Nixonomics and Canadian Independence
The Empire Club of Canada Addresses (Toronto, Canada), 4 Nov 1971, p. 60-70
Lewis, David, Speaker
Media Type
Item Type
The state of the Canadian economy, short- and long-range prospects. Serious unemployment problems not the result of American policies and an exploration of why not. The import surcharge. Nixonomics. Creating unemployment no longer an effective policy against inflation and why. Economic planning a key ingredient and necessity. Export trade. Continentalism. Independence from the United States.
Date of Original
4 Nov 1971
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Full Text
NOVEMBER 4, 1971
Nixonomics and Canadian Independence
CHAIRMAN The President, Henry N. R. Jackman


It is customary at Empire Club luncheons when introducing a business or financial tycoon, to suggest that the speaker has come from humble origins and describe how he has built a great industrial empire with nothing save his bare hands, his own initiative, and an abiding faith in the free enterprise system. Our speaker today has some of those characteristics. He has come from modest beginnings and he has certainly been directly responsible for building a great organization--but he has done something far more important than achieving business success--he, perhaps more than any single person, has been responsible for founding a great political movement which today represents the aspirations of millions of Canadians.

David Lewis came to this country from war torn Eastern Europe, when he was but twelve years old--not knowing how to speak English and facing those other handicaps that so many new Canadians experience when they first come to Canada. He taught himself both English and French, completed high school within three years, and went on to receive a scholarship to McGill University. On graduation he applied for a Rhodes Scholarship.

The story of his oral examination for the Rhodes has often been told, for it brought forth a confrontation between young David and a Goliath of his time, Sir Edward Beatty, one of the examiners and the then President of the Canadian Pacific Railway. When asked by Sir Edward what would be his first move when elected Prime Minister, our guest replied, "I would nationalize the CPR". The story does credit to both men, as David Lewis won the scholarship. If Sir Edward were still with us, I am sure he would not be displeased with the result. David Lewis is still not yet Prime Minister and the CPR is still in private hands.

Returning to Canada from Oxford he immersed himself in socialist politics, becoming full-time Secretary of the CCF and subsequently becoming his Party's Vice-Chairman, Chairman and President.

He also achieved an enviable reputation as a lawyer and a Queen's Counsel. He is generally acknowledged to be one of Canada's ablest labour lawyers.

Frequently a candidate for public office, he suffered his share of defeats, in those early days, but ultimately achieved success when he was elected to the Federal House of Commons for York South in 1962. Defeated in 1963, he persevered and in 1965 he won his seat back and has been re-elected with increasing majorities ever since. By 1969, with the imminent retirement of the Honourable T. C. Douglas as Leader of the NDP, his Party turned to our guest as the logical choice to lead them in the years ahead.

Although the New Democratic Party and its predecessors have had their ups and downs in the last 30 years, there can be no doubt that if one analyses the election returns their Party, particularly since our speaker became its Leader, has gained increasing acceptance from Canadians in all walks of life and in all regions of our country. It is generally considered that in relation to their numbers the NDP has the most effective parliamentary group in the House of Commons. They now form the Government in Manitoba and Saskatchewan, and while many observers feel that the recent Ontario election was a setback, the fact still remains that they increased their share of the popular vote and showed surprising strength in areas which heretofore had been considered the preserve of the older Parties.

I mention this simply to show that under David Lewis the New Democratic Party is positioned to take a greater role in Canada's political life than it ever has been before. For this reason it is incumbent on all of us to carefully appraise their policies and their leadership.

I have, therefore, the great honour to present to you David Lewis, Q.C., M.P., National Leader of the New Democratic Party.


I understand that a week ago you had as your guest the leader of the Progressive Conservative Party and that the audience warmly approved and applauded his pronouncements. This aroused my envy and I began to look for a subject on which my ideas might also evoke enthusiastic support from this distinguished audience. Alas, and by definition, this did not appear as easy for me as for Mr. Stanfield. I could, of course, have talked pompously about virtue or wistfully about sex and win your approval for arguing that the two are not incompatible but the American import surtax grinned evilly and romance fled. In any case, I know that you invited me to hear my views, having some idea what they are likely to be, and that you would respect my expressing them frankly and strongly, as is my habit.

The state of the economy is particularly at the centre of Canadian consciousness today. We are worried about it in the short run but we have urgent reason to be concerned about its long-range prospects as well. This not because of any lack of resources or manpower or needs in Canada but because of serious dislocations in our trade patterns, caused and likely to be caused by the protectionist policies of the American administration and the entry by Britain into the European Economic Community.

Let us be clear about one thing. Our serious unemployment today is not the result of American policies. No doubt they will have an effect later, as the months go by. But the September unemployment figures at 7.1% on a seasonally adjusted basis,--the highest in ten years for that month were the result of the government's domestic policies. The Nixon ten percent surtax announced only one month earlier could not have had much effect. Hence, the disastrous unemployment from which we have suffered for two years was created by the government deliberately slowing down the economy in a vain quest for alleged price stability. The result is a bitter one: Unemployment we have; price stability we have not. True, there was some easing of the pressure on prices toward the end of last year. But that came from unpegging the Canadian dollar which floated its price up some 6% or more and thus reduced the cost of our imports. This did slow down the rate of increase in the Consumer Price Index for a short while but after a few months prices began to go up again.

You will recall that just before last Christmas the Prime Minister blithely announced that the problem of inflation had been licked. Since then, he has had to eat those words. Indeed, the government has been forced to live on a continuous diet of mistaken forecasts and pollyanna assurances which were regurgitated almost as soon as they were pronounced. I would have enjoyed watching the government's indigestion with glee, were it not for the fact that Canada's economy and the Canadian people suffered unnecessarily.

I hope we have all learned that creating unemployment is no longer effective as a policy against the dangers of inflation unless one is prepared to accept such massive levels of unemployment as to court disaster for the entire society. In any event, it is an abhorrent policy,--cruel and degrading for those thrown into idleness and dangerously frustrating to the youth of the country who feel betrayed by a society that seemingly cannot provide them the opportunity of participating and developing.

The fact is that the market is no longer the responsive agent it once was. To an important degree, prices are no longer governed by the market; nor are wages and salaries; nor are rents, interest rates, professional fees or profits. Regulation of prices and income can no longer be left to the play of supply and demand because these are no longer free. They are administered and manipulated by economic forces before which the consumer is virtually helpless. Economic planning by government and agencies of government has become an urgent necessity, because the power of strong private economic forces, accountable only to themselves, is far too great.

This, of course, has been the basis of the economic and social philosophy of my party since its foundation. It has been my approach throughout my adult life. But planning can take two alternative forms: it can be biased in favour of the strong to the detriment of ordinary people. This is the direction of the Nixon controls in the United States: tough on wage controls but soft on profits, dividends, rent and interest. Or planning can be biased in favour of the average citizen, aiming at greater equality of income and of condition across the nation. The objective of any system of collective planning and government controls must be, in my view, to make the weak stronger and the powerful weaker so that individuals as well as corporations, small business as well as the giants, have an equal break and an equal share. This emphatically is not the case now and this is one of the major sources of conflict and frustration in our society.

In Canada we must grapple with another dimension of this struggle which derives from the extent to which our economy is controlled by multi-national corporations, mainly American. The statistics of such control are by now well known. They have been documented in a number of reports. Without going into detailed figures, it is clear that our natural resources are overwhelmingly in foreign hands; in some cases,--in petroleum and natural gas, for example,--the proportion of foreign ownership is well over 80% and 90%, and in mining it is well over 60%. It is also clear that more than 60% of our manufacturing is controlled by multinational corporations; again in some cases it is over 80% and even more than 90%.

This makes us immensely more vulnerable than any other economy to the present American policies. For it is not only our export trade with the United States which is threatened but the very existence of many of our plants. It is clear that American tax incentives for investment in homemade machinery and equipment and the implementation of the program of Domestic International Sales Corporations, known as DISC, may well lead multi-national corporations to shut down operations in Canada, in whole or in part, and to transfer production and jobs to the United States. As I read it, one of the major thrusts of Nixonomics is to slow down foreign investment and to curtail the production of goods in foreign countries by American corporations. And because of the massive extent of American control of Canada's economy, the threat to our future is greater than to that of any other country.

Thus, President Nixon has awakened us at last, at least some of us, to the serious dangers to which continentalism has exposed us. To my knowledge, Canada is the only country which has permitted foreign investment without limitation, without controls or rules and without any apparent concern for long-run consequences. The only exceptions, and they have been imposed only in recent years, concern the fields of banking, uranium and communications media. Ours has been a reckless policy, prompted by business leaders, some of them perhaps in this room, large investors and political leaders who were blinded by the prospect of a fast buck and of growth for its own sake rather than for the sake of a strong and independent Canada.

We have had ample warnings that the day of reckoning was coming, as decisions made in Washington endangered our economic health. In 1963, there was the interest equalization tax and in 1965, the threatened repatriation of the reserves of American subsidiaries. We wiggled out of these difficulties by pleading for and getting exemptions, at a price; at the price of a straightjacket on our freedom in monetary policy and of even greater dependence on the United States.

But with the age of Nixonomics, it appears that the time has come to pay. Pilgrimages to Washington have not helped. The American surcharge on imports will continue to apply to us despite the fact that we must sell a great deal to the United States if we are to earn the money to pay the interest and dividends, the management, patent, license and technology fees, the charges for marketing services and development costs, which American investors and parent corporations extract from the Canadian economy.

Significantly, raw resources, such as oil, natural gas, and minerals are exempted from the Nixon surcharge. What President Nixon is telling us is something my colleagues and I have warned Canadians about for years: the United States wants Canada only as a secure source of scarce natural resources but not as a competitor in manufactured goods. This is a disastrous prospect. The exploitation of our natural resources requires massive inputs of capital which produce relatively few jobs. And if the capital continues to come from American multi-national corporations, it increases our dependence, drives up the price of our dollar and adds further difficulties for many of our export industries. Yet it is manufacturing and, of course, the service industries, on which we must depend for jobs.

Thus, the challenge facing Canada today as for years past, goes far beyond the limited problem to which the government has so far addressed itself--escaping the impact of the import surcharge, whether by so-called employment support grants or by scurrying to Washington, head on chest, pleading for an exemption.

The challenge facing Canada is the urgent need to free ourselves from our dependency on the United States and to build a strong, self-reliant economy that can provide work for Canadians and generate the capital we need for development and expansion.

I am not suggesting that we should build a wall around Canada or that we should shut out the United States completely even if that were possible, which it is not. By all means we must maintain a close relationship and friendship with the United States. Geography, history and language make it unavoidable as well as desirable. But a friendship founded in equality and self-respect is honourable and productive; a relationship based on the timidity of a satellite is humiliating and sterile.

Indeed, I want to make clear that I don't blame the Americans for our weak, dependent position. It is sometimes said that Canada has permitted the foreign takeover of our economy. But this is really an understatement. Some people suggest that the Americans have raped us. But this is obviously slanderous, for there is no rape where there is invitation and consent.

The fact is that political and business leaders invited the takeover, pleaded with American corporations to exploit our oil fields, our gas reserves, our minerals and many of our forests, and begged them to establish manufacturing industries. Having done this for many decades, Canada is now in a bind. Particularly is this so since the expansion of foreign ownership and control is no longer due mainly to direct foreign investment. It is due mostly to the accumulation of undistributed or retained earnings which are used by foreign subsidiaries for further investment, expansion and takeovers. In short, foreign corporations have been buying us out with our own money.

A very good example of the ambivalent attitude of some leading Canadians was seen in Parliament yesterday. The Conservatives moved a motion of censure against the government concerning its relations with the United States. Significantly, the first part of the motion seemed to call for even closer economic and political relations with that country, but the second part wanted a new economic policy to strengthen our economic independence. And the glaring contradiction between the two did not seem to bother the sponsors of the motion.

Assuming that this incredible doubletalk is not crassly political, it illuminates the confusion and ambivalence of some Canadians. Basically, they are fearful of Canadian independence; they bend their knees before American economic power with awe and helplessness. Essentially they are prepared to let the Americans set the limits of Canadian independence. I passionately reject this attitude.

Indeed, the problems of foreign ownership and control threatening Canada's welfare and independence have become universal problems, although they are most acute in our country. They have been created by modern economic imperialism which penetrates foreign countries accompanied not by bayonet and cannon but by computer and bank-roll. Modern corporate conquest does not resort to the crude method of grabbing nations by force; it quietly and smilingly conquers the means by which nations live. More humane, of course, but also more profitable and much more insidious. The great attraction is that the multinational corporation brings not only capital but technology, not only modern machines but modern know-how. This strengthens further the hold of the corporation, for the longer the situation continues the more dependent becomes the host country on the technology and know-how of the outside corporation even when investment capital is available at home.

The time has come for a creative and constructive Canadian nationalism to assert itself. I want to see a society in this country distinct from that of our giant neighbour, with its monstrous inequalities and crass materialism. We must free ourselves, even at some cost, from outside domination of our economic life and our cultural values.

The time has come for Canadians to renew their faith in their country. I get angry every time I hear the suggestion that Canadians are not prepared to take risks. Canada was built by heroes who defied the dangers of climate and wilderness to build railways, blast mountains and clear vast tracts of land. As one travels across this great country, one never fails to be impressed by the immense wealth and great beauty with which we have been endowed. One never fails to be impressed by the greatness of its people, not greater than others but as great as any other. A country as wealthy and as beautiful as ours, with a people as great as ours, must have the will, as it has the capacity, to stand on its own feet. Not in isolation or arrogance but in determination to control its own destiny and to shape its own future.

This is the challenge which recent developments have restated for us in urgent terms. I plead that we not continue to ignore it in the future as we have done in the past. This isn't anti-Americanism or socialist propaganda. Of course, my social philosophy leads me to reject many American values and to oppose angrily that country's indefensible war in SouthEast Asia, and many other of its policies. Indeed, I cannot help but regard the American military-industrial complex as one of the world's two great dangers; the other one being the military-state complex in the Soviet Union. But all this is not relevant to my theme today.

For I plead with you not on ideological grounds but on the stark and frightening fact that continuing continentalism will endanger not only our independence but our very existence as a distinct or almost distinct society. Nixon's reactionary policies will no doubt do the world and Canada considerable harm. But it's an ill wind, as the old proverb suggests. Perhaps the very cruelty of Nixonomics will at last awaken Canadians to seek their own road and to build their own future. I profoundly hope so.

Mr. Lewis was thanked on behalf of The Empire Club of Canada by Major Arthur J. Langley, C.D.

EDITOR'S NOTE: This address by Mr. David Lewis, Q.C., M.P. the Leader of the New Democratic Party defines the attitude of his Party to President Nixon's economic initiatives that were causing great concern to Canadians. (See Editor's Note on page 57.)

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Nixonomics and Canadian Independence

The state of the Canadian economy, short- and long-range prospects. Serious unemployment problems not the result of American policies and an exploration of why not. The import surcharge. Nixonomics. Creating unemployment no longer an effective policy against inflation and why. Economic planning a key ingredient and necessity. Export trade. Continentalism. Independence from the United States.