April 26, 1932 (17th Parliament, 3rd Session)

Mr. MACKENZIE KING:

If my hon. friend will just endeavour to be polite for the time I am speaking, I will thank him very much. I am going to ask you, Mr. Speaker, from now on kindly to have order kept this afternoon. I have not interrupted an hon. gentleman on the other side speaking in the house this year except to ask a question, and I am entitled in speaking on this great question of the tariff and of the Imperial conference, as I intend to do this afternoon, to have a proper hearing from hon. gentlemen opposite and no interruptions. _
I was about to say that we on this side had made in the course of the debates in this house several suggestions which had they been accepted by the administration would, I believe, have been of service to the country. But they have not been accepted, and as a consequence expenditures and borrowings have been on a much larger scale than otherwise would have been the case.
I refer, first of all, to the suggestion that was made at the special session, and again at the session of last year, that there should be called immediately a dominion-provincial conference for the purpose of discussing between the dominion and the provinces financial arrangements as they affect both parties; that before the government entered into the policy of making grants in aid, for all kinds .of purposes, and to all sorts of amounts, there should be not merely a one-day conference between the Prime Minister and some of his ministers with the premiers or other ministers of the several provinces, but a gathering that would occupy several days and which would go into the whole question of the relation of the dominion to the provinces in the matter of subsidies, in the matter of grants in aid, in the matter of what particular obligations should be shouldered by the provinces with respect to social services and what particular obligations should be shouldered by the dominion. I say that had a conference of that character been held before the Dominion government began to make these vast loans to the provinces and to enter upon increased grants in aid in one direction or another, and to carry out some of the extravagant schemes on which it has embarked, a large saving would have been effected, and, as a consequence of that saving, there would have been less in the way of borrowing and less in the way of taxation necessary at this particular time. May I again say that I hope that such a conference to consider the financial arrangements between the dominion and the provinces may be held at the earliest possible moment. I do not consider the conference held a few days ago, the one-day interview which took place, as at all the kind of conference that could begin to discuss financial relations as outlined from this side of the house at different times in the course of the debate. I do think that now that we have before us in the very resolution which was introduced this afternoon notice of a bill to give further money to the provinces and to allow the ministry again more or less of a free hand in the expenditure of public moneys for relief purposes and the like, there should be an immediate conference held in which it would be possible to set out definitely the limits on each side with respect to what is to be undertaken by the provinces, on the one hand, and by the dominion on the other, and what is to be expected in the way of grants supplementary to those undertakings.
The other suggestion which was made from this side, and which I think has everything to commend it, was that an unemployment relief commission should be appointed to administer federal relief funds, that there should be some body specially charged with the administration of the vast sums being given to the provinces, and in part paid out directly for relief. Two years have gone by in which a great deal of very valuable material might have been gathered to guide this house in subsequent legislation on unemployment, but we have, as I have said repeatedly nothing to show at the present time for the millions that have been expended on relief except the additions to the public debt, and what appears in the way of statistics in the blue books. We have no report from any body indicating wherein some scheme of unemployment insurance would help to meet the situation more effectively. We have had no opinions of experts dealing with this question, which of all the economic questions of the day necessitates expert opinion.
So I repeat, Mr. Speaker, that while world conditions may be responsible to a very considerable extent for what the country has been suffering, the policies of hon. gentlemen opposite, intensifying as they have the adverse effects of world conditions, have made things infinitely worse than otherwise would have been the case.

The Budget-Mr. Mackenzie King
The effect of these policies has been shown particularly in the matter of trade. It is with respect to trade that we get at fundamental facts in connection with a country's progress. The trade figures which I shall give in a few moments will indicate the extent to which the policies of hon. gentlemen opposite have been directly responsible for the dislocated condition in which things are to-day. Before I quote the figures, however, I wish to read what was said from this side of the house in reference to the policies of hon. gentlemen opposite at the time those policies were introduced and again at the last session. At page 16 of Hansard for the year 1931, will be found reference to the policies then being introduced, and a statement as to their probable effect. At that time I said:
The great question in the course of this session and this parliament is going to be whether the policies of hon. gentlemen opposite will serve to promote or to cripple the trade of the country. I believe it can be shown that the most serious of all the results of the policies of hon. gentlemen opposite will be the very certain contraction in trade that we shall find on all sides, a contraction that will affect all classes; whether they be employers of labour or employees, whether they be the heads of large industries, transportation companies, financiers, wholesale merchants, retail merchants or others, all are going to feel the effects of the contracted trade of this country as a result of the policies hon. gentlemen opposite are putting into force.
I ask if that prophecy has not been fully fulfilled. May I continue with a reference to be found at page 54 of the same volume:
May I state further that already we are beginning to experience-
And this was as a result of policies inaugurated at the special session.
-in a very critical way the effects of the policies of hon. gentlemen opposite as put through at the last special session. Look at the figures on trade and see how trade is diminishing. Look at the figures with respect
Imports
Exports-
Canadian.. .. Foreign
Total trade
to national revenue and see how the national revenue from customs dues is shrinking. Wait until the budget comes down and see what the additional taxation will be. Already we can see the effect^ upon the western farmers in loss of purchasing power. The western farmers not being able to sell their grain, and the producers generally not being able to get rid of their surplus products, where are we going to get the purchasing power to stimulate our industries? It may be true that here and there, where a protecting wall has been thrown around an individual industry, there has been created a temporary boom. That undoubtedly happens, and will happen in certain eases where competition from without is suddenly cheeked. But what takes place after the point has been reached where there is no one to purchase the products of the industries thus artificially stimulated? When the demand falls off, what will happen to the transportation companies, the banks, the wholesale and retail businesses of the country? What is to be the lot of every householder in the land when we experience more contraction in the trade of the country?
That was said at the last session of parliament in reference to the policies of the previous session. I repeat it concerning the policies of this session. The effect has been and will again be felt through a reduction of trade, felt in regard to revenues, in regard to taxation, in regard to debt, in regard to unemployment. As to the significance of the balanced budget I shall have a word or two to say in a moment. I will also make a statement as to the significance to be attached to the so-called favourable balance of trade.
So that there may be no gainsaying the exact position, I should like to give the figures with respect to trade for the last three years. These figures are taken from the National Revenue Review for the month of April. First I shall give the figures for the fiscal year 1929-30, then for the fiscal year 1930-31, and then for the fiscal year 1931-32. I shall read only the totals, but with the permission of hon. members I should like to put the figures on record in tabular form.
Fiscal Year
1929-1930 $1,248,000,000
1,120,000,000
24,000,000
Fiscal Year
1930-1931 $ 906,000,000
799,000,000
17,000,000
Fiscal Year
1931-1932 $ 579,000,000
576,000,000
11,000,000
$2,392,000,000 $1,722,000,000 $1,166,000,000
What is the significance of these figures? They show, Mr. Speaker, that since the present administration has been in office during the last two years-and I shall give my reason for confining the statement to the present administration-the trade of Canada has been more than cut in half. That is a tremendous
cut. I repeat, the trade of Canada has been more than cut in half in that short period of time. I put the whole responsibility on the present government for this reason. It was at the special session that these high tariffs were first imposed. It was at the last session of parliament that further increases were made in

The Budget-Mr. Mackenzie King
the customs tariff and that an excise tax was for the first time imposed, with a minor exception or two, against all goods coming into the country, whether or not they had been previously admitted duty free. It is due to those tariff increases, and to the additional excise imposed at the last session that we have this astonishing decline in the trade of our country. As I have said the trade during the fiscal year 1931-32 has fallen to less than half of the trade in the fiscal year 1929-30. I wish to impress upon hon. members the fact that our trade has been more than cut in half in a two year period.
Speaking of world conditions, undoubtedly there are, in the main, three which have affected the situation in Canada and elsewhere. The first is that of debts and reparations; that is a legacy of the war, and is not a matter with which this parliament can deal effectively to any extent if at all. The second is the mishandling of the gold of the world, and the general disorganization of currency and credit as related to the supplies of gold. The third is the matter of high tariffs which have been imposed against international commerce. High tariffs have been imposed by the governments of other countries as well as that of Canada. It will be noticed that all three conditions are very considerably inter-related. More and more the economists of the day are pointing out the inter-relation between the effect of high tariffs and the inability of other countries to meet war debts and reparations. More and more there has been pointed out the relation between high tariffs and the present condition of credit and currency in international relations. More and more has attention been drawn to the very serious effects of high tariffs upon trade between the different countries. They are^ interrelated. These are problems each of which is international in character. Some of them to a greater extent than others are capable of solution by national effort. Of these conditions, the one arising out of tariffs, is the one with which a single nation can do most on its own account. Every nation is in complete control of the tariff it itself imposes. On the other hand no single nation can deal by itself with any condition of world credit or currency, nor can it deal by itself with the problem of war debts or reparations.
If the Liberal party have at this time in its amendment to the budget drawn attention specifically to the tariff and its effect upon present conditions it is because we believe first of all that the tariff has been the most serious of all factors responsible for the intensification in Canada of adverse world conditions, and in the second place, that it is
one which can be dealt with in the most practical way at this time. We have done so, not because we do not appreciate that the other factors are important, but because we believe this is the most important and the most practical one to be dealt with by this parliament at this time. More than that, we say it is the most immediate one in view of the matters to be considered at the forthcoming Imperial economic conference which is to be held in this city in the course of the next three months. These are some of the reasons which have caused us to emphasize the importance of the tariff at this time.
There is another reason. We believe that the vast increase in taxation which has taken place this year has been necessitated in large part by the loss of revenue which this country has suffered in consequence of the tariff ceasing to be a tariff for revenue and becoming a highly protective, I should say, a prohibitive tariff. I wonder if hon. members realize the extent to which the revenue of this countiy, as collected from customs dues, has fallen. It is a very significant thing that our trade has been more than cut in half. I think it will be found that the revenue of the country from customs duties has been nearly cut in half as well. The Minister of Finance in dealing with this matter said:
Customs receipts fell to $102,800,000 reflecting the drop in the value of imports occasioned by a number of factors, such as the further decline in prices, the unfavourable exchange rate as regards importations from the United States and generally the policy of encouraging production in Canada.
The policy of encouraging production in Canada 1 That ought to have been called, "The policy of discouraging production in Canada." It is the policy that is indicated by protective tariffs-that is what is meant by the phrase-of tariffs raised to a point which has made it next to impossible for producers in the great basic industries to develop those industries as they should be developed in this country. May I give the house the total customs import duties for the last four years:
1928- 29
$187,000,0001929- 30
179.000.0001930- 31
131,000,0001931-32 (estimated).. .. 102,000,000
Now, the total receipts from taxation in these years were as follows:
1928- 29
$395,000,0001929- 30
378,000,0001930- 31
296,000,0001931- 32 (estimated) .. .. 273,000,000
What do these figures dhow? They show that the percentage of customs receipts to total receipts was 47 per cent in 1928-29, 47 per cent again in 1929-30, that it dropped to

The Budget-Mr. Mackenzie King
cerned. Why was that? The reason is that everything depends upon the state of development of a country. If a country is borrowing from abroad for the purpose of development, as was the case in this country when we were constructing our great railways, during the period of Sir Wilfrid Laurier's regime, or the period during which the Canadian Pacific railway was being constructed, one would expect an unfavourable balance. That circumstance, however, did not signify anything adverse with regard to the position and development of the country. It was only the outcome of an investment which was going to bring its return later on. I need not, I believe, go further into that question; I think it is quite clear.
As to the third matter of which I spoke, that is, the excise tax being an increase in the tariff, I think on that score also I have said enough for the moment. May I, however, direct attention to the last point to which I referred, namely, the significance and importance of this budget in regard to the forthcoming Imperial conference. There is nothing that I can see in the budget which, read across the sea or in any portion of the world where there is a British dominion, will bring aught of encouragement to any government of the British Empire. I do not know how we in Canada would have felt if, when Britain introduced her duties, she had put up the tariff against Canada as well as against foreign countries, in the way this government has been doing ever since it came into office. So far as this year is concerned, Canada and all parts of the empire had a right to expect that, in the budget preceding the conference, there would be something that would resemble a gesture of goodwill, something indicative of an attitude of friendship towards the other portions of the British Empire. But I will deal with that further in a moment. May I repeat that it is because of the facts which I have mentioned that the Liberal party brought down this year an amendment limited particularly to the tariff. If the house will permit me, I would here like to put the Liberal amendment on record:
That all the words after the word "that" be struck out and the following substituted therefor:
"this house is of the opinion "that increases made by the present admin-.stration in the customs tariff have been arbitrary, ill-considered and inordinate, and have had the effect of stifling agriculture and other industries, restricting trade and commerce. and increasing unemployment;
"that the fixing of values for duty purposes by orders in council is an interference with the inherent right of parliament to regulate duties and determine taxation, and has had an un-
settling effect on commerce, a depressing effect on business, and has been detrimental to the interests alike of producers, importers, distributors and consumers;
"that a reversal of the present fiscal policy in relation to customs tariffs and an immediate resumption of parliamentary direction and control with respect thereto are essential to a revival of trade, and improvement in business, and to the ultimate return of prosperity in Canada."
That amendment was followed by an amendment moved by hon. members of the Progressive party in the far corner, and, if the house will permit, I should like also to place that amendment on record so that the two will be side by side:
That all the words after the word "that" in the said proposed amendment be deleted, and the following substituted therefor:
Whereas, in Canada there exists an ample supply of natural resources to provide for all primary needs, and
Whereas, we have developed an efficient industrial machine capable of producing more than sufficient of the requirements of our people, and
Whereas, notwithstanding this our external and internal debts are increasing enormously- large numbers of our citizens are in dire need and exist through governmental and charitable relief, and a large proportion are faced with declining purchasing power involving a lowered standard of living, and
Whereas, in our opinion these conditions are attributable to fundamental defects in the present economic system, and
Whereas, it is therefore necessary that parliament, the agency with the widest legislative powers, should take the initiative in the task of reconstructing national production and consumption with a view to the widest possible use of commodities on a basis of human needs, and
Whereas, the control of finance is a basic element in such reconstruction, affecting as it does industrial plant establishment and develp-ment, the distribution of goods and the price level of goods and services.
Therefore be it resolved, that in the opinion of this house, as a first step towards general economic reconstruction, our financial system should be nationalized, and provision be made to issue immediately sufficient money to bring the value of the dollar as speedily as possible to that point at which the major portion of our debts were incurred during the war; stabilize the dollar at this point internally and thereafter manage credit and currency issue to secure and maintain a stable price level within Canada.
With regard to the Progressive amendment may I say that it relates exclusively to the question of currency and credit. It is in the nature of an amendment dealing with financial reform, whereas the amendment moved by the Liberal party might be described as having to do with tariff reform. I want to say quite frankly that I think hon. members who are responsible for this amendment are to be congratulated for the time, the thought and the study they have given to financial questions.

The Budget-Mr. Mackenzie King
I think they are right in looking upon questions of credit, particularly the involved problem of the world's supply of gold and its distribution, and matters of currency, as allimportant questions that cannot receive too careful attention. But I do submit that they might have hoped to get more in the way of sympathetic reception for their views had they taken a different means of presenting them to the house. I cannot see why it was necessary to wipe out completely the Liberal amendment in order to bring their amendment before the house; they might have amended the Liberal amendment, if they had wished to do so, by adding something with reference to credit, currency and the like. Their subamendment goes farther than that, it strikes out the whole Liberal amendment; it is equivalent to saying: We do not regard this tariff situation, affecting as it does trade, taxation and all the rest of it, as at all comparable to what we have in our subamendment.
I can hardly believe that the hon. members responsible for the subamendment are sincerely of that view, that they really meant that, but that is the effect of the subamendment in the way in which it is introduced.
I shall now deal with the subamendment. May I say that to what is expressed in the preamble, no exception could possibly be taken. The preamble relates very largely to prevailing industrial conditions and the existing depression. It is a mere statement of fact. However, it goes on to give the reasons why the depressed condition is what it is, and these reasons are set out as follows:
Whereas, in our opinion these conditions are attributable to fundamental defects in the present economic system, and
Whereas, it is therefore necessary that parliament, the agency with the widest legislative powers, should take the initiative in the task of reconstructing national production and consumption with a view to the widest possible use of commodities on a basis of human needs, and
Whereas, the control of finance is a basic element in such reconstruction, affecting as it does industrial plant establishment and development, the distribution of goods and the price level of goods and services.
May I point out that while it is true that some of these conditions are attributable to the present economic system, that system is not a matter for which Canada alone is responsible nor which Canada alone can change. The present economic system is something for which many countries are jointly responsible and if there is to be any alteration, I venture to say it will not be brought about by the action of any one country but by cooperative action on the part of many. It will be probably one of the
most difficult things in the world to bring about. I agree with those in this house who have said that it is impossible for any thinking man or woman to view conditions as they are in this and other countries, conditions of plenty on the one side, with distress and starvation on the other, without realizing that there is something wrong with the existing condition, but I do not agree with those who hold the view that parliament can remedy everything, governments can remedy everything. Governments can do a certain amount, parliaments can do a certain amount, but I believe that the fundamental things which in the long run are going to be of greatest effect in improving and changing social conditions will be the things done outside of parliament by voluntary action of a cooperative character.
In this regard may I refer to what the hon. member for Winnipeg North Centre (Mr. Woodsworth) said the other day as to the necessity of a new motive in dealing with social and industrial problems. I agree that we need a new motive and that industry should be considered as being in the nature of social service. I agree that everyone who has to do with industry', no matter in what form his contribution be given, whether it be the capitalist who contributes his capital, whether it be labour which gives its labour, whether it be managerial ability which gives its skill, or whether it be the community which makes its contribution in a thousand and one forms, all of these who are engaged in making a contribution to industry are doing something in the nature of social service. If we would take that view, I think probably we would be starting on the right road toward a solution, our efforts *would be more effective than by opposing what may be said as to the need of some new motive.
May I direct attention to this fact: After all, the golden rule is the rule which underlies all social service. If parliament could by enactment of the golden rule enforce or bring about its application to any extent, we would not be sitting to-day in this house waiting for something of the kind to be done, it would have been done by public bodies many hundreds if not thousands of years ago. The golden rule will be brought into force only through a process of education, a process which began in its highest form nearly two thousand years ago, and which has been making extensive headway despite what might be said to the contrary. However, it is a process which has a long way to go before it begins to govern and control the actions of men in their financial and business relations. Let us
2372 COMMONS
The Budget-Mr. Mackenzie King
hope that the agencies that are seeking to develop that new spirit and that new attitude will be furthered in every direction possible, that the hands of those who direct them will be strengthened and their work enhanced, but we must not deceive ourselves into thinking that any parliament on earth is going to be able to bring about a permanent change in social and economic conditions. Parliaments cannot do everything but because we may have to wait some time for another motive is to my mind no reason why, to the extent of our ability both in and out of parliament, we might not do very much towards helping to bring about better social conditions.
Frankly, my view is that the crux of the whole situation lies not so much in any outward reorganizing of industry according to any particular model but rather in the control of policy by those who make any contribution to industry. As I see it, the present system of industry, the so-called capitalistic system, is a system organized largely on the basis of the single control of industrial policies by capital investors. It is the capitalist who invests his money who has the say in the choice of the board of directors; it is the board of directors that appoints the management; it is the management which in a large part dictates the policies of the industry under the direction of the board, and which has to do with determining rates to be paid to labour and the prices or rates to be paid by the consumer for the commodities produced and the services rendered. Looking broadly at the Changes which are taking place in different parts of the world, it seems to me that what is being attempted in one part is an endeavour to substitute for that single control on the part of capital, single control on the part of some other factor contributing to industrial development. As I see the movement in Russia, the emphasis is laid largely on the single control 'by labour. In Prussia before the war great emphasis was laid on the single control of the community organized as the state, state socialism in a highly developed form. I believe that, a large part of the conflict which arises in these matters comes from the effort of one factor contributing to industry seeking to gain a monopoly of control and failing to realize that the secret of any change which is going to be permanent, enduring and worth while lies not in the substitution of monopoly by some other factor for the one which exists. The secret lies in the doing away altogether with monopoly of control and the substitution in its stead of joint control of industrial policy.

At the risk of being considered indiscreet, may I outline a practical experiment which may help to explain what I mean in a concrete -way. I do not want any part of what I say to be taken too literally, I should like the matter to be considered as being tentative, but I bring it forward with a view to disclosing the kind of thing I have in mind. I spoke of substituting joint-control in all matters pertaining to industrial policy for single control. Consider the railways of this country. So far as the Canadian Pacific Railway is concerned, it is under private management; and for the most part control is in the hands of the directors who are appointed by those who have capital invested. The Canadian National system is a government-owned road. There the control is largely that of the directors who have been appointed by the government of the day which, in its action in that regard, is supposed to represent the people. Whether the directors fairly represent the different classes in the community, one has to examine for oneself; see who they are, and what their previous relations and associations may have been. At any rate, each of these systems is controlled as respects the policies which govern by certain groups of gentlemen who represent very definite interests.
We have, in the railway commission, a body which also has to be considered in connection with the railways of the country. It is in a very real way representative of the community, of consumers and producers. It is a body which has been appointed by parliament to see that rates are subject to control. The extent to w'hich it is truly representative of all groups must again be decided upon examination of those who sit upon the board and who have the controlling influence there. Attention has been given to the representation of labour and also of the farmers on that board, and, to that extent, it comes close to representing the sort of thing I have in mind: when I speak of joint-control by all interested groups as being essential in the determination of policy.
If it be a good thing to have all classes represented in that way on the railway commission, why should such representation not be an equally good thing with respect to the management of the railroads, whether they be under government or private ownership? That is a point I should like to have considered. Why should there not be on the board at Montreal, whether it be of the 'Canadian Pacific or of the Canadian National, representatives of the great brotherhoods, such as the locomotive engineers, firemen, conductors.

The Budget-Mr. Mackenzie King
trainmen, maintenance of way men and others, railwaymen who are giving their lives daily in the service of their roads and who have brought into being their large eminently efficient and well managed organizations? Why should their representatives not be seated on the board of directors, having their voice, along with representatives of capital, in the shaping of railway policy? Why should the community generally, taking it broadly, not have directors chosen, not merely by a government exercising its own will in the matter, but by a government having regard for the different elements that go to make up the nation, choosing as its appointees amongst others men who would be representative of the agricultural interests, and of other great interests such, for example, as- the commercial and business interests organized in chambers of commerce, boards of trade and the like?
I venture to say that a joint board fashioned in that way, directing the affairs of the railways of the country and having the determination of policy, would have a very far-reaching effect in reconciling the different interests concerned. I doubt very much whether, under a board so arranged, there would be extravagances in the construction of too elaborate hotels, of palatial ships or what in other directions would be regarded to-day as unnecessary if not wasteful expenditure. I doubt very much whether matters might not be so arranged as to make possible the continuous employment of those who are giving their lives to the railway service. Why should not a great industry like the railways be so organized as to take care, under some system of unemployment insurance with the aid of the state in some way, if you like, of all who enter its employment? If such were the case, we would not have lay-offs such as we have at the present time. What can be more tragic than the condition we are hearing about from day to day in the press and in the house of hundreds, yes of thousands of men who have given their lives to the railway service of the country, being laid off at this time without any remuneration whatever? If the railways were organized in the way I have indicated, I believe in the result matters would be so arranged* that the unemployment situation would be cared for along with the rest. It would become part of the obligation upon the industry to see that it was run in such a way that those who have their labour as well as those who have their capital invested in it would be cared for.
While undoubtedly a step of the kind suggested would have to be a gradual one, while it would have to be effected by a little here and a little there, a tending in that direction,
taking a single industry in a single country at a time, an example I submit would be set to other industries and to other countries and in that way a natural evolution would come about in industrial management and particu-laitly in control of industrial policy which would go a dong way towards improving social and economic conditions. After all, does not each of these parties receive at the present time a certain, recognition for its services? Does not capital receive its remuneration in the form of interest? Does not labour receive its remuneration in the form of wages? Does not the community receive its recognition in the form of services performed at a particular rate? Does not management receive its recognition in the salaries paid to it? If all receive recognition for their services in that way, why should not all also receive recognition in the matter of having a voice in the shaping of policy with respect to conditions generally under which they all have to make their respective contributions.