmed, Canadians have acquired a set of extravagant or exaggerated expectations. We want full employment, but not rising prices. We want expensive social services, but at someone else's expense. We want to maintain Canadian unity, but we are not prepared to accept the price of adapting to changed circumstances. We want to preserve our independence from the United States while enjoying parity of wages and other comforts when our productivity as a whole is less. We hope to consume all the fruits of our modern industrial machine even though we sometimes impede and frustrate its operation by strikes and picket lines. We want industry to be efficient, modern and highly developed, but often we are not ready to meet the exacting demands required to accomplish it. In short, we want many things--things that in time are capable of being realized, providing we can develop the discipline required to achieve them.

Consider, for instance, the matter of preserving our Canadian identity and viability. It is understandable that Canadians wish to share the same income and comfort standards as our friends in the United States. I can conceive of many reasons why we should aspire to that goal. Its realization would constitute a great attraction not only to immigrants from abroad, but to our own native born who are emerging from our schools and universities and seeking interesting and rewarding jobs with reasonably competitive incomes. But real parity cannot be obtained, except in special situations, by negotiation or legislation. Although I am aware that both of these processes have been tried, there is no way by which they can produce gains that are widely shared.

Canada has a potential unsurpassed by any other country, but it still has several formidable handicaps. By most standards we have a relatively small domestic mar ket and for many products we lack the long production runs that make for high productivity and low unit costs. Our financial and human resources in terms of those of the United States are far short of those required to maintain a corresponding volume and diversity of research and technology. Add to these shortcomings our large net foreign debt that has to be serviced and we have three good reasons why appeals to negotiation and legislation to effect comparable real incomes and living standards are for most Canadians an exercise in futility.

I do not despair that Canadians can ultimately bridge the gap, but success will not come automatically. There is no magic formula. If we are to match American incomes and living standards, we must be prepared to produce and export more in relation to our imports, and generate more savings for our domestic capital needs and the acquisition of investments abroad. No amount of tinkering with the country's laws or of driving hard wage bargains will alter these fundamental economic realities. The elimination of the discrepancies in nominal incomes and prices in Canada and the United States will depend on how effectively we apply some of those old-fashioned vitrues such as hard work, saving, ingenuity, inventiveness and good sense.

What of that other puzzle, the preservation of Canadian unity? The issues here run wider and deeper than many people believe, and it would appear that almost superhuman understanding, patience and effort will be needed to find a formula that will accommodate, within reasonable tolerance, all the conflicting views and interests that are held on this subject.

Prime Minister Robarts aptly expressed the need for better understanding on the part of the English-speaking Canadians when he said that you cannot in one breath speak in favour of unity and in the next argue against all change. While a new approach by English-speaking people is, no doubt, overdue, our French-speaking compatriots in Quebec should also be guided by the realization that the process of opting out and maitre chez nous can be carried to a point where representation from that Province in the Federal Parliament would be neither tenable nor justified. This process can destroy Confederation in effect, if not in name, just as surely as if Quebec took formal action to separate.

Failure to reach a satisfactory accommodation would have tragic consequences, and one should not treat lightly the feelings in Quebec for more independence. Make no mistake: we in the rest of Canada are richer by being joined with Quebec. On Quebec's part, there should be an appreciation of the staggering problems--fiscal, economic, social, political and territorial--that it would face if it ventured into separation. Canadians could not make a more fitting New Year's Resolution than to rededicate themselves to building a nation united politically, economically and intellectually.

We in Ontario Hydro, and indeed in the whole electrical industry, also face testing times--times that will challenge the best efforts and talents of all of us.

Traditionally, Ontario Hydro has doubled its capacity every ten to twelve years. But in the next decade we will have to do better. Indeed, in the next eight to nine years we must bring into service as much capacity as Hydro has built and acquired in the past sixty years. And this is only a harbringer of what lies ahead. By the year 2000, just 32 years away, Ontario Hydro will be required to build the equivalent of seven or eight power systems of its present size.

However, it is on our commitments in the next several years that I wish to focus your attention. This task in itself will be formidable. It will involve not only Ontario Hydro but also a broad cross-section of our manufacturing industry and construction trades.

As one of the giants in the electric supply industry--we are one of the two largest electric power utilities on the North American continent--Ontario Hydro is able to take full advantage of the economies of scale in planning its production programme. It is big enough to install and operate the largest and most efficient generating units and high performance equipment now being manufactured.

Although for many years Ontario Hydro relied on the development of water power to meet its requirements, this is no longer possible. Of our total committed expansion of nearly 8-million kilowatts (our present capacity is 9million kilowatts) less than three-quarters of a million is hydraulic; ninety per cent of our commitment is thermal generation.

In earlier years the concentration of hydro-electric power development led to the creation of a market for turbines and generators that Canadian industry was able to supply with great skill and competence. Canadian water turbines and generators enjoy a high reputation throughout the world. While there is still a substantial demand in several other provinces for hydro-electric equipment, the trend towards thermal generation in Ontario poses a difficult supply problem for the electrical manufacturing industry.

Compounding problems of expansion and restructuring has been the dramatic increase in the size of the units installed. The most common size in the early 1950s was 100,000 kilowatts. Now all our new stations will have units of one-half million with a total plant capacity in each case of 2 million kilowatts, equal to the whole of our power generation at Niagara Falls.

These thermal stations have many of the characteristics of one of Rube Goldberg's finest creations. Exotic materials are employed to stand up under operating tem peratures of a thousand degrees and pressures exceeding 2,000 pounds per square inch. The turbine blade tips spin at a speed of 750 miles an hour, glow a cherry red, and generate a force several times that of a tornado. With their miles of piping, tubing, wiring and several hundred electric motors and pressure and temperature switches and control valves, they form a package that for temperament would make Maria Callas look like a study in cultivated calm.

Such highly sophisticated machines impose the most exacting demands upon manufacturers and our own staff. Design, machining and fabrication call for the highest technical skill and precision workmanship. When the units are first installed, commissioning problems can be frustrating and time consuming, but our experience is that once the teething stage has been passed, the equipment can be brought to a state of satisfactory performance.

Ontario Hydro, indeed all utilities, have had their share of difficulties with these large prototype--but in the end cost-shaving--units. With the combination of manu facturing difficulties and longer commissioning trials, it has become imperative for us to double our lead time which, has now reached seven years. Obviously, the longer the lead time the greater the risk of error in equating our total capacity to our total load, and the greater strain thrown on our load forecasting techniques and personnel.

I have always regarded one of Ontario Hydro's most challenging tasks that of matching its capacity to demand, neither on the one hand having a surfeit of capacity that would drive up power costs, nor on the other a deficiency that would inhibit the province's industrial and community growth.

For Hydro to plan its capacity to meet not only adverse weather conditions and forced outages but a several months' construction strike--the first of any consequence in 16 years, and the largest in our history--would be ultra safe and ultra expensive. Any organization that over the years is not at full stretch at the time of its annual peak demand would be hard put to defend itself against claims of extravagance.

Trying to steer a course between security of power supply and economy of supply is made doubly difficult today by the fact that the entire electrical industry has been undergoing a traumatic transformation as a consequence of major breakthroughs in science and technology. We have entered a new chapter in our development which is founded on nuclear and fossil-fuelled thermal machines, involving concepts and designs which have never been put to the test of full-scale commercial operation.

This is particularly true of our efforts to harness nuclear energy for the generation of electric power. We have joined with Atomic Energy of Canada in the develop ment of the CANDU reactor--a Canadian design employing Canadian natural uranium as a fuel, and soon, Canadian heavy water as a moderator. It would be nice, if we could afford it, to experiment with a number of other concepts, but without the financial and scientific resources we could spread ourselves so thinly that we would fail to bring anything to fruition.

The Atomic Energy of Canada's reactor design is adapted to Canadian resources. It requires a large capital investment--this is a disadvantage--but it is offset by low fuel cost. We know the reactor works, and estimates of the cost of larger developments suggest that they will operate well below the unit cost of power generated from conventional fossil-fuel stations. As it becomes a demonstrable success, Canada will possess an important new manufacturing and export activity.

Granted, there have been delays in bringing the 200,000 kilowatt Douglas Point station into service, but this has been the experience of other utilities, and most of the defects at Douglas Point have been in the primary heavy water circuit pumps rather than the reactor itself. After producing power last January, and later reaching about one-half its capacity, the plant encountered difficulties which caused it to be shut down. The station again came on the line before Christmas, and last week was adding 162,000 kilowatts of power to the system.

In time experience may suggest improved designs or even new concepts. Hydro's primary motivation in nuclear development is an extension of its basic responsibility, which is producing electricity at the lowest cost possible, and at this stage the Canadian natural uranium, heavywater reactor offers us the best nuclear means of doing that.

Despite the setbacks and disappointments, Canadians are entitled to take some satisfaction from the fact that no other country of our size has embarked upon a nuclear programme, designing and developing its own nuclear system and manufacturing capacity. Moreover, with Picker- . ing under way, Ontario Hydro in relation to its capacity has about as large a stake in nuclear power development as any country in the world, including Great Britain and the United States. Admittedly innovation is risky. Certainly we could have concentrated upon conventional hardware, but had we done so we would not have afforded Ontario and Canada or the graduates from its schools and universities the same opportunity of advancing in nuclear research and technology. This would not have been good enough. We have to venture. We have to move ahead, applying the scientific disciplines of tomorrow, today.

I have tried to emphasize the need for seeking solutions for problems from the standpoint of the community interest or the common good. No doubt that is idealistic, and we will never achieve perfection. Nevertheless, the exercise of striving for it may be salutary.

In the light of all the things we are trying to accomplish, I wonder how Canadians can justify wage increases of double those in the United States and the rash of strikes that beset us from time to time. I am not against high wages and salaries. They should be the highest that the economy can afford.

The role of unions in improving working conditions is fully acknowledged. But I am sure that many in the union movement will admit that wage increases of eight to fifteen per cent, far in excess of any conceivable growth in productivity, may thwart our development and wrench it off its forward course. Even increases of eight per cent annually mean that the income levels will double every nine years. In the wake of this powerful thrust, one is left to contemplate the impact upon interest rates, the heavy cost of carrying mortgages and its effect upon business expansion and home ownership. And then there is the plight of all those who have to live on fixed incomes, including pensions. Surely considerations of both economics and equity dictate that we should not be complacent about the size of the income increases we have been experiencing. It must be plain even to those who have been able to make such demands effective that their efforts are in part self-defeating. Neither government, nor industry nor Hydro can absorb them through gains in productivity. The upshot is higher costs, higher prices, higher rates, higher taxes.

There was a time when unions could justify a degree of economic dislocation and general inconvenience because this power was being wielded on behalf of less for tunate members in the economy. Generally speaking this is no longer true. It is the unorganized workers and citizens and the general public who now are more likely to suffer.

The strike of the construction unions which crippled vital Hydro projects for many months last year did not involve wages; it was concerned with the role of the union in society and the authority it would exercise. We value the work of unions. By far the major proportion of Hydro's construction is carried out by union organized workers and contractors. Any worker taken on Hydro's construction staff becomes, after a short waiting period, a member of the trade union associated with his particular skill. Any contractor engaged on a Hydro project must adopt wage rates and monetary working conditions for his employees equal to those negotiated by Hydro for its construction workers. On the other hand, as a publicly-owned, provincewide organization, carrying on its activities in a variety of union and non-union labour markets, we have held to the position that we could not deny to any contractor or worker who was qualified, the opportunity to bid or work on a Hydro project.

Many construction trade unions now have constituted themselves into organizations that effectively control and manage labour. They determine the number of recruits who may enter the trade and what members should work on different jobs or projects. The right of the worker to practise his trade may rest with the union. Inherent in this power is the danger of an abridgment of the individual worker's rights. If an individual finds that his work is unacceptable to any particular employer, he can offer his services to others. However, if as a card-carrying member he has a falling out with his union, he may be barred from practising his trade with any employer who has a union agreement.

In theory, under the collective bargaining process, if an agreement cannot be reached, the union may strike the job, post pickets, close down the project, while the striking workers wait on the sidelines. This is all right in theory. In practice, under relatively full employment, the striking union posts token pickets, halts work on the site, and most of its members hive off to work at their trade elsewhere. Under such circumstances, the contest can be very unequal.

Out of the crucible of experience of the past year must surely come a better understanding and more effective approach to resolving differences. I have the utmost sym pathy for the construction worker who is vulnerable to insecurity of employment and income. But the answer is not in protective or make-work practices. Our objective should be to unleash energies, to find short cuts to productivity so all may benefit, and while not impeding the mobility that is inherent in the construction industry, to strive for more continuity of employment and stability of income.

Over the years Ontario Hydro has enjoyed good relations with labour and other members of its staff and attaches great importance to maintaining the closest pos

sible rapport with them. Across the whole economy there is a need for better ways of maintaining uninterrupted production and restraining increases in costs.

Well, there you have it. In Centennial Year plus one, Canadians find themselves with a number of knots to untangle: economic viability, national unity, the challenge of the new technology, labour-management relations, and others. How will we fare? I know there is a school of thought that suggests that in the confused world in which we live the undisciplined individual is more able to cope with life than one who accepts some of the responsibilities that society imposes. I do not subscribe to that philosophy. To me it is better to face up to reality than to be in constant pursuit of that illusive state of being-happy-in-spiteof-everything.

History has enshrined an old adage that hardships, problems and difficulties can act as a grindstone upon individuals and nations--either wearing them down or tempering and polishing them; and whether it is one or the other depends upon the character and stuff of which the nation and its people are made. A more generous application of economic discipline today could avoid sterner demands being imposed upon us tomorrow.

by E. A. Royce.

Thanks of the meeting were expressed