Looking Ahead

MR. INWOOD: Our distinguished guest speaker today can truly speak for industry in the United States as he is the chief executive of one of our neighbour's largest companies -International Harvester Company.It was only after a personal visit to Chicago and after having the pleasure of meeting him that I finally persuaded him to journey to Toronto and speak to us on current business conditions, as he is certainly most qualified to do as a top-level American businessman.

Mr. McCaffrey began his career with International Harvester Company as a warehouse clerk in 1909 at a wage of $40, per month U.S. funds, or $38.70 Canadian funds as of 10:00 a.m. this morning according to Mr. Stewart of the Bank of Montreal.

After serving for 37 years in many and varied branches of his corporation he was elected president in May 1946, He is a director of the Harris Trust and Savings Bank of Chicago, a director of the American Telephone & Telegraph Company, a director of an American Railroad, vice-chairman of the board of the United States InterAmerican Council, and vice-chairman of the American Heritage Foundation as well as a trustee of the U.S. Council of the International Chamber of Commerce, Among his other activities he is a trustee of the University of Chicago, University of Chicago Cancer Research Foundation and the Museum of Science & Industry. He is also a trustee of the Catholic Charities in United States and the University of Notre Dame and among other interests he is on the advisory committee of the Banking and Currency Committee of the United States Senate,

His company in Canada under the direction of Mr. Roce is deeply respected by its Canadian employees and customers from Halifax to Vancouver,

It gives me much pleasure to present to you Mr.. John L. McCaffrey whose subject is "Looking Ahead",

MR. McCAFFREY: It is a great many years now since I first came to Canada. In those years, my travels have taken me from the Maritime Provinces to British Columbia and back again, to your cities and towns as well as to your farms, I have had an unusual opportunity to know and to admire your great nation. I always come to Canada with the feeling that I am visiting an old and valued friend, and I only hope that feeling is a mutual one.

During the years that I have been coming here, great changes have taken place in Canada and great changes have taken place in the operations of International Harvester in Canada, It is natural and inevitable that this should be true, for our business serves your basic industries--agriculture, mining, transportation, construction--and anything which greatly affects Canada must greatly affect us also.

This association is of long standing. The present International Harvester is a successor and a direct corporate descendant of the old McCormick Harvesting Machine Company which had its inception with the development of the reaper by Cyrus Hall McCormick, The first reapers were sold here more than a century ago, and our first Canadian operation--a sales office--was opened at Winnipeg in 1887.

The creation of a separate company to serve Canada was one of the first important acts of the present International Harvester Company. The United States company was formed in 1902, and International Harvester of Canada was created just one year later, in 1903, Manufacturing operations soon followed, and the Hamilton Works of the Canadian company this year will complete its first half-century of production.

Physically, the Canadian company has grown greatly in that half-century. It now comprises our General Offices, the Hamilton Works, the Hamilton Twine Mill, the Chatham Works where we make our motor trucks, nineteen sales offices across the Dominion, and a transfer operation at Fort William, As another measure of scope, its sales in 1953 totaled more than $122 millions Canadian.

To me a very interesting thing is that as the Canadian company has grown, it has become more and more Canadian. This was natural but not accidental. We intended it that way.

At one time, especially during its formative years, the Canadian company had among its officers men who were also officers or officials of the parent company in the United States. It should be clear, however, that since 1944 International Harvester of Canada has been a completely autonomous Canadian company, Its president and all its other officers are residents of Canada. Its board of directors meets in Hamilton. Its decisions are taken in Canada.

This reflects our fundamental policy that the Canadian company shall develop its organization, its functions and its facilities on the basis of autonomy.

In the years since the end of World War II, International Harvester Company of Canada has spent approximately $21 millions for additions to its production, engineering and distribution facilities.

These expenditures have included about $9 millions at Hamilton, more than $5 millions spent for the new motor truck factory at Chatham and approximately $7 millions for new district sales offices. Last year, the Canadian company completed and placed in operation its new engineering building at Hamilton, which has complete engineering facilities, including experimental workshops.

I am sure most of you know that some of the products sold in Canada by the Canadian company are made, in whole or in part, in the United States. You may not know, however, that this is an arrangement which cuts both ways and that, in fact, there has been a remarkable growth in the number and value of products made in Canada and exported to the United States.

For example for some years now all grain drills have been produced at Hamilton Works, both for the Canadian and the United States trade.

This is also true of some new, heavy-tillage implements.

All binder twine sold by our Company in the United States comes from the Hamilton Twine Mill.

This year the Canadian company will undertake the manufacture of substantial schedules of machines formerly imported from the United States, This includes a very popular automatic pick-up hay baler and our largest selling model of combine, In addition, production will be undertaken here on spreaders and on disk blades, All these will be net additions to Canadian manufacturing for the Canadian market,

So we like to feel, and we hope you will also feel, that our activities here are in tune with the growth and development of the Dominion,

Actually, the terms "growth" and "development" sometimes seem too weak to describe the events that have been happening in Canada in recent years, Sir Wilfred Laurier's famous prediction of 50 years ago, that "the Twentieth Century is Canada's", has been coming true at an astonishing rate.

I have said that I am no stranger to Canada, and that is true. I have many friends here. I try to keep myself generally informed of what is taking place in business and industry and farming. And yet I must admit that when I got into the actual figures of what you have been doing, I was frequently taken by surprise.

We are accustomed, of course, to acknowledge Canada's world leadership in certain areas of economic activity, For example, no one is surprised that you are first in the production of newsprint, of asbestos, nickel and platinum. In the same way, nearly everyone knows that Canada is an important producer of aluminum, zinc, cobalt and lead. Your fur and fishing industries have been prominent for several generations now.

But I was surprised to learn, for example, that between 1940 and 1952 you had increased your production of zinc by 73% and of asbestos by 157%.

As you all know, in the last few years, Canadian events have been as prominent in the headlines in the rest of the world as within Canada itself. You have been adding new words to the geography of the business world-names such as Kitimat, Beaver Lodge Lake, Peace River, Redwater, the Athabasca Sands, Lynn Lake and Steep Rock and many others.

These have been bold and dramatic events. So most of us know that new resources for the world and new wealth for Canada have come from the exploration of great new deposits of oil, iron ore and uranium.

The figures relating to uranium, of course, are matters of military secrecy, But some measure of the rapidity and scope of these developments is given by a comparison of the years 1940 and 1952--the most recent figures I could get.

In that period, Canadian production of crude petroleum increased by 612%, including an increase of 110% in the last two years alone, In the same time your production of iron ore showed the fabulous increase of 1,154%, Output, of course, is still climbing at a rapid rate and even these figures are already out of date as indicators of your progress.

In reading about these materials, I was struck by a reference made to Canada by one of your officials as "The Last Frontier". That set me thinking about the general nature of the Canadian economy and the question as to how Canada might be expected to develop in the future.

A nation may be a frontier in the economic sense, of course, without being a frontier in the political or social sense at all, and many nations are, Typically, a frontier economy is one which is mainly engaged in the production of raw materials which are processed and largely consumed elsewhere. A frontier economy exchanges its raw material output for manufactured goods produced in other nations and usually derives a considerable part of its financing from other nations.

The United States for a great many years was a frontier economy of this type. Judged by these standards, I think most of us will agree that Canada has been up to now largely a frontier economy.

Now, the question that interests me is not whether Canada is to have rapid growth and great prosperity, I think we can take those things for granted, Rather, I have been interested in whether Canada will grow into a still larger economy of the frontier type, or whether the nature of your development will change and the future will see a Canada with a more nearly balanced type of economy.

Your sensational new developments, of course, have been in the field of raw materials production. Those are the most publicized changes in Canada. By themselves, they would tend to indicate further development of the frontier type of economy. But I was interested in the question I have posed, so I began to search further, to see if there might be signs of a new sort of economy--a change in nature as well as size-developing here in Canada.

I looked first at the matter of people. Canada has always been enormous in area, Your 3,845,000 square miles make you almost one-third larger than the United States. But Canada has also been relatively empty and even today the population of 3.8 persons per square mile makes this Dominion the most lightly settled nation in the Americas.

This is an important matter, since it requires people to carry on any sort of expanded program, and it takes people to form a market large enough to encourage large domestic production. In the United States there are many businessmen and economists who base their expectations of long-term prosperity mainly upon the growing population. In the States, you know, we think our population growth in recent years has been quite remarkable.

So one of the first and largest surprises I got was when I discovered that your growth in population had far outstripped ours, In 1940 the total population of Canada was 11,381,000, In 1952 it was estimated at 14,430,000--an increase of 26.8% in twelve years. In that same period, the population increase of the United States was 19%.

Part of your growth was accounted for by sizeable immigration from other countries. In the five years from 1948 through 1952, Canada acquired 587,000 new residents in this way. Nevertheless, you seem likely to maintain your lead in population growth, for I found that the Canadian birth rate in 1952 was 27.,4 per 1,000 population (as against 24.6 in the United States) and your death rate was only 8.6 per 1,000 population (as against our 9,6., So quite aside from immigration and looking only at natural causes, you are having relatively more babies and fewer deaths than we are.

The second thing I looked at was what these people were doing and where they were living, A typical situation as an economy begins to leave the frontier type of organization is a shift of population from farming and other extractive industries into the cities, to manufacturing, trade and service occupations,

Here again I found a significant trend, In 1931 about 31% of Canada's people lived on farms, In 1941, that had gone down to 27% and in 1951 it had dropped to 21%. In other words, a third of your farmers had left the farms in 20 years, the larger part of them within ten years.

Correspondingly, in 1931 the urban population of Canada was 53.7%, only a little more than half the total. By 1941 it had not increased very much, in fact, a little less than 1%. But in the next ten years, up to 1951, urban population jumped to 61.6% of the total Canadian population. As a comparison, the 1950 urban population of the United States was 64% of its total, so you can see that Canada is taking generally the same course, with somewhat greater emphasis on rural non-farm groups which include your mining, fishing and similar activities.

That kind of a population shift, of course, immediately raises the question of food supply. You have more people, more of them are living and working in cities; where are they getting their food? What has happened to agricutural production as men left the farm?

Here again, I found that your course is similar to ours. I compared acreage and crop yield figures for 1952 with those representing averages for the period 1935-39, back before the war.

I found that your wheat acreage had changed only 1% but your wheat production in bushels was up 120%. In oats, the acreage had gone down 16.5% but the production was up 38%. In barley there had been an acreage increase of 97.6% but the yield was increased 228%.

So it was plain that Canada was increasing its farm productivity in the same way and with the same rapid progress as its other production. New plant varieties, improved livestock strains, better pest control, increased fertilization and many other things played important parts in this.

Certainly one big factor was increased mechanization. In the ten years from 1943 to 1953 the tractor population of Canadian farms went up from 182,000 units to 475, 000, an increase of 161%. In the same period the number of combines on Canadian farms went up from 25,000 to 130,000, an increase of 420%.

This seems to have been good for the farmer, too, for a quick look at the figures tells me that between 1940 and 1952 cash farm income in Canada showed an increase of 277%. That is particularly impressive when one remembers that in about the same time the number of farmers was going down almost one-third.

So you had a lot more people, more of them were living and working in the cities and in industry, and there was plenty of food for them to eat. In fact, they were living better than ever before, for the Canadian Consumers Price Index shows that living costs increased about 60% between 1942 and 1952 while at the same time average hourly earnings of employees in manufacturing plants were going up 86%. So your people were better off. Total salaries and wages paid reflect both the higher wage rates and the greater number of people employed and these payments, comparing 1952 with 1942, showed an increase of 155.8%.

This prosperity was reflected in many directions. For example, from 1940 to 1952 there was an increase of 325% in the annual new investment for housing. There was an increase of 85% in the number of motor vehicles registered in Canada during the same period, Where were these automobiles and trucks coming from? Were they being imported? Some of them were, of course. But not many, In 1952 Canada produced 433,000 vehicles and your imports amounted to only 38,000, Between 1942 and 1952 Canadian automobile production, in number of units, increased 94.4%.

Well, if automobile production had increased like that, what was happening to your other forms of production? I took a look.

I looked at indexes which compare 1952 production with the average for the period 1935-39, that average being taken as 100, I found that the index for total industrial production of Canada in 1952 had reached 232.9. But I found what was to me a very interesting thing. Despite your great new gains in mining and raw materials activities, the biggest proportionate gains were not in those areas.

Leading the list, from the standpoint of growth, was manufacture of electrical apparatus and supplies whose index had soared to 393.,1. Next was production of transportation equipment at 373.1. Then followed nonmetallic mineral products with 346.1; beverages with 323,6; the mining of fuels with 301,5; petroleum and coal products at 295.1 and iron and steel products at 292.3.

Taking the production of Canada by the four major categories, the leader among the groups was durable goods manufacture with an index of 294.8, then electric power with 234.9, then non-durable goods manufacture at 215.2 and mining at 174.7.

We must bear in mind, of course, that these index figures do not measure the relative weight or size of these activities at the present time. What they do measure is their rate of growth. They show the trend.

Still in pursuit of an answer to my question about Canada's future, I looked at another group of figures. We know that what is produced has to be sold. Some time, in some form, it has to find its way into retail trade. What is the picture there?

I found that between 1941 and 1952 the value of retail trade in Canada had increased 229%. I looked at gross national product for an over-all figure and saw that it had increased from 1940 to 1952 by 234.4%.

And I looked at foreign trade, particularly your trade with the United States, I remembered that my own company was steadily importing more Canadian goods and I wondered if that might not be true generally, I found that it was. I found that between 1940 and 1952 your exports to the United States had increased in value by 420% and also had jumped from being 37.6% of your total export trade to being 53.6% of your total export trade.

I found that your imports from the United States had increased also, but at a more conservative rate, In dollar value your imports had increased 300%, and they had increased slightly in relation to your total imports, moving up from about 69% of the total to about 74%. Moreover, your trade with the United States was closely approaching a balance between exports and imports, as nearly as that condition is ever achieved in an imperfect world.

And so, at last, I formed a conclusion, I hope I have not wearied you too much with the long succession of figures which led me to it.

I may be wrong, and I often am, but I feel very sure of this in my own mind:

First, that Canada faces an extremely bright and promising future, and second, that her development will be away from the frontier type of economy and steadily toward a balanced economy.

And that leads me to one further conclusion. I have heard it said that there are three things a man needs to be happy in his work. The first is a feeling that his job is worth doing. The second is a record of accomplishment in the past, And the third is the expectation of growth and development in the future.

If that statement is true--and I think it is--my conclusion is that you gentlemen of Canada ought to be just about the happiest group of businessmen in the world.

THANKS OF THE MEETING were expressed by Mr. Bruce Legge, a member of the executive of the Club.