Mr. Sinclair:

Free trade.

Mr. Cruickshank:

Yes, free trade, and we believe in free trade, but just before I came

208 HOUSE OF

The Address-Mr. Cruickshank east a firm in Vancouver sent me a sample of fertilizer to try in my garden. I wish I had brought with me the description of that sample. It is up in my office. It indicates all the things that they had taken out of whale oil. They even took the odour out but they left the oil. When my colleague wants to ruin 500,000 dairy farmers in order to put such junk as whale oil into something to put on the tables of people who unfortunately cannot afford to buy butter at present prices, I should like to tell him that he would be far better advised, particularly in the happy position he holds in the right branch of the Department of Finance, to see that the taxation system is such that those who can afford to bear it will pay in order that the people can buy butter at a reasonable rate.

Mr. Sinclair:

Free trade.

Mr. Cruickshank:

I quite agree with the statement credited to the Minister of Agriculture (Mr. Gardiner) in one of the best papers in Vancouver under date of January 15. The headline is, "Butter holds power in Canada."

Mr. Sinclair:

Free trade.

Mr. Cruickshank:

Again I am getting interjections from my junior colleague on the left. We are short of butter and he has played a large part in the fact that we are short of butter. He introduced this axle grease, with the result that the farmers sold their good heifers because there was not the demand or the price for butter; they were being undersold by this colourless, useless stuff that he brought into our country legally, through the decision of a few judges. I am now surrounded by $32,000 extra a year; but those gentlemen surrounding me would not be getting the extra money but for the fact, as they said, that butter holds the balance of power in Canada. So I think they should cease their opposition to butter and stop supporting margarine. I hear someone say "sour grapes." You know the way businessmen generally go about arriving at a figure for a key man in their business. They size up what they are paying an executive in this department and a superintendent in that department, and make up their minds accordingly. I have come to the conclusion, with this galaxy of extra talent around me, that when my turn comes, if the Prime Minister will divide the $32,000 in proportion, 1 will get more than they will.

I am sorry to have taken so long; I would not have done so but for these interruptions.

I want now to turn to public works, and I am going to be very brief. We see the results of one of these five-year plans over here at the fire trap called the east block. Why, any

good Fraser Valley farmer could put that roof on in three months, but they have been at it for two years. Some years ago, before I came to this house, there was a popular song called, "I know where the flies go in the wintertime." I never knew until this year, but now I see that as part of the five-year plan they are finally taking the fly screens off that building, in this kind of weather.

Mr. Fraser:

The efficient Liberal government.

Mr. Cruickshank:

Yes; but if it had been a C.C.F. government the screens would have been on there still. In 1948 this government was most generous to the farmers of the Fraser valley, as was the provincial government. That year we had a disastrous flood, and while this government had no legal responsibility it recognized a moral obligation and responded generously. On behalf of the people of Fraser Valley I want to say that we appreciate very much the generosity that was extended to us. Ninety per cent of the dikes happen to be in my riding. The federal government invested some $10 million in those dikes. Forget the farms in that valley; forget, if you like, the third largest city in Canada. The fact remains that we have $10 million of the money of the people invested there. Last year we had very high water before the dikes could properly settle, with the result that parts of them washed away and we found weak places. So I believe it is incumbent upon some authority to find the small amount of money necessary to repair the damage and reinforce the weak spots.

I have some pictures here; I am only sorry all hon. members cannot see them. One shows a hole 30 feet deep and 130 feet long right into the dike. I was able to show that hole to the parliamentary assistant to the Minister of Finance (Mr. Sinclair), the future minister of agriculture, and also the hon. member for Glengarry (Mr. Major) and the hon. member for Norquay (Mr. Wood). One of those gentlemen was only an engineer; another sold what we produce on the farms; but the third was a real farmer. It does not make sense to me, Mr. Speaker, that a government should spend $10 million and then, for the sake of a paltry few thousand dollars in addition, let the original investment be wiped out. Why, within 150 feet of the weakest spot in that dike we have the main line of the Canadian National Railways, the main line of the Canadian Pacific serving Fort Lewis and the main line of the British Columbia Electric. In one day at the beginning of the year eight troop trains went over one line, near my house. I realize that the provincial government should make the move, but they have done

nothing. If the provincial government does not have the gumption to do anything about it, it seems to me the federal government, who have been so generous and fair to us in the past, should cut oil some of their grants, or give them a boost in some other way, to see that this work is done. We in British Columbia have tried, but we cannot hope to wake them up until the -next election, when once more they will try to ride in on the back of the Liberal party here in Ottawa.

I am serious about this; I think it is very important. As I say, we appreciate the generous treatment we were given, and surely it is good business to spend another few thousand or few hundred! thousand and do the necessary work to protect our investment of $10 million. I thank hon. members for being so patient with me. In passing I might say, for once, a good word about the Canadian Manufacturers Association, which is a great organization. I could never hope to achieve membership in that organization unless, by some chance or other, I should happen to engage in the hardware business.

Mr. George H. Hees (Broadview):

Mr. Speaker, during the next three years this country will spend $5 billion for defence. This will necessitate a curtailment in the production of a great many different kinds of goods, and the facilities producing them will have to be diverted to the production of defence materials. This will create shortages in many of the necessities of life which are in free supply today, and the bidding for the fewer goods available will cause prices to rise rapidly.

In addition, the wages of the extra people needed in industry and the armed forces to carry out a worth-while preparedness program will increase the amount of money available to bid for these goods. This will further accelerate the rise in prices.

The net result of all this will be that speculators will make tremendous profits, and the buying public must foot the bill.

During the past year we have had an increase of ten points in the cost of living index. This has caused severe hardship to pensioners and those in the lower income brackets. Further accelerated rises in the cost of living-due to defence preparedness- will create an intolerable situation for all our people, if they are allowed to go on unchecked.

It is obvious, therefore, that a defence preparedness program must be accompanied by over-all price controls.

At the same time that price control is introduced, it will be necessary to introduce wage control as well, because you cannot

The Address-Mr. Hees expect the cost of goods and services to remain stationary while the cost of the labour producing them increases.

Together with price and wage controls, of course, must come rent controls to protect those whose incomes will become controlled. This will create no hardship for landlords, because the cost of the things they buy, and the people they hire, will also be controlled.

As it will take some considerable time to set up the machinery for over-all controls, I strongly urge the government to set the machinery in motion now so that our defence preparedness program may proceed without causing great hardship to the people of this country. Prices have already risen considerably in anticipation of controls. Every day we delay their imposition, the more prices will continue to rise.

The Minister of Trade and Commerce (Mr. Howe) this afternoon indicated that if the government should ever get around to doing something towards controlling inflation, the method they would prefer would be fiscal and monetary measures. These will not do the job, for two reasons. First of all, they are only directed against one source of inflationary pressure, namely the supply of money. Second, in order to get results, these measures would have to be applied with such severity that the result would be hardship among many income classes. An authority for these views is to be found in the report of the royal commission on prices, volume i page 42, paragraph 6. It reads as follows:

For reasons which are outlined in chapter 6, it was decided that fiscal and monetary actions, though an essential part of the full program, could not be depended upon to curb the powerful inflationary forces then being put in motion. More direct action was necessary. Which should it be, an intensification of the use of selective controls, firmly fixing prices and regulating uses but confining these actions to key and basic commodities; or placing a price ceiling on all goods and services, with accompanying production and distribution controls? The choice fell on the over-all ceiling policy, for reasons which were outlined by the Minister of Finance in the House of Commons on November 6, 1941, and have been further discussed by Mr. K. W. Taylor.

Now, just as fiscal and monetary measures alone will not do the job, neither will selective controls, and for three reasons. First of all, they are discriminatory. Second, we have today no unused resources. Selective controls might work if we had vast unused resources of men and materials, but they will not work in a condition of full employment such as we have today. Third, industry is too integrated and interdependent to seal off a section of it manufacturing the necessities of life only.

The forces that are generating this inflation are too strong to be dealt with by other than an all-out attack, using all weapons. An

The Address-Mr. Johnston authority for those views is the report of the royal commission on prices, volume 2, page 90, paragraphs 2 and 3, where it is stated:

As we see it, selective price control may be justified under exceptional circumstances for a temporary period. It may, for example, be justified by a temporary restriction of imports for exchange conservation purposes which, if allowed to affect prices, might result simply in a fortuitous profit to domestic producers, and if some imports are permitted to importers. Selective price control, combined with subsidies, may also be justified as a means of slowing down the wage-price spiral, on the assumption that the rise in the cost of living is temporary and will soon be replaced by a decline. In specific cases of acute shortages of important commodities, direct controls may be necessary to ensure that the scarce supplies are directed to where they will best serve the national interest.

Except under such circumstances it is doubtful, however, if selective price control has much to commend it in ordinary time. It is bound to be discriminatory. It is extremely difficult and complicated to administer. Most important of all, and particularly if subsidies are paid on the controlled goods, selective controls are more likely to augment the inflationary gap between demand and supply than to reduce it. If a general attack on inflation is to be made, the weapons should, in the main, also be general, directed to bringing the flow of money available for expenditure into equilibrium with the supply of goods and services available for purchases.

It therefore seems to me, Mr. Speaker, that we are entering a period' of extreme inflationary pressure, for a substantial rearmament program is being imposed in an economy which is already fully extended. I believe there is only one way to meet this condition, and that is by making use of all the measures available to us, namely:

(1) Over-all price and wage controls;

(2) Fiscal and monetary measures; and

(3) The distribution and allocation of materials.

I sincerely urge the government to take action in these directions at the very earliest possible moment.

Mr. C. E. Johnston (Bow River):

Mr. Speaker, when the date was set for the opening of parliament I believe most Canadians, and certainly all members of parliament, expected to attend one of the most serious sessions of parliament held in a long time. Since coming to parliament it seems to me that there has been a great deal of shadowboxing between both the old line parties. Each seems to be afraid to speak out in terms that the ordinary people of Canada will understand. It reminds me a great deal of the beginning of the 1939 session when war was declared. At that time the Liberal party said in effect, "We will tell the people everything if necessary, but not necessarily anything."

I have been waiting with a great deal of concern trying to find out from spokesmen

[Mr. Hees.l

on the government side of the house exactly how serious the international situation is. I do not think there is anyone in this house, and I am sure there is no one in Canada, who is not greatly concerned with the international situation as well as the domestic situation. I read the speech from the throne with a great deal of care. I listened to the speeches made by the Leader of the Opposition (Mr. Drew), by the Prime Minister (Mr. St. Laurent) and by the Secretary of State for External Affairs (Mr. Pearson).

In the speech from the throne I could not find very much apart from generalities. It referred to a number of amendments which were going to be introduced. We all expected these amendments because there are some every session. There will be amendments to the veterans pension legislation, amendments to the Canadian Citizenship Act, the Immigration Act, the Post Office Act, the Central Mortgage and Housing Corporation Act and the Emergency Gold Mining Assistance Act. Then there was mention made of new tax agreements with the provinces. It is true that it did not overlook the international situation. It outlined the international situation in general terms. It drew to our attention the gravity of the situation. But when one compares some of the remarks which have been made by responsible persons, one begins to wonder how serious the situation is. The Prime Minister has been reported to have said that there is too much talk about war and that he is still confident that there will be no war in his time. In his speech in the house, as reported at page 26 of Hansard he even went on to say:

In spite of the gravity of the situation I do not believe a world war is inevitable.

Of course I do not think anyone would say that it was inevitable. We all trust that it is not. We trust that we shall never again have to face a war. But one of the best ways to prevent war is by being thoroughly prepared. In the September session, I recall the Minister of National Defence (Mr. Claxton) telling us how well this country was being prepared, and how adequate our forces were then to take care of any immediate situation. Then when it came to the Korean war we found that we did not even have any troops prepared with which to take our share in the Korean conflict. Now we are going to spend $1-6 billion in defence; and over the period of three years we are going to spend $5 billion in war preparations. These figures would indicate that we were not at all well prepared before the Korean outbreak.

I do not profess to be any authority whatever on military or foreign affairs, Mr. Speaker. I have never studied that subject

The Address-Mr. Johnston

since I have been here in the House of Commons, although I have listened to the speeches carefully. I must therefore rely on the information we get from the members of our own group, from the members of the other parties who had the privilege of attending the meetings of the United Nations, and the speeches which were made by the Secretary of State for External Affairs.

When I read the speeches of the Secretary of State for External Affairs, I am somewhat impressed as I am also when I listen to those members who attended the United Nations, and I am convinced that the situation is quite serious. For instance, at one place in Hansard, at page 60, the Secretary of State for External Affairs is reported as follows:

In conclusion, Mr. Speaker, I return from Asia to our own western and north Atlantic world. Here we are now entering the period of greatest danger in the months ahead.

Then he goes on to emphasize the seriousness of the situation when he says:

If we do not, but give way to smug complacency on the one hand or unreasoning panic on the other, we shall become, and deserve to become, slaves ourselves.

Those are grave words of warning to which we must all give a great deal of heed. When one hears, on the one hand, the words of complacency uttered by the Prime Minister, to the effect that he does not expect a war in his time and, on the other hand, has the grave words of warning of the Secretary of State for External Affairs, one wonders just how one can reconcile those two frames of mind in members of the same party and, in fact, members of the same cabinet.

I think that the action the government is now taking, although it is late, will result in a great deal more of preparedness. With that I think we shall have to be content. But speaking of preparedness, I have some views on the matter and I want to mention a few of them. If a war does break out-and I use the word "if" advisedly-it seems to me that we should not be in quite the same position as we were in 1939. In my estimation, one of the best ways to be prepared is to have a national registration. This is not something new. I think almost every organization in Canada is asking for that action. Certainly the veteran organizations of Canada are asking for it, and those who are the heads of the veterans' national organizations have had some experience in this field. In order to carry on efficiently national preparedness, it would seem to me that national registration is the first step in order that we shall know the place in which every man and woman in this country can best be fitted. When the first world war came upon us, we had time to prepare. Everyone told us that when the next

war came, if it did, we would not have any time to prepare, that it would come overnight, in fact. Such is not the case. We have the warning from the Secretary of State for External Affairs, so we can be thankful for that. We should take advantage of the opportunity and should have a national registration under way immediately. We should know where every person fits in agriculture, in industry and in defence. In agriculture we should know just exactly what commodities we are going to require and in what abundance. In industry we should know what industries are capable of producing those materials which they can produce most efficiently in their plants. In defence we should know for what service men are best suited, whether for the army, the navy or the air force. I want to congratulate the Minister of Labour (Mr. Gregg) on his foresight in this regard. He is coming nearly to a national registration when he speaks of a national advisory council which he was given authority to set up under P.C. 567 and which I think is now under way. I think it was a good step to take, with regard to that national advisory council which the Minister of Labour says he is going to set up, to provide that there should be four representatives from labour, four representatives from employers, two from agriculture, two from the women of Canada and two from the veterans. I think that fairly thoroughly covers all the different fields in this country. I hope there will be good results from that national advisory council. But the success or the failure of such a council depends entirely upon the efficiency of that organization, on the completeness of their tabulation and on the records being kept of that tabulation. But I do not think it is sufficient to have a national registration and merely leave it to manpower as the proposition under the Department of Labour would suggest. I think that it must be a thorough canvass not only of industry but of finance as well.

When we came to this session there was one subject with which all members of the House of Commons and the people of Canada were concerned. I believe it has been mentioned by every member who has taken part in this debate on the address in reply. I refer to the cost of living. Despite this fact however the government seems to be most reluctant, and seems to be doing a little more shadow-boxing in telling us how it is going to cope with the problem.

This afternoon I listened carefully to the Minister of Trade and Commerce (Mr. Howe) who, I thought, gave an excellent account of the manner in which moneys were going to be spent for national defence, and for the procurement of munitions and supply. But

The Address-Mr. Johnston when it came to dealing with economic problems he did not seem to be so sure of himself. He spoke of the method1 that would be used to bring about controls, and indicated that the chief emphasis would, be placed on monetary control. I cannot imagine what control in that field he had in mind. However, if he was thinking of the remedy suggested by the hon. member for Fraser Valley (Mr. Cruick-shank), that the only way controls can be handled is by taxation, then I think he will fall far short of completing the task. In my judgment prices cannot be controlled by taxation alone. That has been tried; it is not something new.

For instance, the other day the Minister of Resources and Development (Mr. Winters) referred to tightening loans on houses. Well, the tightening of loans on houses is certainly not going to lower the cost of houses, nor will it lower the cost of materials. It may lessen the scarcity of supplies, but it certainly will never affect costs. The same is true of the government's plan for curtailing credit buying. It will stop buying just as effectively as the procedure outlined by the minister will stop the building of houses; but in neither case will it lower prices.

That is evident from the fact that, while we have had a tightening of credit buying for some months, during that time we have had additional increases in prices-to such an extent, in fact, that it has become extremely alarming. Yet the government seems to rely upon this old procedure that it has been using for months, knowing that it cannot be very effective.

I do not think there is anyone who believes in free enterprise who favours controls just for the sake of controls. Certainly the Social Credit party does not. But we also believe that when it is necessary to have controls initiated-and in my judgment it is necessary now-there is no use for the government attempting to attack a problem by simply talking about it, and continuing to talk about it.

As was said so well this afternoon by the hon. member for Acadia (Mr. Quelch), this idle talk by government officials about putting in price controls, or the probability of having price controls, is one of the greatest factors in driving prices upwards. That is exactly what is happening.

When price controls are put into effect I believe there should be a complete coverage through not only price controls but wage controls as well. There should be an immediate freezing of wages and prices, and then a proper adjustment made of both. I do not think any fair-minded person would say that we could have an over-all system

of price controls without having some form of wage control. Indeed, I do not think labour itself would expect that. Anyone must realize wages form a substantial part of cost, and must therefore enter into prices. However, I shall deal with that later on.

May I add in all kindness to both the hon. member for Fraser Valley and the hon. member for Broadview (Mr. Hees), who immediately preceded me, and who spoke about controls, that neither of them said how they would bring about those controls. They spoke only in generalities. One has to be somewhat more specific when applying the principle of price controls. The Social Credit party has always taken the position that when they make suggestions in this connection they have a plan to apply, and I shall outline it as we go along.

This afternoon the hon. member for Acadia told the house how controls could be instituted. It seems to me there is a great need for them. Every member in the house has received hundreds of cards from different organizations.

No.

Mr. Johnston:

I have a pile of them now which must be at least three and a half to four inches thick. They come from all parts of my constituency. I have gone over those cards carefully to ascertain the distribution and I can tell the house that they come from every part of my constituency. The names on the cards represent every industry and every form of occupation in my riding. They come from the railway workers in Calgary, from the oil workers in Calgary, from the ordinary workingmen in Calgary; they come from the farmers throughout my district and from the miners in the Drumheller area. Every part is represented in those cards.

So it cannot be said that it is just a concerted effort of labour, of agriculture or of any other group to send out cards. When we see a coverage as broad as that, we can say that the people generally are very much alarmed about soaring prices. They are. Members of the house are, too. We are all concerned because the prices are going up continuously.

I have here a clipping from the Ottawa Journal of February 2 headed "Living Costs Zip Yet Higher Into Wild Blue Yonder," and stating:

The official cost of living index rose 1-4 points in December to a new high of 172 5 from 171-1, the bureau of statistics reported today.

All groups surveyed showed increases. Prices were higher for meat, butter, vegetables, fruits, men's wear, furniture, blankets, carpets, telephone rates-

They should have included freight rates, too.

-laundry, coal, health care, barbers' fees, gasoline, street car fares and newspapers.

It was the tenth jump in the prices barometer in the twelve months of 1950. The index is based on 1935-39 prices equalling 100.

Yes, it was the tenth rise in 1950. When we see prices soaring to that extent, and as rapidly as that, is it any wonder the people are so much concerned about it? Yet everyone seems to be cautious about what steps should be taken.

Let me read another extract along the same lines. It indicates the great concern of different classes of people in this country over this question. I intend to quote from the Ottawa Morning Citizen of February 7 an article entitled, "The Wives Speak", by Jack Scott. His first reference is to a barrister, although I did not think that barristers were financially embarrassed. He states:

A barrister writes that "to live with any degree of modest comfort costs us $350 a month and any saving is out of the question."

I put that on record to give some idea of just what is necessary for people to live in any form of modest comfort. As is indicated, you cannot do it for less than $300 or $350 a month. But that is not the class with which I am concerned most. One woman whose husband makes $50 a week writes:

We have a family of two boys and just manage to get by on his salary by living like hermits and cutting our food to a minimum. I dread to think of how people who make less than this are living.

Then another woman writes:

Have you ever tried to live on $77 a month, feed two children, clothe them, keep them warm and house them, and try to keep up appearances? It's only believing in God and the innermost spiritual belief that keeps me carrying on.

As the writer states, many of the letters are downright tragic. The article continues:

There is the woman whose husband is a bus driver. They have two children. Her husband's take-home pay is $72.50 every two weeks. They have found it impossible to make ends meet on this salary and are forced to sell the small home they built together.

"When I look at the house," she writes, "I think of all the nails I've hammered, all the rocks I wheeled for the drains, the roof we worked so hard on, the cold and wet, the laughter and tears that went into our home. We love it. It is our home. But it is for sale.

I'm tired of counting every penny, of telling the children, 'We can't afford it,' of not being able to go to a show or go bowling, of buying soup bones and not roast, of walking instead of riding the bus, of no holidays.

I am just so damned tired of existing and not living."

That is what that woman writes and I do not blame her for using the language she did. I have heard some members of parliament use stronger language than that in referring to

The Address-Mr. Johnston the cost of living. I think they too are justified. If you want to really hear what people are saying just go out into some of the farming and mining districts. Then you will hear what is really being said about the high cost of living. It is time that this government did something definite and concrete in regard to the cost of living.

We heard the hon. member for Fraser Valley (Mr. Cruickshank) say that probably the best way to take care of this is by taxation. Let us consider some of the causes for the increase in the cost of living. One of the most important causes is government taxation. When the government decides to put on a, direct tax everybody knows of it when they look at an article or buy one; they know that the tax is causing an increase in the cost. When the government increases income tax, that depreciates the purchasing power with a resultant decrease in the standard of living. There should be no reduction in the income tax exemption level. Two thousand a year or $166 a month is little enough for a married person to have in order to eke out a living with present day high costs.

Indirect taxes should be done away with because that is just a subtle means of reducing the people's standard of living without their being thoroughly conscious of it. It is idle for the government to talk about their going to do something when it becomes necessary, because that it just another direct way of increasing costs. There is no doubt that when a business concern hears about the possibility of controls they begin to raise their costs in anticipation.

The second reason for the increased cost of living is the large profits being made by industry. I do not refer to all industry, but the greater part comes within this category in the last few years. I should like to place on the record details of some of the profits that have been made. I am not one of those who do not believe in profits. I do not think anybody can carry on a business without profits. I do not think labour can exist without profits in the form of wages because that is what they are. Certainly no farmer could carry on without profits. But there is such a thing as excess profits, particularly in these trying times when living costs are so high. I should like to quote from the Labour Research of December, 1950, as follows:

Profits are at or near an all-time high. In 1949, total corporation profits after taxes (DBS) were $1,241,000,000. This is $18,000,000 below the 1948 figure, but there is every indication that 1950 will more than make up this difference. Financial statements of 38 companies with fiscal years ending August 31, 1950, and later, summarized in the Financial Post, show an increase of $7,314,409, or

The Address-Mr. Johnston 12-7 per cent over 1949. Even if the percentage increase in 1950 total profits is only half as large, this would' bring the 1950 total to about $1,320,000,000, or 75 8 per cent above 1946.

You do not mind people making a profit, but let us not kid ourselves about the huge profits that were made during the last war. We heard it said in this house in 1939 that there would be no blood money made in the war. What a lot of rubbish. You only have to look around the country to see the way industry has prospered, to know that there was a lot of money made during the war. In my opinion that was blood money. Something must be done or we are going to follow exactly the same track.

I spoke a moment ago about wages forming a part of the cost which enters into prices. If we are going to have price control it must be brought in immediately and there must be a levelling off of prices. Wages must form part of that levelling off process. First of all, there must be a parity set for prices and then wages must be set in fair relation to that. Whenever there is an adjustment in price, there must of necessity be an adjustment in wages.

One of the reasons the labour unions have been compelled to fight for higher wages is that they knew without question that prices were going to keep soaring and soaring and, if they did not fight for an increase in wages for their workers, those workers were going to be in a mighty tough position as a result of the high cost of living. So they have been compelled to take that action, but wages have never kept up with prices. The only way you can ever have a reconciliation between this ever-increasing cost and wages is by having a fair price set, and then having wages tied to that.

Then there is the low income group of people, even below the tax exemption of $2,000 a year. There are the old age pensioners. I agree one hundred per cent with what the hon. member for Fraser Valley said a while ago. He said that it was a disgrace and a shame to ask any of our people to live on the sums that they are receiving by way of pension. Imagine an old age pensioner having to rent a house and get a little meat at 98 cents or $1 a pound on an income of $40 a month. I do not see how those people exist. When it is necessary we can raise billions for other purposes, so surely we can raise a few paltry millions, if necessary, to help people in the low income group.

It is not only those living on pensions who are in the low income group. There are many people in the civil service who are in the low income group and need assistance. They

have not sufficient to make ends meet during this period of high prices. They should also have some protection.

I remember speaking in the house on one occasion in 1939 after the war began and pleading with the government to decentralize industry. The danger of attack was great then. At that time our industry was centralized in the two provinces of Ontario and Quebec. Much as it might be desirable to have a centralization of industry in those provinces, it is certainly not in the interests of the defence of this country, and particularly in the next war if there should be one. With the tremendous destructive power available to our enemies, it is not in the interests of the nation that our industries should be centralized in Ontario and Quebec. There is no reason in the world why we could not disperse our industries. Take the province of Alberta, and I am only using it as an illustration. We have tremendous quantities of oil and tremendous quantities of gas. We have an unlimited supply of coal and lots of raw materials. There is no reason why we should not be concentrating on the development of heavy industry, not light industry but heavy industry, in the province of Alberta. It would be much safer from attack.

I venture to say that our industrial potential could be almost ruined overnight as the situation stands today with our industries centralized in two provinces, and in just a portion of those two provinces, mostly in Toronto and Montreal. When you think of the tremendous destructive power of the atomic bomb, how long would it take to put us out of commission? How long would it take to ruin us as one of the great suppliers of munitions and supplies? Even in Russia they have recognized this problem and have gone to great pains to rectify it. They have not concentrated all their heavy industries in the large centres. They have dispersed them throughout the whole country, away out in the mountain areas for protection from their enemies. Yet we have not seen fit to do that. I have not time to expand that subject as much as I should like.

I want to say a word about highways. I think we should make every effort to develop a trans-Canada highway system, and that it should be done immediately. I understand that the Minister of Trade and Commerce recognizes the importance of motor trans-portatior. in Canada. I am given to understand that when the motor transport delegation met the Minister of Trade and Commerce not long ago-I think it was last summer-he gave them assurances that

21S

The Address-Mr. J. M. Macdonnell

priority would be given for motor transport replacements and the maintenance of such transport. I am sure he recognizes that in case of an attack on this country our railways could be put out of commission very readily, and it would be some days, weeks or maybe months before they could be repaired sufficiently to be of any use again. Motor transport could be operating again in much less time. If they were damaged the highways could be repaired in a matter of hours or days. I think every effort should be made to see that the trans-Canada highway system is completed at the earliest possible moment.

Mr. J. M. Macdonnell (Greenwood):

Mr. Speaker, it gives me more than the usual pleasure tonight to congratulate the mover (Mr. McMillan) and the seconder (Mr. Breton) of the address in reply to the speech from the throne. The mover happens to have the great good fortune to be a graduate of Queen's university, Kingston, of which I also am a graduate, and it gives me hope. When one looks at the serried ranks opposite and also to the right, one always has hope that here and there the light of reason may break through and effect a conversion. Of course when it is a fellow graduate of mine-although I am afraid he is not in the chamber at the moment-my hope is greater. With respect to the seconder of the address I should just like to say in my very indifferent French that I thought he did well. 11 a gagne ses epaulettes!

Since we arrived here we have been discussing very largely dangers from outside, and indeed they are worth discussing. They are serious enough. I wish tonight to take some time, Mr. Speaker, in discussing the great danger at home, which we also have been discussing, the danger of inflation. Inflation has been described very simply, more simply than I thought an economist could ever describe anything. It is described very simply by an economist called Kemmerer. He says, "Inflation is too much money and deposit currency"-simply that.

I am not going to weary the house by going over ground that we on this side have gone over a good many times in the last five or six years, pointing out to the government how they have been constantly keeping the fires of inflation going. I am not going to weary the house by giving figures which have been given so often-that the means of payment have multiplied about four times while goods and services have multiplied about twice. I am not going to count up the many times we advised the government to free the dollar before they did it, and try to compare the many times we have told them to stop inflating it, because it might be that I might lose

hope. If I did that I might find that we have said the one ten times and we have only said the other five times, and therefore we have got a long time to wait. At any rate it has been much discussed, and now for the first time I think people are beginning to consider that it may mean them. For the last few years our tendency has been to think of inflation as a funny thing that afflicts far off, funny people who do not know how to look after their own affairs. We have had a very simple phrase that has come to us from Britain, about "too much money pursuing too few goods."

I am not going to weary the house with a description of inflation elsewhere, because I do not think it is necessary. I only remind hon. members that after the first war there was inflation not only in Germany, where there was some suspicion they might be wanting to inflate in order to escape their debts, but in France, thrifty, hard-working, saving, hard-headed France. By 1926 they had suffered such a degree of inflation that their franc had gone down to about one-seventh of its value, and it was only by herculean courage and energy on the part of Poincare that it was rescued at that time. Since then, of course, it has gone infinitely lower. I was in Paris last summer and for a very modest breakfast at a curb restaurant one paid 200 francs, which was the equivalent of about 60 cents Canadian; and it was sad to reflect that when I was first in Paris, 200 francs would have been worth $40 Canadian.

Now just a word about the situation here. We are under pressure; we all know that. I am not going to worry you with figures, because we are all familiar with the situation. However, I do think we should remind ourselves that really the pressure is just getting well under way. I suppose that with the people who will be engaged on war orders, plus the people who will be required for the various armed services, plus the people who will be required to supply materials for the armed services, one would not be exaggerating if he said that within a year or eighteen months from now perhaps ten per cent of the present working force will have been diverted from the production of consumer goods. I am not going into the question of the tremendous capital investments facing us, to which the Minister of Trade and Commerce (Mr. Howe) referred this afternoon, but I do wanit to comment on one point. I would be the last person to suggest that it would have been simple or easy to have prevented it, but it is bitter irony that in spite of the glowing figures the Minister of Trade and Commerce gave us this afternoon about our exports and imports, our investments and our production of all kinds of things-all of

The Address-Mr. J. M. Macdonnell which was interesting and impressive-nevertheless to an extent we hate to admit we have here a kind of "poverty in the midst of plenty". We know that, and it is a very unpleasant thing to reflect upon.

I want to say just a word more about this easy money before I pass on. It has been said before, but frankly it does not seem to me that the lessons have all been learned yet. I have here an editorial which appeared in the Winnipeg Free Press of November 18 entitled "The Big Blunder". The blunder they describe is a blunder we on this side of the house have tried to describe. It is that in the year 1945 an excellent tool was devised and put forward in a white paper for dealing with a depression, and it was used for five years to deal with boom conditions. That is what the Winnipeg Free Press describes as the big blunder, and I shall read a paragraph from the editorial, which describes ini some detail what has been happening. It goes on to say:

Toward the end of the second world war the governments of all free countries expected peace to bring a major depression unless they could head it off.

I would be the last to blame them for that; I think what was done at that time was a very proper precaution; but I quote again:

The great blumier was made in Washington, but the government of Canada cannot escape its share of responsibility. It, too, misjudged the economic current, was haunted by the fear of deflation and announced boldly in the famous white paper issued in the spring of 1945 that it would use every means of heading off another depression.

It did use those means year after year, I suggest, in spite of everything that could be said. That is what you might call the public inflation; but there was a little private inflation, too.

I want now to refer to the inflation that took place last autumn, connected with our freeing of the dollar, when we added another $200 million of naked inflation, that is to say money without anything to represent it. Again I shall quote the Free Press, feeling that it probably will be taken on the other side of the house as an authority of some value:

The government was compelled to make new money to the amount of $200 million . . .

That was to satisfy the demand of the United States investors in Canadian dollars.

This money was borrowed from the private banks on short term paper, which meant in fact that it was created by a fountain pen. At a time when the money supply was too big it was swelled by $200 million overnight.

That brings us to the session of last autumn. I would not want to blame people for not foreseeing things I did not foresee and probably no one else foresaw, but we did not need an awful lot of foresight last

September to realize that we were getting in a tough spot. It seems to me it is fair enough to complain if there was any neglect of serious restrictive credit measures beginning last September. As I look back now, indeed when we considered matters last September, there did not seem to be any sense of tremendous urgency. The government did this and did that, but there was no great sense of urgency, and today we are reaping the result.

That brings me to the speech this afternoon by the Minister of Trade and Commerce. The part with which I wish to deal is the last part, in which he spoke of inflation, or prices, or price control. I suggest that a newspaper man might headline that speech something like this: "We have missed the

bus. We are too late. Prices have got away from us. The inventories have been built up. We must just wait and see, and hope that the United States may help us out of our trouble." I shall try to satisfy you that this is a fair summary of some of the things, at any rate, the minister said this afternoon.

Let me review some of the chief points of his speech. He asked us to believe that fundamental governmental inflationary policies, as he called them, have been vigorously pursued. I wish I could think they had; that is what the minister said, and I shall quote his words:

We must continue to pursue fundamental antiinflationary policies as vigorously as ever.

Note the words "as ever." Let us have a look at the vigour. Can anyone tell me what has really been done since last September to halt inflation? I should like to know. First of all let us take bank loans. If it wishes, the government can. have something to say about bank loans. We have a central bank; we have all kinds of powers and influences and suggestions that can be made, but let us look at the bank loans. They are pretty good evidence of what is going on in the way of credit expansion. We find that current loans were up something like $300 million in the last six months of the year; and I believe that is an understatement. I have not the December figure, and I think it is more than that. I do not blame the banks. They cannot conduct a gestapo. If they have a credit-worthy borrower the bank cannot say, "What are you going to use this for?". You cannot even blame the borrowers, because after all these people are in business. If everyone else is buying and putting up the price and they do not buy, they will go out of business quickly enough. The people to blame are the people at the source of credit, the people supposed to guide our credit policy, the Department of Finance and the Bank of Canada. But,

The Address-Mr. J. M. Macdonnell

as I have shown, last autumn the Bank of Canada and the government were busy injecting $200 million more credit of their own into the system, without trying to curb what was being done at that time by the banks.

As a matter of fact it seems to me that since last September everything has been going wrong. We have had any amount of talk, really too much talk, but precious little action. What was attempted last autumn? The only thing I can remember in the way of credit curbing was in connection with instalment buying. I have to admit that I have not been able to get the actual figures. But my impression is that they are not very large. In any event, I say without hesitation that so far as they have had an effect on the over-all credit situation, they have been as much good as a bucket of water on a three-alarm fire.

Now, the truth of the matter is that the government has been wholly inactive, but the purchasers of commodities have not been inactive. They have been on the job. The Minister of Trade and Commerce makes that very clear. I must say that he was very fair in a lot of the things he said this afternoon, and I thought he was surprisingly frank.

Mr. Gillis:

Will the hon. member permit a question?

Mr. Macdonnell (Greenwood):

Yes, certainly.

Mr. Gillis:

I believe the hon. member

made a statement a moment ago which I should like clarified. I thought he said that the Bank of Canada and the Department of Finance controlled the issuance of currency and credit through the chartered banks of Canada.

Mr. Macdonnell (Greenwood):

I did not

say that. I said that the Bank of Canada and the Department of Finance could exercise over-all control over the credit of this country.

Mr. Abbott:

How? I should like the hon. member's view as to how we could do it.

Mr. Macdonnell (Greenwood):

I am not

going to get involved in that. We have been told many times, and we all have evidence of it, as to the influence of the Bank of Canada. No knowledgeable person in this house doubts that, least of all the Minister of Finance.

Mr. Abbott:

I did not know whether you thought the Bank of Canada might approve the bank loans?