Quebec—Problems of Growth
Publication
The Empire Club of Canada Addresses (Toronto, Canada), 12 Dec 1963, p. 137-148
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Kierans, Honourable Eric W., Speaker
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Text
Item Type
Speeches
Description
The Province of Quebec's determination to improve the standard of living for all its people, to reduce the level of unemployment and to increase the rate of economic growth in the province. Planning for the attainment of these goals. Quebec entering the most difficult period in its history and why that is so. What is required for the road to higher living standards. A programme of industrialization, particularly in the eastern and northern parts of the province which are largely undeveloped. Details of such a programme. Fostering a steel industry, and how it may be done. The current political controversy. The need for foreign investment: points in the argument. Criticism against current restrictions. Problems for provinces if Ottawa increases economic nationalism. The difficulties of dividing the fields of policy clearly between federal and provincial responsibilities. The challenge of Quebec leadership to provide continuity amid change, a basis for faith in the new and the hope of security in the future.
Date of Original
12 Dec 1963
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English
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Full Text
DECEMBER 12, 1963
Quebec-Problems of Growth
AN ADDRESS BY Honourable Eric W. Kierans, MINISTER OF REVENUE PROVINCE OF QUEBEC
CHAIRMAN, The President, Mr. Arthur J. Langley

MR. LANGLEY:

If the many guests who are here today will bear with us for a brief moment, we have an item of Club business to transact:

In accordance with the special notice sent to all members on December 2nd last, this meeting is also a special meeting for the purpose of considering an amendment to the Club's constitution, to provide that in addition to being allowed to have an Honorary President, who by tradition has always been the Governor General, we might also be permitted to have an Honorary VicePresident.

Accordingly, I have the following motion before me:

"That Section (5) of Article 6 of the Constitution of the Empire Club of Canada be amended by the insertion of the words 'Honorary Vice-President', immediately after the words Honorary President, wherever they occur." This amendment is proposed by Past President Dr. C. C. Goldring and seconded by Mr. Horace Harpham, both of whom are here today.

I think the members should know that your Board of Directors are unanimously in favour of this amendment.

Are we ready for the Question? Members voting by show of hands-all in favour?-contrary if any?

I declare the amendment carried.

MR. LANGLEY:

Distinguished Guests and Members of the Empire Club of Canada, Eric William Kierans has had a most fascinating career, spanning in reality, several careers.

A product of Loyola and McGill, he built an enviable sales career with several firms and became Professor of Commerce at McGill. Continuing simultaneous successes in two apparently unrelated fields led him to form his own industrial firm in 1946 and to be appointed Director of McGill's School of Commerce in 1953. Three years of wartime service with the Victoria Rifles, marriage, and a family also helped to fill these busy years.

We all know the story from May 1960 on. As President of the Montreal and Canadian Stock Exchanges, our Guest made quite an impact on the financial community. Some-times controversial, but always fearless and dedicated, he rose to face what must rank as his greatest challenge, in successfully entering the political arena this fall and assuming the Portfolio of Revenue in Jean Lesage's Cabinet.

For a man not yet 50, this is indeed quite a record, and we are delighted to have the opportunity of warmly welcoming-The Honourable Eric Kierans.

MR. KIERANS:

The Government of the Province of Quebec is determined to improve the standard of living for all its people, to reduce the level of unemployment and to increase the rate of economic growth in the province. In planning for the attainment of these goals, we are quite aware that French Canadians are individualists, that they believe in political freedom, and that they will not tolerate any interference with their rights and the principles of private property. The Government of the province neither contemplates any programme of socialization nor does it believe that a devotion to, and the retention of, the values of our political democracy inhibits in any way the attainment of the goals of fuller employment, a faster rate of growth, and a higher standard of living.

The Province is, however, entering the most difficult period in its history. During the past three years, we have spent very large sums on social overhead projects,- educa- tion, family and social welfare, health, public works, roads, etc.,-in order to make up for the lag in the provision of these elementary social needs that had developed over generations and particularly since the Second World War. As George Ferguson, editor of the Montreal Star, has noted, -we were under the rule of a mid-Victorian whose philosophy permitted government to play only the most meagre role in assuring growth and a minimum measure of welfare and security. The road to higher living standards required, therefore, an initial concentration by government on social welfare measures and investment in such pre-expansion activities as education and roads.

We are now faced with the challenge that we must increase the output of goods and services not only to justify the heavy social investments but also to share the burden of their costs and to provide funds for continuing public investment. Investment in social services and capital prepares the groundwork for an industrial expansion and does create additional employment and income but this increase is not permanent and, in fact, requires perpetual injections of new investment which can still only secure temporary additions to the working force.

To obtain a permanent increase in employment and output, a programme of industrialization must be carried out and particularly in the eastern and northern parts of the province which are largely undeveloped. We cannot wait for the industrialization induced by our investment in social overhead capital that economic theory normally suggests. It may follow, but when? Again, such investment may come eventually but it may not come in the undeveloped areas of the province where it is most needed. It is an over-simplification to say that if profitable opportunities existed in such regions, private enterprise would invest. There are a variety of reasons-not necessarily economic-why this may not happen:- the myopia and inertia of our investment institutions, the lack of entrepreneurial capacities in such regions, the reluctance of management to leave the more civilized, cultural and metropolitan centres to live in semi-frontier conditions, the difficulty of moving capital out of established, industrialized centres, etc.,-there is a social as well as an economic content to such barriers to investment in undeveloped areas. The solution, and the particular responsibility of the Provincial, not Federal, government is to take direct action to promote the industrialization of these regions in Quebec. We have taken the indirect measures of improving roads and communications and increasing manpower skills and resources by the tremendous expansion of our educational and training facilities. Our challenge is to go on from there.

If the human resources and entrepreneurial skills of Quebec are largely concentrated in the metropolitan areas, the mineral and forest resources are not. So we do have two advantages on which to base our regional development policy, -our natural resources and the developed pre-industrialization structure of good communications, abundant power and expanded educational facilities. The region itself, from Three Rivers down the St. Lawrence, is not as well situated to serve the purely domestic markets of Metropolitan Montreal and Ontario as industries based in those areas, but it is ideally located if we broaden our concept of markets to include Europe, Africa and all of North America. Obviously, such development must be aided by a national policy that is firmly based on expanded world trade on multilateral, nondiscriminatory lines for the region offers not only primary resources in abundance to the markets of the world but also year-round, cheap water transportation to those markets.

Industry and commerce operate within the framework of government activity and direction. The decisions, policies and the desires of governments have an immediate and substantial effect on the private sector. This is the result not only of the overwhelming influence of government expenditures and tax policies but also because we subscribe, in our democracy, to the primacy of political authority over economic power. In short, governments set the rules of the game, objectives and goals and, within that framework, private initiative and individual or corporate enterprise attempt to maximize their own rewards. It follows that a government which is pursuing a policy of forcing the pace of industrialization should have some idea of the kind of economic activity that it wishes to encourage in order to expand the commercial base and to obtain a respectable increase in output and employment. In the particular case of the Province of Quebec, it is well known that we believe that such expansion will come from the creation of an integrated steel complex. The general conditions for such a development are all favourable. We have the iron ore, power in abundance, roads and railways and, if based below Three Rivers, we have year round water transportation to the markets of the world. The feasibility of a steel project is enhanced by the fact that large sums are not needed for investment in the building of supporting structures. These exist.

Why is the Province of Quebec so determined to foster a steel industry? We are convinced that it is the quicker way to secure the immediate economic growth which is a sharp necessity for the undeveloped regions of the province. Secondly, we do not believe that this growth can be attained in the foreseeable future by simply following a policy of encouraging new small firms and then waiting for their painful growth through long stages to medium-size and eventually large-scale efficiency. This was the pattern of industrialization in the eighteenth and nineteenth centuries but it is no longer sufficient. Today, the surest road to industrialization is the establishment of large units, branch plants and subsidiaries, in developing areas by domestic or foreign corporations. It is the large unit which gives the impetus to growth and attracts the cluster of medium and small enterprises to the new industrial site.

This brings us face to face with a current political controversy. Given the need for large units to industrialize a new region, how important is the nationality of these units? While Canadians might prefer that the needed development be financed and owned by Canadians, the problems of unemployment and lagging growth will not be solved while we are waiting for this millenium. And who suffers in the meanwhile for the adoption of a false and artificial position but the unemployed?

a) A $50 million pulp mill may yield $1 million in dividends to foreign investors. But it also may add $35 million to the gross national product of a province and of Canada; it may also employ directly in'mill and woods operations 1,500 people and indirectly many hundreds more; it may pay $10 million in wages and salaries and purchase $15 million of raw materials, power and transportation services; it may be taxed $3 million by federal, provincial and municipal governments and still have several million dollars left for reinvestment and further development. I find it difficult to be concerned about the meagre returns paid to the original investor, be he Canadian or American. Of all the returns paid from new investment, dividends are the least-smaller than retained earning, far less than taxes, and, of course, not a fraction of the wages, employment and processing of our raw materials that this investment brings! What are we crying about?
b) As I said earlier, business operates within the framework and rules laid down by governments. Our tariff laws turned Canada into a branch plant economy because we laid down the rule that a share of our domestic market could only be obtained by factories built within our tariff walls. A manufacturer comes to Canada to share in our market,not to export to the 21 other countries in which he has subsidiary operations. I am thinking here of the specific case of a manufacturer who did not come to Canada because of the prevailing discrimination against foreign capital-and we have lost 200 jobs.
c) Certainly, many subsidiaries do not export or are not free to do so. But do they not suffer a handicap with their markets restricted to this country in competition with Cana dian firms in the same industry who can go where they please-if they go, and there is the rub. Our complaint should be-not that subsidiaries do not export, but that we ourselves do not do more.
d) It is a strange thing that Canadians should begin to harp on the dangers of ownership abroad at precisely the time when ownership, foreign or domestic, does not matter any more. So diffused is present day public ownership of stocks and bonds that the direction and control of corporations lies in non-ownership hands,-i.e., management. Management is guided by the technical and economic norms of efficiency. Owners and investors are guided purely by the return On their investment and the former intimate relationship between ownership and enterprise has melted away in the search for better price-earnings ratios elsewhere. It is indeed silly to suggest that investors are acting in their own or their country's best interests when they are asked to place their money in 2 per cent projects rather than 5 per cent international corporations where such opportunities exist.
e) Today, when all nations are searching and planning for economic growth, governments direct the pattern of development. The political authority is pre-eminent and, in an era of government assistance, cooperation and intervention, displays the primacy of its position over economic power. It is here in joint discussions with management and labour, not with ownership, that the future directions of a province or a region take shape. It is quite literally the responsibility of governments, in our Confederation the particular responsibility of provincial governments, to stir up and rouse the populace to the most efficient and satisfying use of all their human and material resources and, in cooperation with private industry, to reach and carry out the major decisions that will ensure economic growth. It is this continuing consultation that gives government a voice in the direction of economic activity,-not a plaintive call to the reassertion of minority shareholders' rights, the disappearance of which was fully documented by Berle and Means a generation ago.

If I have laboured with this problem of foreign investment, it is because our current discriminatory and despicable attitude towards those who invest in and encourage our growth is unworthy of Canadian traditions and temper and is lowering the high regard and esteem that the world has had for our country. Certainly, I would prefer to see a greater proportion of Canadian investment in equity and ownership so that the benefits of future growth would accrue to Canadians, but the solution lies in our own attitudes,not in the unfair punishment of friends and neighbours.

We are in no position to criticize others when they apply restrictive measures against us. Despite the pronounced internationalism of our position in world politics and the renown of our Prime Minister for his contributions to peace and the United Nations, we are pursuing a maverick policy of economic nationalism in financial and trade policies. Certainly, we belong to the O.E.C.D. but when the twenty industrialized nations of the west sign a convention undertaking to abolish restrictions on the movement of capital and to treat all non-resident owned assets in the same way, there is a footnote to the agreement which states that "Canada does not adhere to the Code of Liberalization of Capital Movements." Where, then, is our bargaining power when we ask others not to discriminate against us? Certainly, we subscribe to G.A.T.T. but our trading partners take a dim view of specially devised policies to force the manufacture of auto parts, or other goods, in Canada and they do not consider these devices to be within the spirit of our trade agreements, or within the law. And if retaliation comes. against our own exports of aluminum, oil, lumber, pulp and paper,-can we throw the first stone?

The relevance of these criticisms is that provincial governments must know the general aims and direction of federal economic policy if we are to carry out effectively our own plans for development and growth. Our constitution makes the federal government supreme in the all important areas of fiscal, monetary and trade policy. It cannot be otherwise. But if the provinces are to plan at all, our programmes must be conceived and carried out within a national policy that is logical, coherent and consistent. It is the first duty of federal economic policy to maintain harmonious and trustful relations with the nations of the West so that our markets will be secured by our own good faith and scrupulous respect for the rights of others and from whom, in turn, we can demand the same. It may be that our trading partners were disturbed by the Ontario "Buy Canadian" campaign as press reports from Ottawa have recently suggested. On the other hand, I believe that our image abroad has been damaged more by the recent activities of the newborn Department of Industry than by your own campaign. We cannot pursue two commercial policies in Canada, one directed by the Department of Industry and another by a Department of Trade of Commerce, very conscious of its international trade responsibilities.

Just as business operates within the set of rules laid down by governments, so too must provincial governments be intimately concerned with the broad lines of federal eco nomic policy. In this day of urgent efforts to plan for increased growth, it cannot be otherwise. It is for this reason that so much emphasis was laid by Premier Lesage on the need for prior consultation by Ottawa with the provinces on all matters affecting economic policy. We are not interfering for the sake of interference. We just have to know. Are we in Quebec to encourage increased aluminum and pulp and paper production in our Province if these become expendable industries as the result of increased economic nationalism in Ottawa? Or is it not our duty to present the case as we see it, that Canadian commercial policy should firmly support and encourage world movements towards freer trade? Are we to sit idly by and permit hasty discriminatory action against foreign investment to close the capital markets of the world at precisely the time when Quebec needs large sums for its own development? Or are we not justified in maintaining that barriers to the free flow of capital will cause irreparable harm to Canada and the Provinces? We are not extreme in taking these positions. We are simply concerned with the problems of creating growth in our province.

It will be difficult to divide the fields of policy clearly between federal and provincial responsibilities. In a general way, however, I would say that the federal government is basically responsible for raising the general level of demand throughout the country by monetary and fiscal measures which would in turn induce additional investment in plant capacity. I am certain that it will cause less strain and stress between Ottawa and the provinces if direct measures to encourage industry by incentives and concessions were left to the provinces. Each province, as Premier Robarts has said, knows its own problems best and it is we who are responsible under Confederation for increasing the skills and capacities of our people and providing the social capital that will enable a province to function more effectively. We need only the resources which is what Dominion-Provincial conferences are all about!

We are not extreme in Quebec. Every time that I hear criticism of Premier Lesage's requests for a 25%--25%--100% apportionment of income, corporate and succession duties taxes, I think back to July 25th, 1960. On that day, another Premier demanded 50% -50% of income and corporate taxes. His name? Premier Frost of Ontario. This year, Premier Bennett of British Columbia wanted Ottawa to vacate the fields entirely. May I conclude on a personal note? Last Monday, I had lunch with the professors of 1'Ecole Secondaire de Cote St. Luc after saying a few words to the students. The inevitable question came up. Would I stay in Quebec if it became independent? This question was first asked by Jean Marc Leger of Le Devoir and my answer was quite simply, "Yes." Ever since I have been surprised by the warm pleasure expressed by my French-Canadian friends and disturbed by the attitude of some of my English friends. No French speaking Canadian ever thought that this meant that I was a separatist or crypto-separatist although many English did.

For the record, let me say that I am a Canadian but not one who believes that Canada will be secured when Frenchspeaking Canadians "become more like us". Guy Cormier in Monday's La Presse expressed this perfectly: -Etre nousmemes, c'est un ton, un style, une fawn de voir les choses, une langue pour les dire, et une fagon d'organiser la vie. Nous ne sommes pas faits pour la mimique et l'imitation. Par tradition et par formation!

The Province is shaping itself to be a more integral part of an outer world that it has too long ignored. Inevitably as old institutions lose power and new structures modify tradi tional patterns and practices, a people feel that they have lost their roots. In such a vacuum, the extremist can flourish. It is the challenge of Quebec leadership to provide continuity amid this change, a basis for faith in the new and the hope of security in the future.

We are all faced with the task and the art of our own living. The effective centre of my Own fife is the Province of Quebec and I would not have it otherwise.

Thanks

Thanks of this meeting were expressed by Graham M. Gore, a Director of the Club.

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Quebec—Problems of Growth


The Province of Quebec's determination to improve the standard of living for all its people, to reduce the level of unemployment and to increase the rate of economic growth in the province. Planning for the attainment of these goals. Quebec entering the most difficult period in its history and why that is so. What is required for the road to higher living standards. A programme of industrialization, particularly in the eastern and northern parts of the province which are largely undeveloped. Details of such a programme. Fostering a steel industry, and how it may be done. The current political controversy. The need for foreign investment: points in the argument. Criticism against current restrictions. Problems for provinces if Ottawa increases economic nationalism. The difficulties of dividing the fields of policy clearly between federal and provincial responsibilities. The challenge of Quebec leadership to provide continuity amid change, a basis for faith in the new and the hope of security in the future.