February 12, 1935

LIB

Ernest Lapointe

Liberal

Mr. LAPOINTE:

And even the radio case.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

Listen to this, on the matter of jurisdiction:

The question of jurisdiction-

This is very interesting.

,-therefore is at the bottom of all relief which is of a permanent character.

It is not hon. -members on this side of the house- (who have raised the constitutional: ssue; it is the Prime Minister himself. These are his own words:

The question of jurisdiction therefore is at the bottom of all relief which is of a per-niauent character. Any legislation that may be enacted to deal, for instance, with social insurance problems must have the support of the provincial authorities. I made_ that abundantly-clear on more than one occasion here, and it was agreed to I think by every member of the house who had taken the trouble to consider the question. Now pressure has been brought to 'bear by various organisations throughout the dominion to ensure the passage of what is known as contributory unemployment insurance legislation.

That is what we have in this 'bill.

That legislation, to be effective in this country, with jurisdiction divided between the provincial legislatures and the federal^ parliament. could have validity only, if it nad the sanction both of the legislatures and of parliament. That I think has been conceded but that difficulty is one that can be overcome. It can be overcome rather readily if the provinces will agree to such an amendment _ to our constitution as will clothe parliament with the appropriate authority.

But the Prime Minister has given them no opportunity to confer with him at any length to work out the means to that end. Then further:

There are other questions to consider besides those affecting social insurance and social problems. There are problems with respect to taxation. There are problems with respect to the Companies Act.

And so on. Recognizing that there are other obligations as great, he continues:

The British unemployment insurance legislation was predicated upon actuarial computation. The difficulties arose because it was found in practice that the fund had to borrow to enable it to discharge its obligations, and the borrowings became so great that, in the language of the government of the day, it threatened the very solvency of the state itself.

That was another reason that was given why they could not go on. Then the preceding sentence in the right hon. gentleman's observations:

I take it that* the judgment of the house, broadly speaking, was that any measure of social insurance should be contributory in its character, that it could not be otherwise.

Then he speaks about the difficulties about raising money for contributory purposes, and goes on to say:

If in the language of one hon. gentleman who has spoken in this discussion we are to derive any benefit from the knowledge of the past, it can only be because we can rely upon it to enable us to go forward with plans and proposals that will not be shipwrecked because they are based upon guesswork. I pointed out then that the census would be taken in 1931, and I further pointed out that when the census was completed we proposed to have the figures disclosed by the census so analysed as to enable us to deal with the subject, assuming, as we did. that we might be able to make a satisfactory arrangement with the provinces. I therefore desire to make it perfectly clear that in pursuance of the statement which I then made and which I shall now read, it is the purpose of this government to have a conference of the provinces to determine what action may be agreed upon with respect to this and other matters.

As I have said, that conference never took place. I was going to quote from Hansard for 1931, but as I wish to conclude before six o'clock I shall omit any further extracts with the exception of one. At the time to which I have made reference a motion was before the house which had been moved by the hon. member for North Winnipeg (Mr. Heaps) to the effect that immediate attention should be given to the matter of unemployment insurance. Speaking on the motion the Prime Minister said, as reported at page 1099 of Hansard for 1931:

Mr. Speaker, I do not propose this afternoon to traverse at length the ground covered by the hon. gentleman who has just taken his seat (Mr. Heaps). I desire only to point out two or three problems which must be dealt with before this question can be determined.

Before.

First there is the question of the respective jurisdiction of the federal parliament and the provincial legislatures which has to some extent been determined by the law officers of the crown. As has been pointed out by the provincial Premiers, there is no reason to doubt that -with the joint action of the provinces and the dominion some satisfactory solution of this problem can be found.

Then he made a reference to the Minister of Labour of that day and stated that the then member for Kenora-Rainy River (Mr. Heenan)-

-suggested the other day that this matter might have been discussed at the recent dominion-provincial conference. I can only say-

And this is apropos of what the Prime Minister said to me a day or two ago, when I expressed the view that a conference to

Unemployment Insurance-Mr. Mackenzie King

be of any value would take a little time, and he replied that there was no necessity to take time, that it could all be done in a day.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

Oh, no.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

Oh, yes.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

Not as bad as that.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

Not more

than a day, anyway. But here is what the right hon. gentleman said in 1931:

I can only say that the question could not be dealt with at any such conference in one or two days, or in half a dozen days; there are questions which involve consequences of the most far-reaching effects in every possible way so far as the body politic is concerned.

And so on, and so on. Then elsewhere he

said:

First it suggests that the government should take consideration the immediate establishment of a federal system of insurance. I do not think my hon. friend is well advised in leaving the word "immediate" in his motion for the simple reason and obvious reason that it must be known to him and to every hon. member who has read any book upon the subject-

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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?

Some hon. MEMBERS:

Hear, hear.

Topic:   UNEMPLOYMENT INSURANCE
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

-or who has given time or consideration to the problems involved that it cannot be dealt with in three weeks, six weeks, one month or several months. So far as that feature is concerned. I would suggest that he delete the word "immediate" from his resolution. I suggest also that after the word "federal" and before the word "system" he add the word "contributory." thus making it a federal contributory system. Then I will suggest that the words "after satisfactory arrangements have been made with the provinces" be added at the end of the resolution.

He continued to emphasize that point.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

The other part is very important, if you do not mind reading it.

Topic:   UNEMPLOYMENT INSURANCE
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

I wish to conclude my remarks by six o'clock. My right hon. friend may read it later on, if he wishes.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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?

An hon. MEMBER:

Why did he change his mind?

Topic:   UNEMPLOYMENT INSURANCE
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

Someone asks why did he change his mind. I think, from his references to others, that the Prime Minister's mind may be easily understood. On April 26, 1932, when the Prime Minister came across some literature which was issued by the League for Social Reconstruction he tried to make it appear that the zeal shown Iby those who favoured unemployment insurance had arisen from motives of advantage in electoral campaigns. I have before me his 92582-48

observations, as they appear at page 2404 of Hansard for 1932. Dealing with the document I have mentioned he said:

The document I have before me is not entitled "the policy of the Liberal party," but at the end I find the words: "The League for Social Reconstruction."

Then I shall read one paragraph from the document the right hon. gentleman quoted, a paragraph which has a familiar sound today:

The present capitalist system has shown itself unjust and inhuman, economically wasteful and a standing threat to peace and democratic government.

That paragraph was contained in the statement issued by the League for Social Reconstruction. There are set forth a number of measures which are said to be part of the policy of the League for Social Reconstruction, number 4 of which reads as follows:

Social legislation to secure to the worker adequate income and leisure, freedom of association, insurance against illness, accident, old age, and unemployment, and an effective voice in the management of his industry.

The vesting in Canada of the power to amend and interpret the Canadian constitution so as to give the federal government power to control the national economic development.

The Prime Minister commented on that as follows:

I commend that to the members from Quebec. There go your provincial rights, there go your provincial constitution.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

Hear, hear.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

I continue the

quotation:

Mr. Casgrain: Not at a'll.

At that time the Prime Minister had it in his mind-how it came there I don't know- that Hon. Vincent Massey was responsible for this League for Social Reconstruction and that as president of the National Liberal Federation this policy had been brought forward for election purposes. Now I ask the house to listen to this; hon. members will see why we are getting this unemployment insurance scheme at this moment. I quote again from Hansard of April 26, 1932:

Mr. Bennett: I commend this new declaration to the consideration of the house because it indicates that change for which we have all 'been waiting, namely, an effort to take advantage of what may be described as the unrest and the distrust incident to the present economic condition and to capitalize it for party advantage through the oblique attack of the establishment of social reconstruction.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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CON

Richard Bedford Bennett (Prime Minister; President of the Privy Council; Secretary of State for External Affairs)

Conservative (1867-1942)

Mr. BENNETT:

Hear, hear.

754 COMMONS

Unemployment Insurance-Mr. Mackenzie King

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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LIB

William Lyon Mackenzie King (Leader of the Official Opposition)

Liberal

Mr. MACKENZIE KING:

There, Mr. Speaker, I think is the full explanation of why we have this measure brought down at the present time.

May I say to the Prime Minister that he knows better than anyone else that the final authority that settles these questions of jurisdiction is the courts, and that he cannot by assertion or by assumption give to this parliament any power to deal with these matters ffhich it does not now possess. That is the reason, and the sole reason, why hon. members on this side bring to the attention of the government, as is their duty, and why as leader of the opposition as is my duty I stress the point, that we believe, proceeding as he is, he has adopted a course which will not commend itself to the courts when this legislation comes eventually before them for final decision. In order that I may do the Prime Minister full justice in the matter of the importance he attaches to the judiciary with respect to the interpretation and effect of all legislation, I want to read his words which I have before quoted indirectly, and which I quote directly now. He was speaking at Toronto on February 18, 1932, on the occasion of being called to the bar of Ontario and being made a bencher of the Law Society of Upper Canada. I quote from the Ottawa Journal of February 19, 1932:

Marking centenary celebrations of Osgoode Hall, home of the law courts of the piovince, was the induction of the Prime Minister of Canada as a barrister at law of Ontario.

"I think the judicial branch of government is the most important," said Mr. Bennett, addressing the convocation of benchers of the Law Society after he had been introduced by W. N. Tilley, K.C., treasurer of the Law Society, and sworn in by Clarence Bell, assistant registrar.

"The legislative branch is very important, the executive tremendously so, but in the final analysis the judicial branch of the government is the one to which most attention should be paid. It interprets the acts of the legislative and executive branches, and upon the collective judgment of those we appoint for this purpose depends not only life, liberty and freedom, but the enjoyment of property and all that is thereby involved."

Mr. Speaker, this legislation most certainly will eventually come before the courts for decision. I should like to have seen an unemployment measure passed by this house in accordance with the recommendations of the standing committee on industrial and international relations, a course that would have made the legislation unanimous and would have removed all possibility of doubt as to its validity. When this legislation is passed, there will still be the doubt as to whether it has any validity at all.

[Mr. Bennett.1

In the circumstances, I say to the Prime Minister that in these days of stress and anxiety and suffering for the mass of the people, they are crying for bread and he is giving them a stone. They are crying for fish and he is giving them a serpent; because in addition to their distress and their suffering, when this legislation is found to be ultra vires there will be the sting of bitter disappointment.

At six o'clock the house took recess.

After Recess

The house resumed at eight o'clock.

Topic:   UNEMPLOYMENT INSURANCE
Subtopic:   MEASURE TO ESTABLISH AN UNEMPLOYMENT AND SOCIAL INSURANCE COMMISSION
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INTEREST ACT AMENDMENT


Mr. G. G. COOTE (Macleod) moved the second reading of Bill No. 11, to amend the Interest Act. He said: The principle of this bill is to place in the Interest Act a maximum rate which may be charged or collected on any agreement. The present Interest Act, being chapter 102 of the Revised Statutes of 1927, provides: Except as otherwise provided by this or by any other act of the parliament of Canada, any person may stipulate for, allow and exact, on any contract or agreement whatsoever, any rate of interest or discount which is agreed upon. It is these particular words to which I take exception, "any rate of interest which may be agreed upon." The Money Lenders Act, which applies of course to persons engaged in the lending of money, fixes a maximum of twelve per cent as the rate that may be charged; and in the Bank Act there is set a maximum rate of seven per cent that may be charged by the banks. The Interest Act sets no limit. Why place a limit on the rate that may be charged by money lenders but set no maximum rate which may be charged by others? I think we all agree that our experience shows the advisability of placing a limit on the rate that may be charged by money lenders as well as by banks, and I feel it is just as necessary to place a limit on the rate which other persons may collect. If a limit should be set, what should that limit be? If the banks are limited to seven per cent I can see no reason at the moment why that same rate should not be set for those engaged in general business. Therefore I have drawn this bill, the new section 2 of which fixes a limit of seven per cent. It is a common practice, in western Canada at any rate, to charge rates as high as eight, ten and even twelve per cent per annum. I know that thousands of machine company notes have Interest Act-Mr. Coote been drawn carrying a rate of eight per cent until due and ten or even twelve per cent per annum after they are due. Millions of dollars have been paid in interest at these rates, but that is impossible now, with prices as they are. There are millions of dollars owing by retailers to wholesalers, which have been carried on their books for years at the rate of eight per cent, and in many instances the interest is made up and compounded every three months and a draft issued on the retailer. In some instances retailers have told me that they calculate they are paying at least nine per cent per annum in this way, and a general limitation of seven per cent such as I suggest would afford considerable relief to such people. And now that the banks are limited to a rate of seven per cent chargeable to wholesalers, I think this provision I suggest is a very necessary one. Section 3 of the present act provides that when interest is payable on any contract, sale or agreement, and no rate is specified, the rate shall be fixed at five per cent. The new section 3, provides that the rate shall be four per cent. I have proposed that change because it see-ms to me that at the present time all rates should be lower. In section 4 the rate is reduced from five per cent to four per cent. This is where the rate of interest is notannual but is fixed weekly or monthly. A new subsection 5 (a) in the bill fixes a rate of four per cent which may be collected on any mortgage on real estate or any agreement for sale of real estate. I have suggested a rate of four per cent because I believe that the general opinion in this house, as expressed in the debate last week, is that four percent is probably the maximum which farmers can pay. Certain members however have suggested that this is too low a rate andthat if it were fixed at five per cent I should probably get more support for the bill. I may say frankly that it is the principle of establishing a maximum which I am asking for, and if the bill is allowed to have second reading I will move that it be sent to the banking and commerce committee, if that is the wish of the house, and the rate can be decided there. I hope we shall be able to do that. I do not want to take up too much time, but I feel I should advance a few facts in support of my contention that the rate on real estate mortgages should be lower than it is at the present time and that a maximum should be fixed. So far there has been no limit, and there are to-day some mortgages outstanding at ten per cent, many more at nine per cent, and the bulk in the west at eight per cent. Though in the past many 92582-4Si farmers have paid off mortgages bearing such rates of interest, that cannot be done to-day. The farmer pays interest out of the products of his farm. In olden times, I believe, he could pay in corn, wine, oil and cattle, but to-day he promises to pay in money and he has no way of monetizing his products; that is done by someone else. To-day, on the average, it takes fifty per cent more of his products to pay his interest than it did at the time he contracted the debt. Further, the farmer can pay only out of his surplus revenue. There are expenditures which he must meet if he is to continue farming, and it might not be out of place to bring before the house a few facts to illustrate the farmer's ability to pay. Taking the average price of field crop commodities in 1926, the index figure being then 100, we find that in 1930 the index was 57-8; in 1931 it was 46-9; in 1932 it was 43-1; in 1933 it was 52-7, the average for these years being a little less than fifty per cent of their value in 1926. In 1933 the gross value of farm products was only forty-three per cent of what it was in 1928, and by 1933 the average farm income, which had stood at 81,600 in 1928, had fallen to $640. This is the average farm income, and probably half the farms in Canada had a lower income than that shown by the average. Let me give two or three figures to illustrate the ability of industry to pay interest rates compared to its ability in 1929. In 1929 the gross value of production of the manufacturing industries was $4,029,000,000, and this had fallen in 1933 to $2,086,000,000. I am told that when we speak in terms of millions in this house it goes over the heads of the people; they do not realize what millions mean, but this is another way of stating that for each $1,000 which the manufacturer had for the value of his product in 1929, he had only $500 in 1933. His ability to pay interest had been much more than cut in two. The total amount of wages and salaries paid in the manufacturing industries in 1929 was $813,000,000 and that had fallen to $465,000,000 in 1933. Perhaps I have said enough to indicate that neither the agricultural nor the manufacturing industry can continue to pay rates of interest such as they have done in the past. There has been a steady depreciation in the money value of all commodities and at the same time for the past five years there has been a steady appreciation of the monetary unit. The holder of money or fixed income bearing securities has found his purchasing power or real income in some cases doubled Interest Act-Mr. Coote



and in nearly all cases increased by thirty or forty per cent. This has created a grave injustice to debtors; payment in many cases has become impossible and this has resulted in what in olden days would be described as usury. I quote from Mr. Woodlock writing in the Wall Street Journal. He says: Stated in its simplest form, the prohibition of usury in the middle ages extended to all loans at interest, the use of which did not produce a profit sufficient at least to meet the interest demanded for the loan, or in which the risk or sacrifice on the lender's part was not such as to require legitimate compensation. Probable profit to the borrower, or loss to the lender, justified interest; otherwise in detail that was the rule respecting usury. If we view the matter in this light, it seems to me that a large part of our debt to-day is usurious and interest thereon has become usury. If the debt cannot be written down, some relief can be given to the debtor by reducing the rate of interest. The country's economy is built on a credit structure. It is quite evident that the structure can be preserved only if the creditor class will make some sacrifice. As Mr. Woodlock says: It is surely historically true that loans which do not produce the means for repayment are in the long run not repaid'. And high rate's of interest in the long run are not in the true interest of even the lender. I would like to give just this one further quotation from Mr. Woodlock. He says: In the historical perspective of business and industry, when all mistakes have been taken into account and all the changes in the methods and plants duly authorized, it becomes very clear that nature in fact will pay but a very small rate of interest on money-capital, if indeed, in the final book-keeping, she will pay any interest at all. Two questions are involved in regard to mortgages, that is mortgages already existing and those that may be entered into in the future. I believe the bill as drawn, would refer to both classes and personally I am more concerned with mortgages that are already in existence than with those that may be entered into in the future. I realize the question of federal jurisdiction may be raised in regard to this and I think it is only fair to have the bill go to the committee where that question as well as others relating to the bill may be threshed out. In conclusion I would just like to say that the principle of the bill as I have introduced it is to establish a maximum rate of interest. It may 'be, as I have said, it is too low; it may be it is too high, but I would just like to say again that if the house would be good enough to give this bill its second reading and allow it to go to the banking committee 1 am quite1 willing that the rate of interest be determined at that time.


LIB

February 12, 1935