1936-05-05

[Stage Direction]
Second report of the standing committee on miscellaneous private bills.-Mr. McPhee.


Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:: That the name of Mr. Kirk be substituted for that of Mr. Duff on the standing committees on privileges and elections and banking and commerce; and that the name of Mr. Cameron (Cape Breton North-Victoria), be substituted for that of Mr. Duff on the standing committee on marine and fisheries.


[Stage Direction]
Motion agreed to.


Mr. S. W. JACOBS (Cartier) moved:: That the petitions for private bills listed below, together with the reports of the clerk

The Budget-Mr. Bennett
of petitions thereon, be referred to the standing committee on standing orders for the purpose of considering the suspension of standing orders 92 and 93 (3)	(a) and (c) in
relation thereto:-
No. 49-Madeleine St. Clair Peacock Milroy (divorce).
No. 50-Mildred Eileen Champion Webster (divorce).
No. 51-Howard Murray and others, to incorporate Quebec and Montmorency Railway Company.
No. 52-Lillian Gladys Cheney Perry (divorce).
No. 53-Edith Astroff Nevitt (divorce).
No. 54-Edythe Mary Ross Brown (divorce).
No. 55-George Marcoux (divorce).


[Stage Direction]
Motion agreed to.

[Stage Direction]
-ARRANGEMENT BETWEEN CANADA AND THE UNITED STATES EFFECTIVE DECEMBER 1923.
On the orders of the day:
Hon. FERNAND RINFRET (Secretary of State):: Mr. Speaker, yesterday the hon. member for St. Lawrence-St. George (Mr. Cahan) asked the Prime Minister (Mr. Mackenzie King) to lay on the table copy of an agreement respecting copyright entered into between Canada and the United States in December, 1923. I may say in reply that the extract from the Canada Gazette of December 29, 1923, reproducing the order made by the Minister of Trade and Commerce of Canada, in whose department copyright and patents then were, under subsection 2 of section 4 of the Copyright Act of 1921 is published as an appendix to the report of the commissioner of patents for the fiscal year ended March 31, 1924.
The proclamation issued by the President of the United States under date of December 27, 1923, is also published as an appendix to the same report. That report was laid on the table of the House of Commons on February 9, 1925.
It will be observed that the arrangement between the government of Canada and the government of the United States was not the subject of a treaty or agreement expressed in a formal document, but was effected by action, under statutory authority, by the Minister of Trade and Commerce of Canada and by the President of the United States.
For the convenience of the hon. gentleman and other members of the house I now beg to lay on the table three copies of that agreement.



PUBLIC WORKS CONSTRUCTION ACTS

[Stage Direction]
On the orders of the day:
Hon. CHARLES A. DUNNING (Minister of Finance): Mr. Speaker, the right hon.
leader of the opposition (Mr. Bennett) asked me, yesterday I think it was, with regard to a statement of moneys expended under the authority of the Public Works Construction Act. I find that I tabled the statement on Monday, February 10 last.
Mr. BENNETT:: Oh, that was the statement? I thought it had to be after the end of the year.


Hon. H. A. STEWART (Leeds):: On February 20 an order of the house was made for a return covering certain information in connection with the Public Works Construction Act of 1934 and the similar act of 1935. The return has not yet been brought down and I should like to ask the Secretary of State to see if he can expedite it.


Louis Édouard Fernand Rinfret: Mr. Speaker, the return is still with the Public Works department. I will undertake to see the minister and have it brought down as soon as possible.


Hugh Alexander Stewart: Thank you.



THE BUDGET


[Stage Direction]
The house resumed from Friday, May 1, consideration of the motion of Hon. Charles A. Dunning (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means.
Richard Bedford Bennett: Mr. Speaker, I desire to congratulate heartily the Minister of Finance (Mr. Dunning) upon both his arrangement and his presentation of the budget on Friday last. In my opinion it was highly creditable alike to the minister and to the officials of the Department of Finance, and I am bound to say, if he will permit me, that he read a very long document with very great distinctness so that everyone in the house could hear what he was saying.
I should like also to congratulate him upon having delivered a budget speech. For the first time in recent years at least, we have had a budget delivered by a member of the Liberal party; for his predecessor in office prior to May, 1930, did not deliver a budget for the succeeding year, and the now Minister of Finance in May, 1930, merely reviewed the expenditures for the year that had ended on March 31, 1930, and indicated the revenues as they were then known, but made no forecast as to the probable expenditures during the year which was to close on March 31, 1931. Neither did he make any estimate of the

The Budget-Mr. Bennett

probable revenues. I pointed out frequently in years prior to that, that such a course could not by any stretch of the imagination be described as constituting a budget statement. It is therefore a matter of great satisfaction to have before us now a statement that is a budget for the year ending March 31, 1937. The minister has indicated the probable revenues of the country and the sources from which they will be derived, and also the probable expenditures and the channels through which they will be made.
I should like, however, to direct attention to the fact that speaking on May 1, 1930, the then Minister of Finance apparently had no appreciation of the great world forces that were marching toward a world depression. He apparently had entirely overlooked the fact that we were on the edge of, in fact had already entered into, that depression period. The government of that day seemed to have had exactly the same view; for I recall that the then Prime Minister, speaking only in April of that year, said:
The fact that hon. members are obliged to restrict themselves to naming individual municipalities and are able to name them in numbers that can be counted on one hand so far as the Dominion of Canada is concerned, demonstrates more strongly than words could how little we have a national problem of unemployment in this country at the jjresent time.
That was in April, 1930. When in 1928 and 1929 attention was directed from this side of the house to world movements which, in our judgment at least, meant inevitable disaster to the prosperity which then was abroad and to the movements in the stock exchanges, we were regarded as pessimists, and we find that as late as May 1, 1930, the Minister of Finance said:
Before touching on the dominion's finances for the fiscal year just ended may I survey a few of the events which have indirectly influenced the balance sheet. As we all know, national revenues are dependent on the volume of business transacted. During the year certain unusual factors made themselves felt, in particular, the delayed marketing of the grain crops and the great decline in prices of stocks in the latter months of the year. While these factors are important they cannot be considered as permanently prejudicial to our economic structure.
Further in his opening observations, having referred to the fact that our harvest had not yet been moved and that it was very remarkable that in the preceding year harvester excursions had not been run to provide the west with harvest help, and having referred also to the condition of industry, he said:
We have marshalled our resources to meet the problems arising from delayed marketing of the grain crops and, at the same time,
[Mr. Bennett. [
absorbed the shock resulting from tens of millions of dollars being suddenly withdrawn from the ordinary reservoirs of credit.
I point that out for this reason: that as the Minister of Finance was in May, 1930, wholly unable to appreciate conditions that indicated a world catastrophe, so I venture to think that on Friday last he somewhat overestimated the forces making towards world recovery. I do that because I regard it as somewhat important that we should have no misunderstanding as to the extent to which the forces of recovery have operated in the world at large and in our own country in particular. Within three months of the date of the making of that statement by the Minister of Finance it was apparent that the views that were held by those who then sat to the left of the Speaker were sound; for our customs duties for April, May, June and July in the year 1930-31 as compared with the year 1929-30 had fallen by 815,815,000, excise taxes by $5,800,000, and excise duties by $547,000, being a net decrease in revenue during that short period of over $22,000,000. I think it is equally true that the income tax collections were somewhat larger than in the previous year, because they were collected on the incomes of 1929. But. the absolute, shall I say, disregard and overlooking of these conditions constituted in my opinion a grave error in judgment on the part of the minister.
There has been much misunderstanding about the many things that have happened during the last five years and I am going to refer shortly to some of the events that have brought about the conditions to which the hon. gentleman) referred. If I took up a much longer time I could not more clearly indicate the progress of this country during the last year or two than to use the words of the Minister of Finance. I am sure there is not an hon. member of this bouse who will say for a single minute that any policies of the present government had anything to do with the condition of affairs in Canada on December 31, 1935. Those conditions, whether good or bad, whether evil or otherwise, were brought about because of the policies pursued by the previous government from August, 1930, up to the end of October, 1935. As there was no opportunity for parliament to meet between October and December, it is obvious that the great improvement to which the bon. gentleman has referred and the figures which he has given are a complete vindication of the policies pursued by the government of that day during the last few years. Perhaps this could not be summed up better than it was in a single

The Budget-Mr. Bennett
paragraph in the speech of the minister. I quote from page 2367 of Hansard, as follows:
I am pleased to be able to report, for the fiscal year just ended, an important gain in our total trade with other countries, amounting in round figures to 152 million dollars. This is an increase of 12-8 per cent over the previous year. It is true that world trade generally has improved during the past year, but it should l)e noted that while the average increase in trade of 24 leading countries in the calendar year 1935 was 4-1 per cent our own trade increase was 11-3 per cent. As a result of this marked expansion in our foreign commerce Canada has moved up from eighth to sixth place among the nations in total world trade.
In that paragraph is contained a complete vindication of what, during all those long years, those who now sit opposite to me denounced in season and out of season with a heartlessness which at times I think aroused the animosity of some Canadians. They pursued their guerrilla warfare and, as I say, constantly in season and out of season denounced the policies that I have lived long enough to see a minister of finance of a new government stand in his place and say have brought to this country that regeneration for which we are looking and that improvement for which we are striving. Hon. gentlemen smile; they may smile but they cannot change the record as it was made by the minister. When the other twenty-four great trading nations of the world showed an improvement of only a little over four per cent, the improvement in our country was more than eleven per cent. Under these circumstances should we not as Canadians be proud that those who toiled, though they did not have the same political faith and opinions as the government of to-day, by " their efforts and through the policies which they formulated, have been able to accomplish the ends for which the minister now takes credit?
If recovery has commenced, it is a recovery based upon policies that this government did not initiate or control. That, I think, will have to 'be admitted. If that recovery is greater than it has been in the other twenty-four great trading countries of the world, three times as great, then there must be some credit given to those who initiated the policies that brought about that result in. Canada. When the Liberal government resigned in 1930, this is the legacy they left us: First of all, commitments had been made for millions of dollars, many having been initiated and created under orders in council passed between the date of the defeat of the government and their resignation. Second, a treaty with New Zealand terminated on that
12739-160}
very day. Third, a shrinkage in trade that amounted to over twenty per cent of the trade of the preceding year, as well as a shrinkage in revenue of a like per cent. Fourth, our railway revenue had diminished to such an extent that immediate steps were necessary to provide funds for the enterprise. Fifth, the reports made to the bureau of statistics showed that at that time unemployment was shown to the extent of 113.000, by reporting companies or enterprises which constitute about half of all those engaged in industry in Canada.


Mr. EULER:: One hundred and thirteen thousand half of the total employment?


Mr. ROGERS:: Not one-half of the total number of employees in Canada?


Richard Bedford Bennett: I said as reported by industry to the bureau of statistics, reports being received from about one-half of the industrial enterprises of the country.


William Daum Euler: That is entirely different.


Richard Bedford Bennett: I think I said that very clearly. We found the stock exchanges in the condition to which the minister referred. On May 1, 1930, we found the provinces practically unable to pay their obligations and looking for means for that purpose. I shall not go into the matter at greater length, although I could if I so desired.
During the ensuing five years, what has been the result? One hon. gentleman opposite referred the other day to the fact that trade through his port had fallen off by more than one-half what it was in 1930. I think it is very desirable that our relations with the other countries of the world should be clearly understood. The other day the Minister of Finance stated something that people sometimes forget when he said that we in Canada are powerless to remove the uncertainties in the world s political outlook. So in this country with eleven million people we have to compare our position with that of the other countries of the world. I think it is very important that we should have a clear understanding of just what has been our position with relation to the other countries of the world since 1929. Let me point out, first, that according to The League of Nations reports, during the great depression world trade fell to 31 [DOT] 3 per cent of what it was in 1929. Some put the figures at just exactly one-third of what it was, but the figures collected by the League of Nations show the figure as 34-3 per cent. This represents the extent to which world trade had decreased.
The Budget-Mr. Bennett


Mr. CRERAR:: That would be in value.


Richard Bedford Bennett: Yes, but in similar terms. What the League of Nations collected was comparisons of comparable things reduced to a common denominator. Let us look at 1929 to see what Canada was doing. That was one of our great years. In that year our export trade was 3-71 per cent of the world's total export trade. That is not imports, but exports-I want to make that clear. In 1929, 3-71 per cent of the world's export trade was done by the Dominion of Canada. In the calendar year 1930 we did 3-42 per cent of the world's export trade. In 1931 it had fallen to 3-29 per cent, and in 1932 it was 3-78, there being an increase over the preceding year. In 1933 it was 3-59 per cent, in 1934, 3-99 per cent, and last year, the calendar year 1935, the League of Nations reports that the export trade of the Dominion of Canada had risen to 4-32 per cent of the world's export trade. That, it will be observed, is a considerably larger percentage of the world's export trade than we did in the year 1929. Our proportion of imports however, for reasons to which presently I will direct attention, was much less because we were steadily diminishing our import trade. The reasons for that were I think apparent to every thoughtful Canadian. In the calendar year 1929 we did 3-65 per cent of the world's import t-rade; in 1930, 3'47; in 1931, 2-91; in 1932, 2-75; in 1933, 2-28; in 1934, 2-60; and in 1935 we did 2-71 per cent of the world's import trade.
Now take the two, add your imports and exports together and ascertain what percentage of the world's trade was done by the Dominion of Canada during the dark five years from 1930 to 1935. In 1929 we did 3-68 per cent of the world's entire trade; in 1930, 3-45 per cent; in 1931, 3-09; in 1932, 3-24; in 1933, 2'94; in 1934, 3-27; and in 1935 we did 3-49 per cent of the entire trade of the world. I give these figures because they bear closely upon the statement made by the minister himself and which I have just read. Then there was another significant fact, one to which the minister referred the other day, and I think very properly, namely, that during the last few years we have modified to a great extent the visible commodity trading balances -of the country; and by reason of gold being (exported as a commodity we had been able to create a very large favourable balance.
The minister referred the other day to our tourist trade, but I leave that entirely out of the matter for the reason that you have to consider other factors as well as the tourist trade. There are insurance premiums; there

is interest that has to be paid abroad and there is interest from abroad; and there are other items that go into the invisibles that make up the ultimate balance of trade. Sc that I will leave out the tourist trade for the moment and confine myself entirely, exclusive of gold, to our commodity balance.
Our commodity balances when we came into office were running steadily against us. In 1930 I could not understand the government of the day reducing the sales tax by half, as they pointed out, and taking other action that was suggested to be a lessening of the burden of taxation at a time when we were urgently in need of revenues; and the shrinkage in these revenues was apparent during the operations of the month of April itself. Now without going into it at length, let me say that in 1921 we had a favourable balance of $17,000,000; in 1928 we had a favourable balance of $151,000,000; but in
1929	we had an unfavourable commodity balance of $103,000,000, and in 1931 of $10,000,000, because the corrective measures that were put in operation in the fall of
1930	had not immediately become apparent. So that in 1932 we had a favourable balance of $49,000,000; in 1933, $136,000,000; in 1934, $146,000,000, and last year, $192,000,000, exclusive of gold, which we will treat as a commodity and which brings about the situation to which the minister referred.
The other day it was pointed out, not improperly, that too much importance may at times be attached to what is called the balance of trade; but there is no possible likelihood of anyone ever gainsaying what was said by the minister the other day as to the importance of the balance of trade when you come to consider its effect upon the stabilizing . of the value of your unit, your dollar abroad among the selling and purchasing countries of the world. It was that factor which we had to consider when we dealt with the matter in 1930. These significant facts indicate, I think, just what we had to face when we came to assume the responsibilities of government in 1930. But there are two or three other matters that might be mentioned when dealing with trade.
In 1935 we increased our domestic exports over 1932 by 47-7 per cent; over 1933 by 37-2 per cent and over 1934 by 11-6, showing that we had made steady progress during those years. Now we come to what I regard as one of the most important matters with which we had to deal, namely, the steps to be taken to correct the conditions to which I have referred. What steps would be suggested? First of all, as has been pointed out in this house very frequently, we raised the tariffs. We certainly

The Budget-Mr. Bennett
did. We raised tariffs in the fall of 1930 at the special session for a very deliberate and definite purpose. We were confronted with a situation such as this country had never faced before, and it became absolutely essential for us to take some steps to safeguard the integrity of the nation.
Now raising tariffs does not necessarily mean increased costs to the consumers. I realized then as I do now the difficulties that have always to be met when tariffs are raised, because it is contended that there is an increased price to the consumer; and so we had regard to the fact that there was, as is pointed out in one of the reports of the tariff board to which I may refer before I conclude, a chaotic condition in many industries in the United States which were seeking, under the lower tariffs that prevailed between Canada and the United States, to find here a market for their surplus products. And they were finding that market. If you take the trade figures you will realize that they were finding that market in increased volume; and every time a dollar's worth of goods came in from that country, industrially chaotic at the time, it displaced a dollar's worth of Canadian industrial effort and deprived the Canadian of his work, throwing him into the ranks of the unemployed.
Faced with that situation we determined that the proper course to pursue was to enact tariff leigislation that would give Canadians an equal opportunity with those who competed with them in their own markets; secondly, legislation that would ensure employment of Canadians to supply the wants of Canadians; and thirdly, we had to take such steps as might be necessary to ensure the consumer against exploitation. How did we do it? If hon. gentlemen will take the trouble to turn to Hansard of May 13, 1930, they will find there a list of communications signed by various industrial firms in Canada, by which they undertook that they would not raise prices to the consumer in Canada if they w'ere afforded an opportunity to secure the Canadian market for their own products. That was in 1930, in the fall.


Mr. DUNNING:: Not in May.


Richard Bedford Bennett: It was on September 22, 1930.


Charles Avery Dunning: You said May.


Richard Bedford Bennett: Thank you so much

 September 22, 1930. I take for instance one letter:
Re Boots and Shoes
Keen and unrestrained domestic competition amongst approximately 190 shoe factories in Canada affords abundant protection to the trade and the public that the selling prices
of Canadian boots and shoes will at all times be very close to actual production costs in the most efficient plants. Moreover, we offer you our pledge that our members will not take any advantage of higher tariff duties to increase their prices, but on the contrary that they will pass on to the trade and the public the benefits of whatever reductions in production costs per pair may result from enlargement of the home market and the increase in Canadian production.
The Shoe Manufacturers' Association of Canada.
John T. Tebbutt. President, The Tebbutt Shoe, and Leather Co. Ltd.
H. Tetrault, Tetrault Shoe Mfg. Co., Ltd.
J. B. Goulet & Son, Inc.
F. S. Scott, Getty & Scott, Ltd.
Alfred Lambert Acton Shoe Co. Ltd., and Alfred Lambert, Ltd.
Oscar Dufresne, Dufresne & Locke, Ltd.
J. D. Palmer, Hartt Boot & Shoe Co., Ltd.
Allan A. Mark, The Empress Shoe Co., Ltd.
John J. McHale, Scott & McHale, Ltd.
J. E. Warrington, The John Ritchie Co., Ltd.
With respect to that commodity, not only has there been no increase in the cost of boots and shoes by reason of that tariff increase, but the consumer was able to purchase them at a better price than before, and assured employment was given to Canadians during that period of depression.
I pass now to another article. They are all set out at length, but I will refer briefly to farm implements, because I am going to say something more about them before I conclude :
The manufacturers are of the opinion that consumers of agricultural implements should not pay higher prices for them, and they are equally emphatic in the statement that if the Canadian market is supplied from Canadian factories, instead of being supplied in such volume by goods manufactured elsewhere, they will not increase prices of implements to consumers. provided the factors entering into manufacturing costs are not increased.
Massey-Harris Company, Limited,
Per George Valentine,
Vice-Pres.
Sawyer-Massey, Limited.
Per H. R. Malley.
Vice-Pres. & General Mgr.
John Goodison Thresher Co. Ltd..
Per L. V. Wright,
Director.
J. Fleury Sons, Limited,
Per II. W. Fleury,
Pres.
Coskshutt Plow Company, Ltd.,
Per E. A. Mott,
General Manager.
Waterloo Manufacturing Co. Ltd.,
Per A. T. Thorn,
Vice-Pres. & Gen. Mgr.
Frost and Wood Company, Ltd.,
Per J. E. Ruby,
Vice-Pres.
That statement was lived up to in its entirety. I say more: the implement producers
The Budget-Mr. Bennett

of this country reduced their prices in 1932, and despite the fact that in 1933 and 1934 there was an increase in the prices of implements in the United States there was no corresponding increase in the Dominion of Canada, and to-day prices in Canada and the United States are practically on a parity; in some cases our prices are less than theirs. I think it may be a matter of interest, when we discuss this matter in committee, to present a complete analysis that was secured, partly by my own personal efforts and partly otherwise, as to prices of like implements at a given point in Montana and a given point in Saskatchewan. I want to pay this tribute to the manufacturers who signed that agreement. Although it was suggested at one time that they should raise prices, they did not do so, and there was no increase of prices in this country until the Canada-United States agreement was signed, when, of course, they were released from their obligation.


Some hon. MEMBERS:: Oh, oh.


Richard Bedford Bennett: That is the fact. You
may laugh, but it is a fact that cannot possibly be successfully challenged. The facts speak for themselves.
Then with respect to electrical products, and printed matter, to which I shall again refer, there was another undertaking, somewhat of the same character as that with respect to implements. As regards gasoline the letter was as follows:
Re Gasoline
The adoption of these recommended revisions will not result in any increase of prices to the retail consumer because of them.
The British American Oil Company, Ltd., Per A. L. Ellsworth. President.
The Canadian Oil Companies Limited,
Per F. H. Littlefield, Vice-Pres.
Imperial Oil, Limited,
Per C. O. Stillman, President.
MeColl Frontenac Oil Company, Limited,
Per J. Irwin, President.
With respect to these items that I have referred to, the manufacturers kept their obligations and respected their undertakings, and did maintain their prices within the terms they stated, excepting in so far as raw material may have increased in price.
Bearing in mind what I have indicated was our intention, we placed upon the statute books the tariff changes of the fall of 1930. That resulted at once in a diminution of our imports, and it assured a measure of employment that was not otherwise available for those who were maintained in their work in the factories to which I have referred. There is a long list of them. One man said he could keep 400. more people permanently employed, JMr. Bennett.]
another man, 40; another, 50; and so on. I put to the house this question: What would have happened to this country had that legislation not been enacted? That is the issue, plainly put, in view of what the minister has proposed in a part of his budget to which I shall refer. What would have happened had those steps not been taken? It is all right to appeal to the passions and the prejudices of men, and say, look at what it has done, this wall higher than Haman's-


Mr. MACKENZIE (Vancouver):: -gallows.


Richard Bedford Bennett: Haman's gallows, I think was the phrase my hon. friend from Vancouver Centre used. I see he remembers it. It is all night to do that, but let us deal with realities. These tariffs were for certain given purposes. The purposes I have indicated. They accomplished the purposes for which they were enacted. True, they were emergency tariffs. We made it clear that that was so. True, it was purposed that in the end those tariffs should of course be reduced, but during the emergency, during that period of time that we were endeavouring to bring this country back to something like stable conditions and to enter upon an era of recovery, it was essential that we should enact the measures we did for the purposes I have indicated.
It is true that these measures did not provide employment for all the unemployed in the country. It is true that the numbers of unemplo.yed increased greatly. The reasons have been given over and over again, but they bore no relation to the work of our industries. I put this to the house: in view of what transpired in respect of unemployment, the increased numbers that became unemployed, what would have been the condition had the steps I have indicated not been taken? That is the test. Bear in mind that those who now sit on the treasury benches condemned by every just and lawful means within their power the measures that were taken.
Then we said: We will endeavour to increase the demand abroad for our goods. AVe will increase exports while we diminish imports, in order that we may bring about an even adjustment with respect to out commodity balances. AVhat did we do? The very next step was to endeavour to secure a trade agreement with the British empire, because as will be recalled by members who were in the house in 1928 and 1929, we then said that if we were put in office the first thing we would do would be to send an invitation to British empire countries to meet here for the purpose of discussing measures

The Budget-Mr. Bennett
of preferential trade. As the result of the efforts of 1932 we succeeded in making what are called the empire trade agreements. Who in this house who was present in 1932 does not recall the almost venomous way in which those agreements were attacked? I wonder if our new friends who have not been in this house before will take the trouble to read Hansard of that day. I wonder if they are interested enough to read the discussions with respect to those empire agreements.


An hon. MEMBER:: That is why I am
here.


Richard Bedford Bennett: One hon. gentleman suggests that these agreements are the cause of his being here. He, then, must have taken credit for them. Apparently he was strongly for them, but what he means to convey, I fancy, is that the opposition to them was so great that he came in as a protest against the government that negotiated them. Well, that may be, but I have lived long enough to hear the Minister of Finance of to-day
(Mr. Dunning) rejoice in the result of those agreements. All you have to do is read his speech; I will not take up the time of the house to read the references that he made to the result of those agreements.


Charles Avery Dunning: I think the right hon. gentleman had better read what I said instead of interpreting it; it is much safer.


Richard Bedford Bennett: If the hon. gentleman desires that the time of the house should be taken up in that way I shall do so. It will be found at page 2368 of Hansard. The hon. gentleman gave the figures for eleven months, though we have the figures for twelve months now. I will not give the twelve months figures.


Charles Avery Dunning: I did not have them at that time.


Richard Bedford Bennett: They were just being completed by the bureau of statistics for publication in the National Revenue Review. The figures quoted were as follows:
Trade of Canada with Empire Countries
(excluding gold coin and bullion)
Eleven months ended
Imports from the United Kingdom Exports to the United Kingdom.. Imports from the British Empire.. Exports to the British Empire.. .
Feb. 28, 1935 $102,602,618 253,488,637 143,989,314 313,665,822
Feb. 20, 1936 $108,177,173 293,002,334 163,429,300 362,178,462
But the interpretation of the figures does not await a Joseph; the minister interpreted them himself. These are his words, starting at the bottom of page 2368:
Upon analyzing our export trade, it is found that the United Kingdom is still our largest market having taken 293 million dollars or 414 per cent in value of our goods exported in the eleven months ended February 29, 1936, which is approximately the same proportion of the total as in the previous similar period. The British empire as a whole purchased 362 million dollars worth, which was 154 per cent more than for the same eleven months a year ago. Within the empire the increased purchases from us were distributed as follows: the United Kingdom 15-6 per cent, Australia 35T per cent, New Zealand 28-7 per cent, and South Africa 7 1 per cent. Exports to British India decreased by 17-2 per cent.
Not only do our increased exports bear witness to the steady growth of our trade with empire countries, but the same trend is also revealed in the figures of our purchases from these countries. While our exports to empire countries gained by 48-5 million dollars, our imports increased 19-4 million dollars or 134 per cent in the eleven months period. This increase in imports from British countries was shared as follows: the United Kingdom 5-4 per cent, Australia 16 per cent, British India 13-4 per cent, New Zealand 21-7 per cent, and South Africa 41-3 per cent.
There is the interpretation of the figures as given by the minister himself, and when I point out that since 1932 there has been not only a steady increase in imports and exports with the United Kingdom but also a steady increase in our trade with the British empire as a whole, I only indicate the importance of that trade as it has been indicated by the language of the minister. These words I commend to the house:
Over fifty-six per cent of our imports come from the United States. At the same time they take only thirty-seven per cent of our exports. From empire countries we purchase about one-third of our imports and sell to them just over one-half our goods exported.


Charles Avery Dunning: The next is very important.


Richard Bedford Bennett: I shall read that:
Approximately eighty-nine per cent of our total trade is. with the British Empire and the United States.
That is only a very simple problem in addition. There you have the export trade of this country, one-half of it with the British empire by reason of the agreements that were concluded in thi9 veTy chamber in 1932.
The Budget-Mr. Bennett

What is more, every fair-minded man admits it. I have not seen any man who has really taken the figures and analyzed them who would not say that this was the result of those agreements between the Dominion of Canada, the motherland and the British empire. But for some strange reason men think it improper to admit a fact. Politics produces strange effects upon given people.


Some hon. MEMBERS:: Hear, hear.


Richard Bedford Bennett: Yes, hon. gentlemen
may say "hear, hear," but the truth of the matter is indicated by the records. You may take the imports and exports of this country with the British empire in 1931, in 1932 and in succeeding years, and I say that no reasonably fair-minded Canadian reading that record will deny that the agreements then entered into brought about the conditions to which the hon. gentleman referred in his speech the other day. That being so, Mr. Speaker, recall the language that was used in those days: "A Tory conspiracy." Those were the words that were quoted with respect to the men who gathered here from every part of the far-flung empire to make agreements that have had the effect these agreements have had: over one-half our exports have gone to empire countries. Look at our trade with Australia and South Africa; look at the increased trade under the treaty we made with New Zealand. We had to make a new treaty with New Zealand, and that treaty has brought about increased trade and has added wealth to both countries. Take Australia or South Africa or Great Britain; analyze our trade with any one of them, and you will find exactly the same trend. I was glad to hear the minister indicate the other day what the trend was.
I am going to put it this way now: If hon. gentlemen opposite attach no importance to these agreements and loudly cheer the sentiment that they have no value to Canada; if they are of no value, as the hon. gentleman says, I venture to suggest that he will not find much difficulty in discovering other countries who would be willing to take over these agreements, if they could have them. More than that, he will find it somewhat difficult to convince many people that these agreements have no appreciable value, and especially will that be so when he is confronted with the necessity of renewing them in 1937. That is the position he will have to face then. Of course it will be very simple at that time to say, "Well, we are not particular about that; there is no value to us in these agreements. You can have this, that and the other thing; they are of no value to us." That is the atttitude that has been taken

by hon. gentlemen opposite this afternoon, and of course that will make it very simple to deal with those with whom you must negotiate next year.
Then there arises another point, and I might as well deal with it now. The other afternoon the hon. gentleman referred to the fact that in the budget there had been a great extension of free entry to British goods coming into Canada. I wondered if he had been reading what had taken place since 1932. When we made the agreements in that year, this country was at the lowest level of its economic life. We had to face a situation in which we could not, for the reasons I have already given with respect to trade and finance, throw down our tariff barriers, if you call them such, and permit free trade, or, shall I say, a very low tariff trade, to come into this country. We told our friends in Great Britain what our position was, and I think you will find that since 1932 we have steadily, although slowly, enlarged their market jn this country. If the hon. member will look at the budget delivered last year by the Minister of Finance he will find that the number of items affecting goods from Great Britain that we placed on the free list amount altogether to over 250. He will find that between 1932 and 1935 there had been an increase of the original number by something like 100. There had also been a removal of the excise tax of three per cent, one and a half per cent in one year and one and a half per cent the next year, and a diminution or lessening of specific duties in other cases. So we had widened and broadened opportunities for British products in our own market. We had done that, explaining to them that we could not maintain the integrity of Canada if we were to permit duties to be so low as to lead to the destruction of our industrial structure, and throw out of employment large numbers of people.
A treaty with New Zealand; a treaty with France-what did we do with respect to France? We gave notice to terminate the treaty then existing with France. We were told at the time that it was a terrible thing for a young country of eleven million people to dare to terminate a treaty with an old and populous country such as France. Nevertheless we terminated that treaty. Why? All you have to do is to look at that treaty, and you will realize the reason why. Then we negotiated a new treaty. My friend the then Secretary of State spent many weeks in France, and in 1934 we made a supplementary treaty. The other day the Minister of Trade and Commerce (Mr. Euler) referred to the fact that the extensions that were referred to

The Budget-Mr. Bennett
by the Minister of Finance were arranged by the preceding government, not by the present administration at all.
So much for the treaty with France. Then we made a treaty with Germany by which we gave Germany the intermediate tariff, a procedure which was much approved at that time, because it was said it gave a wider opportunity to us to sell goods in Germany by reason of securing the minimum tariff. In some of the tariff items about to be considered by this house and the committee of the whole it will be found that the extension of the favoured nation treatment to the United States involves also an extension to all countries enjoying favoured nation treatment from Canada. We extended the intermediate tariff to Austria, and made a trade agreement with them. It was largely negotiated in London by the then Secretary of State. We made a treaty with Brazil and we made a treaty with Poland. Notwithstanding the conditions under which we lived, depressed conditions and a shrinkage of trade throughout the world, we were able to make treaties of commerce and trade with the countries to which I have referred, thereby extending the market for our exports on terms and conditions which I have already indicated. That in itself, if hon. members opposite had done it, would have been heralded from the housetops as a wondrous achievement. The fact that the other day the Minister of Trade and Commerce made slight reference to a few items in the French treaty, which were arranged by his predecessor. necessitated the Minister of Finance making special reference to it in his budget. The reference is in this budget.
Then, let us go a step farther. How long had we been endeavouring to extend our trade with Germany? The former minister of finance, of the Liberal party, had been endeavouring unsuccessfully to make arrangements, but we did succeed in making an agreement with them by which we gave them the intermediate tariff in exchange for their minimum tariff. That applies to Austria. With some slight modifications it is true with respect to Poland.
And what about the new treaty with France? In this connection I shall quote an independent authority. I do not know how accurate his view may be, but he says that "it is the most workable and fair-minded treaty that hasjever been made between France and Canada." We have had a treaty ever since very early days. There has been a general recognition by each of the position of the other. We arrived at arrangements which I believe were fair and equitable to both, and they were not difficult to arrange. From time to time they have purchased large quantities of our wheat,
although our export figures did not show anything like the amount indicated by their import figures, due to the shifting of the ports to which wheat is delivered. One year since 1930 they took from us 36,000.000 bushels of wheat, and they made it abundantly clear to us that they were prepared to take all available wheat that they might require so long as they could secure in Canada a fair market for certain of their products, notably wines and champagnes. We introduced into that particular treaty a provision which stated that the treatment received by us with respect to our wheat production should be in the very same spirit as that accorded to France with respect to the products of her vineyards. We carried that into effect. I mention this because in the light of what has transpired it becomes important to realize that during all the depression period, with all the attacks that were levelled against the administration of the day, there was a gradual and continued expansion of our markets; greater opportunity was afforded to sell our wheat abroad. We could not have maintained the integrity of our economic life had we not taken such action, and the concessions offered in our markets were made coextensive with the possibility of maintenance of our own economic structure. Wherever we could we granted concessions to those who had been granting concessions to us.
Some reference was made to the relations of this country with Japan. I shall not do more than say that the matter has been discussed at some length in the house. It remained for a Canadian government to provide by legislation that when a nation complains of a value fixed by the Canadian minister and an appeal is taken to the tariff board, which is constituted as a court, and the appeal is not prosecuted or terminated within a certain time, Canada is non-suited and the appellant is restored to his original position without further question. That applies to all nations, not only to Japan. When I make that statement, of course, I refer to all nations receiving favoured nation treatment from Canada. So that so far as we are concerned we have afforded opportunity for appeal and then provided that if the appeal so taken is not disposed of within a given time we must lose the appeal, so far as Canada is concerned. The minister is overruled by the other country, whatever that country may be, and is held up to ridicule for having placed upon a commodity a wholly erroneous value for duty purposes. That is the first time I have ever known of the introduction of such a principle into the fiscal or judicial life of a country.
The Budget-Mr. Bennett

Let me deal now with the problem connected with the exemption to the extent of $100 on goods coming from the United States. Perhaps this is the better time to deal with the matter, although a discussion on it might be more logical a little later. The minister will recall that he referred to the treaty made between Canada and the United States. I observe already the shrinkage in customs revenues resulting from that treaty, a shrinkage which will result from it to a greater and greater extent. There has not been a minister of finance in Canada in the last forty years who has not desired to make such an arrangement, but those ministers knew they dare not do it without at the same time endangering their country's integrity. Why? This agreement made with the United States extends to every country to which we give favoured nation treatment. Travellers who cross the sea may all bring in, if they so desire, one hundred dollars' worth of commodities if they have been forty-eight hours in a foreign country, and they can do that three times a year. I wonder if it is known just how many travellers, for instance, went from our ocean ports last year. From ocean ports there left this country last year, apparently as travellers and tourists, some 28,152 people, without including those who went from the Pacific. So it is not too much to say that by water we have about 30,000 people leaving our ocean ports. But when we come to the United States of America and ask how many automobiles and how many passengers entered that country from Canada, I fancy that a great many of our friends will be as greatly surprised as I was, for according to the figures given by the United States authorities, 2,135,999 persons entered the United States from Canada in the year 1935 by automobile, and by rail and steamer another 366,288, making a total of 2,502,287, and if you include the 30,000 odd that I have mentioned you have a grand total of 2.532.287. I desire to point out that these people did not all have their own automobile, but the average was three people per automobile, or slightly over that, and the number of automobiles that entered the United States from Canada was 659,259.
Now, I put this to you, and it is a fair question: Can this country stand the entrance into its markets free of duty of twenty dollars' worth per head of commodities for two and a half million people? To the extent that goods are acquired from foreign countries under the provisions of that arrangement, whether it be from Great Britain or France of Belgium or Spain or the United States, we have made Canada a free trade area within

their country. I say this, sir, that previous ministers of finance felt that they dare not- and I use that word advisedly, because I have discussed it with many of them-take the risk that is involved in a country with only eleven millions of people giving free entry to the extent of possibly $300 a year per head of those who come back to this country after forty-eight hours stay in France or Spain or the United States. I take that figure of two and a half millions of people, and at $20 per head it means fifty million dollars; at $40 per head it means one hundred million dollars; and when you remember the figures I gave as to the volume of our trade with the United States then indeed the members of this house may well ask themselves whether we can afford that luxury or not.
Would I like to see it done? Yes, sir. Would I like to see it carried into effect? Yes, sir. Would every Canadian who goes to and from and trades and barters like to see it done? I think the answer is yes, but there are many things that this country must now learn it cannot do that it would like to do. We would like to have built three railroads across the country, and we did so, but we now know that we should never have done it. I could mention other matters of the same kind, and I mention this because it seems to me it is just as well to mention it here as anywhere else, and dispose of that once and for all.
Now I will deal with our financial position. Shortly after the late government came into office it examined our financial position, and on the first of October we had to go to the market of New York and borrow $100,000,000 at four per cent. We were confronted with the necessity of finding money for the railroad with maturing obligations, and after consulting with the best financial minds it was determined that that was the moment, then or never, having regard to what was happening in the world at large, to raise this money, and so we raised it in the United States at that time. That $100,000,000 is still a liability in the United States of America, being practically all held there. That was our first venture into the market of the United States to secure money to meet our situation at home.
But in 1931 we realized that this country could not continue if it did not make some effort to lessen the burden of debt service, and so we asked the people of Canada to convert their high interest bearing securities to a lower rate. I recall the circumstances very well. It was said that it would be hopeless to undertake to do such a thing at that

The Budget-Mr. Bennett
time, and yet the government of the day believed that the Canadian people would respond. The result was that nearly 8650,000,000 of these securities were converted, effecting a saving larger than any other that was made, a saving in interest of over $6,250,000 per annum. As a result of that conversion and of the sale of treasury bills, to which I shall presently refer, brought about through the creation and organization of a central bank, the Bank of Canada, we were able to reduce before we left office the annual interest charge upon this country by approximately $16,000,000. When I heard my friend the Minister of Finance the other day refer to the saving of interest I thought he might at least have pointed out that $16,000,000 of that saving had been effected by his predecessors in office, that $16,000,000 of that saving in interest charges had been brought about by the conversions to which I have referred.


Charles Avery Dunning: I gave the dates; they speak for themselves. I took no credit.


Richard Bedford Bennett: I do not think the dates were set out. If the minister will turn it up


Charles Avery Dunning: I certainly intended to take no credit, nor to apportion any. I was simply reciting the facts.


Richard Bedford Bennett: in these treasury bills. Therefore treasury bills have played a large part in the financing of the last few years, and I am still delighted to think that the government is still able to utilize the machinery of treasury bills at lower rates for the purpose of carrying out its obligations.
Side by side with .that, was the great drive the government made to secure lower rates of interest. Does anyone think that these lower rates of interest came about by accident? Does he think for a single moment there was no conscious action on the part of any government or organization to bring about that end? First of all. it was necessary to secure a lowering of the rate of interest for deposits in the banks. The provincial authorities had to be considered, hecause in some places they were maintaining savings institutions and paying a higher rate of interest. There were also the building and loan organizations and trust companies to be considered. First, there was the securing of a lesser rate on deposits and then the making of a lower market. In that regard it wild be recalled that when the imperial conference met here in 1932 we adopted a resolution which had for its purpose that very end. It will be recalled that one of the resolutions we adopted was in these terms:
As regards monetary factors, the conference recognizes that the central position of the United Kingdom, not only among the countries of the commonwealth but in world trade and finance, makes the United Kingdom a main factor in anything that can be done. The conference therefore welcomes the following statement made on behalf of the United Kingdom by the Chancellor of the Exchequer:
"His Majesty's government desire to see wholesale sterling prices rise. The best condition for this would be a rise in gold prices and the absence of a rise in gold prices inevitably imposes limitations on what can be done for sterling. A rise in prices cannot be effected by monetary action alone, since various other factors which have combined to bring about the present depression must also be modified or removed before a remedy is assured. His Majesty's government nevertheless recognize that an ample supply of shortterm money at low rates may have a valuable influence, and they are confident that the efforts which have successfully brought about the present favourable monetary conditions can and will, unless unforeseen difficulties arise, be continued."
(d) The conference recommends the other countries of the commonwealth represented here to act in conformity with the line of policy as set out in the statement of the Chancellor of the Exchequer, so far as lies within their power.
In the monetary sphere the primary line of action towards a rise in prices should be the creation and maintenance, within the limits of sound finance, of such conditions as

will assist in the revival of enterprise and trade. Among these conditions are low rates of interest and an abundance of short-term money.	While regard must	be	had	to thedifferent conditions applying to various types of loans, the rate of interest for all purposes should be kept as low as financial conditions permit.	At	the same time	it	is necessary
that these favourable monetary conditions be achieved, not by the inflationary creation of additional means of payment to finance public expenditure, but by an orderly monetary policy, safeguarded if the necessity should arise, by such steps as will restrain and circumscribe the scope of violent speculative movements in commodities or securities.
Upon that policy His Majesty's government	in	Canada acted.	At the	worldeconomic	conference	in	1933	it waspointed	out	that twenty-five	cent	metal
coverage was ample for most purposes. In June, 1934, we amended the Dominion Notes Act to provide that up to $120,000,000, a coverage of twenty-five per cent in gold was all that was required, and that silver might be bought to the extent of 1,671,802 fine ounces of newly-mined Canadian silver in each of the calendar years 1934, 1935, 1936 and 1937, which silver shall be purchased and held by the minister pursuant to the section. Then on July 5, 1935, there was enacted a provision for the revaluation of the gold held by the Bank of Canada under the provisions of the Bank of Canada Act, and, further, that there should be established, if it was thought desirable, a stabilization exchange fund. That fund has not been set up because we thought it desirable at that time not to make it imperative upon the Bank of Canada to take that action, but rather to provide that it could be set up, if it was thought desirable, by proclamation, bringing into force the provisions of that statute. As I understand it, at the present moment the provisions of that statute in connection with the exchange fund have not been brought into force.


Charles Avery Dunning: There are some investments, of course.


Richard Bedford Bennett: That has nothing to do with it. The result of all this was to secure a much lower rate of interest, such a rate of interest as we have never had before in this country, a rate which was undreamed of a few years ago and one that was thought almost impossible of achievement.
In this regard I think this is possibly the best place to discuss the situation that has developed in Australia. Sometimes our friends point to Australia as an example that could readily be followed here. Those who are interested will find that in January, 1931, the average yield basis of Commonwealth of Australia domestic issues was about 7i per cent for a government borrower, a very high

The Budget-Mr. Bennett
rate. In November, 1935, an internal issue of 3J's, due in 1949, was placed at 99-75, a yield basis of just over 3-75 per cent. In that same month an issue of the Dominion of Canada 3's, due in 1955, sold readily in our own market at 98-75, to yield 3-08 per cent. Turning to the London market we find Australian 3|'s, due in 1948, selling at around 99, while Canada 3J's, due in 1955, were selling at 102. On the New York stock exchange we find Australian 5's, due in 1955, at 105, as against a quotation of 112 for Canadian 5's, due in 1952. An economist connected -with a Canadian financial house has asked whether one might be pardoned for wondering if Canada's credit, both in domestic and external markets, is not perhaps overrated. Later figures show that our credit is even better than it was according to what I read a moment ago. That is the achievement of the last few- years.
I might point out further that we provided for farm loans at a lower rate of interest, for debt adjustment, as is known, and for loans to provinces, with respect to which I shall have something to say at this moment. The minister the other afternoon pointed out that the government of the day had made loans to provinces. That is absolutely correct; we did make loans to provinces. I am not satisfied that in all cases the provinces have responded as they should with the most careful economy in the expenditure of the moneys thus loaned. In fact the evidence which I have is very clear that such has not always been the case. Nevertheless we were confronted with this , emergency:	Should we
permit the provinces to default or should we endeavour to save them until such time as recovery would warrant our taking the view that if they did default they -would do no great injury to the credit of the Dominion of Canada? As the minister fairly said, wisely or unwisely, we took the step we did; we did provide these provinces with money with which to meet maturing obligations in New York and London, money with which to carry on relief works and for relief purposes, and in some cases, as was pointed out the other day, for part of the work of government itself. But I ask you, Mr. Speaker, I ask my fellow members of this house, whether in the days of the darkest depression, when every part of the .world where money was available was watching and waiting to see whether or not this or that security would fall, we dared take the risk of permitting default on the part of any of the western provinces. I think not; I still think that that was sound. At times I have had grave doubts sis to whether it was wise to continue it beyond a certain point; but
certainly at the time we first did it, had we not done so, I am satisfied that the gravest disaster possible would have overtaken Canada. At least this was the advice I received from those who were informed and were well able to speak with authority. And the government of the day, realizing that they might be subject to severe criticism both in their own country and in other places, felt nevertheless a compelling sense of duty that necessitated their coming to the rescue of these provinces.
May I point out here that in my opinion it was a great mistake for the minister to suggest that he had arrived at some modified scheme in connection with loan councils and national loans. I say that for this reason. Did Alberta have a fair chance? The correspondence was tabled here. Alberta declined. But Alberta did not have what has now been suggested, a modified scheme; Alberta did not have that scheme before it at the time default came about.


Charles Avery Dunning: She has now.


Richard Bedford Bennett: Yes, but the harm has been done; that is my point. If Alberta accepts it now, then you have this terrible situation, that the government presented a proposal to all the provinces and after one had declined and defaulted the government modified the plan and put it up again to all the provinces. Is that fair?


Charles Avery Dunning: I know that my right hon. friend does not want to leave any impression that might be injurious to the situation. It is true that Alberta refused the original arrangement, an arrangement which by the way still stands. But it is also true that just before the maturity date the province of Alberta indicated its intention of proceeding with a forced conversion on its own account which rendered negotiations all but impossible at that time. I should say, in order to avoid even a suspicion of any intention to discriminate, that efforts were under way then, and discussions of every kind with the provinces affected, including Alberta, to find some method which would meet the situation not only for one but for all; and it was rather unfortunate that the maturity date brought an end to the Alberta negotiations.


Richard Bedford Bennett: The hon. gentleman has
not changed the situation in the slightest. I do not desire for a moment to misrepresent it, but reading his speech I think it is clear that a modified proposal has been made to all the provinces.
The Budget-Mr. Bennett


Charles Avery Dunning: Yes.


Richard Bedford Bennett: Now I say that there is
nothing worse in the world, in finance, when dealing with a situation of that kind than to make a proposal which is not a finality, because if default occurs between the date of the first proposal and the date of the second proposal, by reason of the first being rejected and being still open, although it has been rejected-if there happens to be default in between these two periods you have given grievance to those who have defaulted if they think that the second proposals are satisfactory. I think that is a fair way to put it.


Charles Avery Dunning: No.


Richard Bedford Bennett: And what is more, it is
calculated to be open to a construction which I know is not a proper one, for I know that the minister was not discriminating; and the fact that Alberta passed a statute providing for compulsory conversion has nothing to do with the question whether or not they would undertake to come within the provisions of the proposal made to all the provinces.


Charles Avery Dunning: Oh, yes.


Richard Bedford Bennett: I think not.


Charles Avery Dunning: It has a very vital
bearing.


Richard Bedford Bennett: I think not, because one would nullify the other; there would be no possible chance of a forced conversion taking place if the arrangement with the dominion were carried out.


Charles Avery Dunning: And vice versa.


Richard Bedford Bennett: Now I come to the question as to the creation of national councils and loan councils. I ventured the belief, rightly or wrongly, wisely or unwisely, that until such time as there were evident signs of recovery there could be no real conversion of the securities of the provinces, the municipalities and the railways. That is to say, we might do it spasmodically; we might deal with some millions in connection with the railways, and we might save two or three millions per annum, as we have; but if we are to do it on a broad and comprehensive scale it must be in the light of a recovery, and I do not think we could have done what we did do had it not been for the evidences to which the hon. gentleman has referred.
I will not anticipate the discussion on the resolution which appears on the order paper; that would be improper. But surely it is not intended to amend the constitution by asking the British parliament to enact retroactive legislation that could never find a place

in a people's constitution. It does seem to me extremely doubtful whether we should ask any -parliament to enact legislation of that sort. But when you say that you propose to clothe the provincial legislatures with power over indirect taxation, even though you limit, it, you have created a situation of the greatest gravity, one which we will discuss when we come to the resolution. As I say, I will not anticipate that discussion except to point out that as a result of what has transpired the province of Alberta did not accept the proposal made and has defaulted. And of course the effect will not be felt for some time. People who hold securities do not dump them on the market the next day or the next week or month; they await events. And it is the waiting on events that causes me to make a protest against a new proposal being made at this particular time.


Charles Avery Dunning: It is to help Alberta that it is made.


Richard Bedford Bennett: I know, but it is a new
proposal; and in dealing with financial matters, as I think the hon. gentleman will agree with me, there is nothing more destructive of credit than the lack of finality with respect to proposals that affect great bodies of people.


Charles Avery Dunning: I agree, but my night
hon. friend would be the first to admit that during the last five years arriving at finality, in finances, has been a difficult matter


Richard Bedford Bennett: That was exactly the
point I was endeavouring to make, by stating that I could not quite understand why the proposals made were modified as they were, having regard to the change that is contemplated in the constitution.
Having dealt with the financial situation, and the proposals that have been made from time to time and that have resulted, I think, in what the minister has very properly described as manifest evidences of recovery and in low rates of interest for our borrowings, I shall proceed to discuss shortly the proposals which he has made dealing with the tariff. But before I do that I think I should say a few words with respect to the debt. The hon, gentleman pointed out the other day that in the last six years there has been an addition of $867,000,000 to the national debt. That is undoubtedly quite correct. But $65,000,000 of that was for capital expenditures, and under the public works construction act something over $38,900,000 was expended, the reason being that on all sides in this bouse and in the country there was a continuous clamour for a public works program. A public works program could come

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into being only if the money were provided for it, and the expenditure amounting to
138,905,000	that is mentioned as part of the national debt was incurred for that very purpose. Then, of that total of $887,000,000, you have these two items:	(a) Canadian
National Railways, $264,677,000; (b) Canadian National Railway and indirect, including the steamships, $40,310,000; making a total of about $305,000,000 that was borrowed for the purpose of maintaining these properties. Then we have .relief; that took $231,900,000, or substantially $232,000,000, more; and we wrote off dead assets, that is soldier settlement expenditure, $11000,000. That gives us, of the whole $867,000,000, a total of $652,000,000, leaving the deficits to be responsible for the balance, after adjustments, of $212,000,000. That is a yearly average, as will be observed of less than $40,000,000, and if there is added to that the whole of the contemplated loss with respect to wheat, that would make a total average of about $40,000,000 per annum during the last five years, the balance of the money being for the purposes I have indicated.
That in itself, having regard to conditions in Canada, is not an unfavourable result. I should be glad if it had only been S4,COO,COO or $400,000. But if in this vast country we were to keep people from starvation; if we were to care for the drought-stricken areas; if we were .to take care of what at one time amounted to over 300,000 people in one province receiving benefits; if we were to carry on relief for men, women and children numbering at one time nearly 1,300,000 souls, there is only one way in which this could be done, and that was through the utilization, in the manner intimated, of the credit of the dominion. If on the other hand we were to endeavour to supply employment, as we did, because a broad public works program was urged by this house, that too could be done only by money expended for the purpose. So there you have it both ways. You have the addition to the national debt; you have that money being utilized for relief, on the one hand, and. for work to prevent the necessity of relief, on the other. That is all I have to say with respect to the national debt, without going into it in detail as we may do l-ater on. Of course there was also the enormous item in connection with the railways and the steamships, amounting to over $300,000,000.
I desire to make one observation only with respect to the question of the tariff. When in 1931 we enacted legislation creating the tariff board, those who are students of histoiy
and will take the trouble to read Hansard of that day, particularly the observations of the right hon. the Prime Minister, will see some reason why the ridiculousness of the attitude taken then is apparent in the light of the performance to-day. This will be found in part in Hansard of October 17, 1932, and a later statement of it when certain changes were being made. We were dealing with the old country tariff. Members of the Liberal party of that day said that it was a scandal to have the country come and appeal to the tariff board. By legislation passed this session, all may do this. The Prime Minister said: if one, why not all? It is a matter of principle, so he has given the privilege to all. Second, we had the idea that the tariff board could not make recommendations. It does not; the statute does not give them power to do so. The minister the other day referred to their "recommendations"; I have them under my hand; and, Mr. Speaker, the tariff board do not make recommendations; they do just what the act says; they find the facts and then they find the tariff which would be necessary to give to Canadians an equal opportunity with those from the outside who might be their competitors. Take, for instance, the automobile industry, reference No. 91. That matter was referred to the tariff board by the late government, not by the present government.


Charles Avery Dunning: I said so.


Richard Bedford Bennett: Yes. The proceedings
were protracted, and finally the board gave judgment. In that judgment they set out existing conditions and they set out what in their judgment would be a tariff that would meet the situation which was presented by the users of automobiles in the country. The governments of the various provinces were represented; others also were represented; they made their cases, and as a result the government has adopted that as its tariff to-day. I cannot find a single change in it. So far as I can see, the tariff as written in the resolutions with reference to automobiles is the judgment of the board as to the kind of tariff which it would be necessary to pass to meet the situation.


Charles Avery Dunning: There is just one difference.


Richard Bedford Bennett: Which one is that?


Charles Avery Dunning: The difference is the suggestion that the government should take power to increase the tariff. That suggestion-


Richard Bedford Bennett: I had reference only to the actual enactments and not to the question
The Budget-Mr. Bennett

of suggestions as to what might or might not be done. The government never take power by order in council to increase the tariff; they can always lower it, but never increase it. But the judgment of the board (a) as to the facts and (b) as to the tariff which should be enacted to meet the situation provided by the act, namely that Canadians should have equal opportunity with others, is found now in the resolutions that have been introduced in the house.
Take the next items, artificial silk yarns, forged steel rolls, rhinestones and metals, photographic appliances and equipment; all those are items that have been placed on the resolutions now before the house, and not by other than the tariff board's consideration. The tariff board that was so roundly condemned a few short years ago is now accepted as the proper tribunal to deal with this matter. I desire only to point out that with respect to gasoline, which was referred to the board by the predecessor of the present Minister of Finance, there is a masterly review of the whole situation, a finding of the facts and then a statement that a certain operation would bring about a certain result, namely the equalization, using the word in a broad sense, of opportunity between those inside and those outside this country. That is, owing to conditions to which reference is made, Canadians would be enabled to have an equal opportunity. But before I leave the automobile industry there is just one point that I desire to place on Hansard, because I think it is very important. The effort to secure lower freight rates is referred to, and in chapter V of this report they say:
The board is of the opinion that the existing methods of distribution of automobiles in Canada are unnecessarily wasteful.
In chapter IV of this report the board reviewed the condition with respect to the used car problem and indicated the seriousness of the situation arising out of the unjustifiable allowances made on second hand automobiles. The board, in that chapter, also mentioned that the losses made by dealers on the automobiles taken in trade tend to increase with the net amount of commission allowed on the sale of a new car and, from the facts before the board it is evident that dealers receiving high commissions are the ones most disposed to overbid on used cars traded in, with resultant demoralization of the market.
It would appear, therefore, that it might be expedient for the automobile manufacturers, if they are intent on correcting the above abuses, to reduce existing discounts and to establish-after consultation among themselves-a policy of uniform all-embracing dealers' discounts which would eliminate extra payment to their dealers, referred to in chapter III, in the shape of profit on freight or handling and other charges.
The board is of the opinion that the industry, if it would carry into practice the

suggestions made above, would in time correct some of the major ills existing in the marketing of automobiles and at the same time effect substantial economies that should be passed on to the Canadian consumer.
Then they refer to the provincial governments and the representations made by them as to the necessity of having reduced transportation charges on cars to the respective provinces, and they say:
The board indicated that the selling price in Canada of copper and lead of Canadian origin sold to automobile and automotive parts manufacturers is substantially higher than the price at which these same metals are being sold for export by the Canadian producers.
I see in the budget no evidence of any attempt to remedy that situation, and I think it is high time that it was remedied. I certainly made some effort in that direction, and the former Minister of Finance endeavoured to do so, but nothing except drastic legislation will accomplish that end. I think it is high time that we who are doing so much to assist the provinces and the dominion should see to it that there is no discrimination against Canadian consumers with' respect to metals produced in our own country. That was placed very clearly before the board.
Then, in view of this finding, there is one other matter in connection with which I think legislation should be enacted at this session. This is not a new matter, and would have been dealt with last session but for the fact that the matter was being referred to the board.
The board is of the opinion that wholly owned Canadian subsidiaries of foreign automobile corporations should be requested to publish annually their balance sheets and financial statements to the same extent as public Canadian companies. This^ seems to the board to be specially advisable in the case of corporations seeking and obtaining tariff protection for their products.
I think that can be easily accomplished by an amendment to the Companies Act.


Charles Avery Dunning: That is under consideration.


Richard Bedford Bennett: 

The Budget-Mr. Bennett
anyway. When the other day I saw part of the advertising in connection with this very propaganda to have the reduction made, and when I saw the photograph of an industry in 1911 and the great and magnificent structure in 1936, I did not give much consideration to the cries of poverty which will be put up by that industry, and neither would anybody else. I repeat that that is a feature of the budget calculated in every possible way to be unfair to Canadian producers.
There is another feature of the budget about which I should like to speak, namely countervailing duties. I do not make the statement offensively when I say that countervailing duties represent the cowardice of an administration not prepared to raise the duty. They are frightened, because they say that it is contrary to their general policy, although they admit that under the present budget they have raised the duties in some instances. But look at this: Eggs, cut flowers and potatoes are under countervailing duties. Yes, eggs, flowers and potatoes are under countervailing duties.


Charles Avery Dunning: They have come back, after six years.


Richard Bedford Bennett: Yes; the eggs are pretty stale; the flowers are wilted and the potatoes have sprouted. Let us look at these countervailing duties. As between the United States and Canada, these duties were first set up by the United States and the effect of them was to destroy the market in nearby states for Alberta coal. Making it applicable to the whole country they said, "If a country has a higher duty than we have with respect to coal, then the coal which comes in from Canada must carry a higher rate." The result was that coal from Lethbridge was denied a market in certain parts of the United States.
We tried countervailing provisions in 1930, and now rather than raise the duty frankly, rather than just raise it and say, "Our duty is so and so on eggs, flowers and potatoes," what do we do- We say, "The existing duty is two cents on eggs, but inasmuch as you reduce your duty to two cents, we are going to have the same rate of duty as you have, which is ten cents a dozen."


Charles Avery Dunning: That is all right.


Richard Bedford Bennett: With 130,000,000 people in the United States and 11,000,000 people in Canada? Countervailing duties existing between this country and a great people 130,000,000 strong, with climatic conditions about which we know nothing, a people growing flowers, raising potatoes and producing eggs! And, mark you, this applies to other coun-

tries as well. It applies to China. What is the duty on eggs going into China? Are we now to be supplied with Chinese eggs, such as we received some years ago? Is that to be done?


Charles Avery Dunning: The right hon. gentleman knows better than that.


Richard Bedford Bennett: I do not; it is a fact. I know that in this country for purposes of production of confectionery large quantities of eggs came to Canada from China. So far I have been unable to ascertain what the Chinese duty is, but I think the Chinese duty is no higher than ours. Therefore, if the Chinese duty is nothing we shall be subject to competition from Chinese eggs at two cents a dozen.


Charles Avery Dunning: In that case it does not change our duty in the slightest degree.


Richard Bedford Bennett: No, but what it does is this: It says that we shall not make our tariff, but that if the United States will place a duty of two cents on eggs we shall place ours at two cents, knowing all the time that congress has not been dealing' with tariffs; knowing all the time that the president has no power to reduce the duty, and knowing that under the provisions of the law he can reduce it to only five cents. Is this not just a gigantic gesture which means nothing? The minister knows that the president cannot deal with the tariffs. He knows that congress is not dealing with tariffs at this session, and he therefore must know that this is absolutely nugatory, so far as results are concerned. The same applies to the 40 per cent rate on cut flowers.
The other day the hon. member said that we had left no tariff for the intermediate and the British preference, and neither we had. They were free. They were intended to be free, and 40 per cent was the general tariff. The United States was then under the general tariff. When we changed and gave the United States the intermediate tariff, the simple thing, having reserved our right to do so, was to place a reasonable duty against cut flowers and eggs. They have a 40 per cent rate against us. We are to have a 40 per cent rate. That is the position. Is that the idea of Canada's nationhood?


Charles Avery Dunning: Because flowers go both ways; so do potatoes, and so do eggs.


Richard Bedford Bennett: Yes; I notice, though, that baby chicks are taken care of.


Charles Avery Dunning: Because they do not go both ways.

The Budget-Mr. Bennett


Richard Bedford Bennett: They do not go both ways?


Charles Avery Dunning: No.


Richard Bedford Bennett: I think that is hardly correct, but they do not go in substantial quantities. But to say to the Canadian people that we have to buy eggs from the United States and that there is a two-way traffic in them is a straining of words, because relatively speaking we buy very few eggs from the United States.
So far as cut flowers are concerned we have this simple point to consider: We have a country of which the major part is in the north temperate zone. In the United States are found varieties of climates, and as a result they can produce when we cannot. Eggs, and early potatoes at 75 cents-the minister and every hon. member must know that, congress cannot deal with these, because congress is not dealing with tariffs at this session. The effect of this is what, so far as we are concerned? It is to place a duty of 10 cents on eggs, 40 per cent on flowers and 75 cents on potatoes.
Then we come to one further point in the budget, namely the statement made by the minister with respect to the mining industry. I want to ask a question with regard to a clause which comes to me as not a wholly new recommendation. A year ago the government of the day provided for the development of^ the mining industry by appropriating a million dollars for such development. But when the price of gold was raised from S20.67 to $35 per ounce, the government of that day, knowing that this was not a provincial matter and had been brought about not by provincial but by national happenings, took steps to collect part of the money, and did collect it. I know of no reason why one industry should be singled out for freedom from taxation. But for a moment let us see how the minister puts it. His statement at page 2386 of Hansard is a wonderful one, because it is so seldom one has an opportunity to read on the records of this house a statement of this kind. These are his words:
I desire to add that as uncertainty of taxation is a definite deterrent to the making of new commitments in a hazardous industry, the mining industry may rely upon it that this government will not impose discriminatory taxation with respect to mines.
We will all agree with that. He continues:
While the present government is in power, mining enterprises can depend upon treatment at least as favourable as that accorded to other industries under the corporation income tax.
Now I want to ask this question:	Will
the minister say that all other industries in 12739-161}
Canada will receive treatment as favourable as that accorded to the mining industry? Will he say that? If not, why not? Let us look and see what has happened. Take the income tax imposed against the profits of a mine; whether it was rich or not, whether it had greater reserves or not, fifty per cent of the profits was free from taxation and the 124 per cent corporation tax was reckoned only on one-half. That is, if the profit was $2,000,000, the tax was 124 per cent on $1,000,000. But that was not all. When the dividend went into the hands of the shareholder, the shareholder before he paid his income tax, deducted fifty per cent from his dividend on the ground of exhaustion and depletion,	and	some	of	these mines,according to their own published statements, had reserves ample to take care of anything that might arise for from thirty-five to	fifty	years.	So	we cutthe exemption	d-own to	33J	per	cent as
regards the corporation tax and to 20 per cent on behalf of the shareholders, and of course we incurred much enmity for that. We were abused, and I think we paid a rather high price for 'it.
But, sir, let us have a clear understanding. Is it not right	and	just	and	fair	that, so
far as possible, everybody in Canada should stand equal under our taxation laws? That is what we endeavoured to do. I am wholly in accord with the minister's willingness to grant exemption from income tax at the start to those who may be engaged in this hazardous undertaking, but I point out that he must do something to prevent

he cannot prevent it but he must see to it that the provinces do-this wild speculation that takes place, which sweeps away the earnings of a lifetime and makes paupers in the end of those who speculate. I get letters every day, as the minister does, with respect to this, and surely something must be done about it.


Charles Avery Dunning: I must say that the
provinces are doing a great deal.


Richard Bedford Bennett: To start with Alberta;
that province passed a law which was held intra vires by the privy council, and its action was followed by other provinces. This does a great deal to prevent abuses in that regard. But when a minister makes a statement of this kind:
While the present government is in power, mining enterprises can depend upon treatment at least as favourable as that accorded to other industries under tile corporation income tax.
The converse of that should equally be said, that while he is in office other corpora-
The Budget-Mr. Bennett

tions will receive the treatment as favourable as that accorded ito the mining industry. That will involve the necessary investigation of the situation for the purpose of determining to what extent provision has been made by way of reserves and otherwise for the return of capital and the continued existence of the enterprise itself.
Now I come for a moment to what the minister proposes for the purpose of raising the revenue necessary for carrying on government. Two methods may be pursued: (a) economies, and (b) taxation. The minister may effect further economies, if they can be effected, or he can place the burden by taxation on the people.


Charles Avery Dunning: Or borrow.


Richard Bedford Bennett: That is the same thing;
that is what I mean by taxation. Or he may combine both. He said the other day that the government are investigating the question of economies. One of the first things that the late government had to do was to make investigations in connection with that very matter. But, Mr. Speaker, I am not at all impressed with the great sincerity of the government when the minister talks about the question of economies, for I hold in my hand the report of the civil service commission down to the end of 1935'-I have not the report for 1936-and I find on page 9 how much we actually spent in this countiy to keep the machine going. In round figures we spent in 1925 and subsequent years the following:
1925		 $74,200,000
1926		 74,600.000
1927		 76.200.000
1928		 82.300.000
1929		 S7.500.000
1930		 90.800,000
1931		 94,300,000
That is the year for which we did not budget, the year 1931 prior to March 31.
1932		 $92,500,000
1933		 79.500.000
1934		 77,100.000
1935		 74,460,000
That was necessary to take care of a grand total of permanent and other employees of 38.946 in 1925, 45.581 in 1931, and 40,792 in 1935.
We did succeed in effecting some economies. We did succeed in making it clear beyond peradventure that the country was overstaffed, but I cannot seriously regard the minister's statement of his desire to effect economies when I find a position in the chief electoral officer's office which was vacant when we came into office, and which had not been filled

because there was nothing to do, filled after the election of which Mr. Castonguay took charge by the son of the president of the Liberal Association in Ottawa. After the election he was appointed to that position as assistant to Mr. Castonguay. Can it be explained what he has to do? Can anybody tell us what he has to do? If for nine years there was no necessity for such an appointment, why has that appointment been made? Take the case of Brigadier Caldwell, who had taken his retiring allowance and was about to leave the service, who had taken his six months' leave. We find him appointed master general of the ordnance, a position which had not been filled since the death of General Morrison, and that was years ago.
I think the people of this country like myself will not regard these proceedings as evidence of any serious desire to economize. How many have been added to the service since October 23 last? It is true that this government has displaced nearly every man who held a position and could be displaced by appointing someone favourable to the administration. That we understand, and I am not complaining or cavilling at it. But how many additional men have been placed in positions in the civil service, and why should we discuss this question of taxation or economies until we have dealt with the great problem that is connected with economies? Part of these economies were brought, about by the ten per cent and then the five per cent deduction in salaries. I recall that my hon. friends opposite complained in bitterest terms about that economy, but I notice that they continue the five per cent deduction this year by special enactment.
The point I desire to make is this: The minister is confronted with a crisis, and no one knows that better than I. I do not say this in any boasting sense, but I have a clear appreciation of the difficulties of the minister, and I sympathize with him and am willing to do anything I reasonably can to assist him in his difficulties. But I say this, that he has a stupendous task, and we cannot save Canada unless we are prepared to hew to the line and make sacrifices on a scale such as were made by the old country when they formed the government in 1931. I know that hon. gentlemen opposite with their great majority are in a position to do anything. Never in the history of this country has a government been so situated, and that is why I congratulate the first minister upon the steps taken at the very opening of the session with respect to all these matters. He had to do it.
When I say to the minister that in my judgment an eight per cent sales tax is one

The Budget-Mr. Bennett
which Canada cannot bear, I but reflect the opinion of at least two or three former ministers of finance. We all know that Mr. Fielding thought the country could stand a higher tax than six per cent, but he found out it could not and he had to get the tax back to six per cent. We know what succeeding men have done. The minister succeeded in reducing the tax to one per cent in 1930, but does he think the capitalist system can survive with an eight per cent tax? I think the hon. member for Winnipeg North Centre (Mr Woodsworth) must have rejoiced when he heard this budget, because he knows, as I know, that nothing will strike a greater blow at the whole capitalist system than an eight per cent sales tax. The price of small automobiles goes up S18. All we have to do is realize that the sales tax is one-third greater than it was. Just reckon up what that means Hon. gentlemen have seen the operation of sales taxes in the provinces and in some of the states of the American union. New Jersey employed this tax and the city of New York imposed one to deal with unemployment relief matters. These were turn-over taxes; no matter if your purchase was only a cent, you had to pay the tax by means of a token. That was found to be an onerous tax, but one that produced large sums of money.
Can this country stand an eight per cent sales tax? In my judgment it cannot. I have given as much thought to this as I can, because I have no desire to interpose any objections to the efforts made by the government to do what it is so anxious to do, namely, to establish an equilibrium between income and outgo. But we must face the facts frankly. I do not see how this dominion from what I know of its economic structure, can stand an eight per cent sales tax. This is a tremendous tax. It is a tax which the minister's predecessors felt could not safely be imposed. It will be recalled that considerable discussion was held as to whether this rate could not be increased, but we got down to six per cent as the maximum. I am bound to say that there were those who suggested that the rate should be higher than six pet cent. The former Minister of Finance, the Hon. Mr. Rhodes, looked into the matter with great care. I believe there are men in the department wrho believe that an eight per cent tax is sound; that the tax could be increased 33,1 per cent, but I cannot see how this country under present conditions can stand an eight per cent sales tax.
There was one other tax about which I used to hear a great deal, the tax of one cent a pound on sugar. I wonder how many hon. members promised that that was going to disappear just as soon as the first budget came along?


Mr. HOWARD:: We did not have to make promises the last time.	.


Richard Bedford Bennett: I am not discussing that phase of the matter now; I am only pointing out that that was so.


Charles Avery Dunning: Nothing would give me greater pleasure than to put it where it was.


Richard Bedford Bennett: The minister has indicated in his answer just what I desired to say. At the close of his speech the minister said that the government were making a conscientious effort to grapple with the problem. May I say that he has no monopoly in that regard. For five years men quite as honest and almost as capable as he were endeavouring to deal with the same problem. In dealing with these problems, if it became necessary to have some certainty with respect to revenue, you must tax something that is of universal consumption and will produce a certain revenue. I agree with the minister when he says that nothing would give him greater pleasure than to remove that tax if he could, but he cannot. But I do not think this argument applies with respect to the eight per cent sales tax. There are other methods, which it is not my duty or privilege to discuss, by which the situation might be met. I can conceive of nothing more disastrous to the capitalist system; I can conceive of nothing that will impose greater hardship and difficulty upon the people of Canada than an endeavour to collect an eight per cent sales tax.
The allegation is made that our tariffs are going to be reduced in order to lessen the cost to the consumer. I have endeavoured to point out that that will not accomplish any such purpose. To the extent that business goes from Canada, to the same extent is lessened the ability of this country to survive. That is quite obvious.
The hon. gentleman has provided for a deficit with respect to wheat and oats extending over a period of five or six years. He knows as well as I do, that the guarantees given to the banks are against ultimate loss and until there has been a liquidation of these stocks, that amount cannot be determined. It must be determined when there has been an ultimate liquidation. The banks were willing to accept a guarantee which provided for the payment of an ultimate loss. Whatever that ultimate loss may be, this is not the time or the place to discuss what I believe to be the ill-conceived policy of the government with respect to wheat. I cannot discuss that at the moment as this may be done at another time. It is the ultimate
The Budget-Mr. Bennett

liability or loss that was guaranteed and until such time as that is determined, why anticipate it in this budget or in any other?


Charles Avery Dunning: I assure my right hon. friend I have not anticipated an ultimate loss at all.


Richard Bedford Bennett: Yes.


Charles Avery Dunning: Oh, no.


Richard Bedford Bennett: The ultimate loss cannot be measured by the taking over of the stocks by the new wheat board. It is provided in the act that the ultimate loss will :ome when there has been a liquidation of the final stocks held by the board. That is the position.


Charles Avery Dunning: But in the meantime under the guarantee a definite loss has occurred which will undoubtedly be very much greater in reality.


Richard Bedford Bennett: But there is no loss under the guarantee until the liquidation of the stocks is complete. That is the position. I did not desire to interrupt the hon. gentleman when he was speaking the other day, but I recall vividly a discussion which I had with my colleagues in connection with this matter. We decided that it was an ultimate liability, an ultimate loss and not a question of the payment of a loss to be ascertained as you went along. The wheat is all pledged to the banks and when the stocks have been liquidated and the last payment made, whatever the balance may be is the balance for which we have assumed liability.


Charles Avery Dunning: I hate to interrupt my right hon. friend, but the guarantee was with respect to loans to the wheat producers and that liability has been definitely established.


Richard Bedford Bennett: No, it has not been established for the simple and obvious reason that the statute itself provides that the wheat board shall take the place of the producers.


Charles Avery Dunning: I wish it were not a loss, but I am afraid it is.


Richard Bedford Bennett: The loss may be much greater, but it cannot be ascertained until there has been a liquidation of the stocks. As I say, the wheat board has taken the place of the wheat producers and that is the end, until there has been a complete liquidation.


William Daum Euler: When the final loss is established it might be very high; should that all be chargeable to the one year?


Richard Bedford Bennett: It is chargeable to the country and it will have to be provided for

when the ultimate liquidation takes place. That is the answer with respect to that.
One step more. The hon. gentleman dealt with the position of the provinces, but I am not going to do more than refer to another statement he made. He said that we had two problems before us, the problem of unemployment and the problem of our railways. Hr made that abundantly clear and I do not think there is a member who differs from him. He then pointed out that we loaned the provinces SI 16,500,000 and that that created a situation which required action and immediate action, too. I think most of us agree as to that. But when he dealt with the railway question he left it merely at the substitution of five directors for three trustees and referred to the bill.


Ian Alistair Mackenzie: Seven.


Richard Bedford Bennett: Yes, seven directors for the three trustees. He left it at that, with a reference to the bill which is now before the house. Let me point out that at page 18 of the Canadian National report there appears this interesting statement:
Profit and loss statement, system net loss, $115,281,689.79.
That is substantially the same figure as the money loaned to the provinces, but that was the loss for one year. The net loss for one year is $115,281,689.79. 'The Minister of the Interior (Mr. Crerar) looks very much alarmed. If he will take the report and look up the statement he will see that it is as I have said.


Thomas Alexander Crerar: Does that include interest?


Richard Bedford Bennett: No, that is merely the profit and loss statement, the largest item being debits for retired road and equipment, $29,000,000.


Charles Avery Dunning: The budget deals only with cash deficits.


Richard Bedford Bennett: 
An hon. MEMBER:: Hear, hear.


Richard Bedford Bennett: That is the idea of the hon. member. How can the people of this country ever appreciate this problem if members of this house, responsible members, say it is purely political.
I close, sir, with this note, because of all the problems confronting the dominion to-day there is not one that is so serious, none fraught with graver possibilities of disaster. There is not one problem more critical than that connected with the railway situation. This problem will not wait; it should not wait. A government fresh from the people and having shown courage to deal with some of the problems in the manner in which they have done, for which I have given them such commendation as it is possible for me to give, should not wait longer to deal with this problem. For it is not a problem that can be solved by the substitution of one man for another. It calls for a bold and determined course, to get to the very bottom of the matter, so that this country may continue, as the minister says, its progress towards recovery. It has made progress; that has been admitted by the minister in stronger terms than I would have used had I been indicating it myself. There is an indication of a reward of the efforts that men made during five long years when they gave their best to the state in which they live and which they serve. But we have now reached the stage where, unless we are prepared to deal heroically with the cancer that is gnawing at the very vitals of our national life, I do not think we can continue our progress towards recovery, and that for two reasons: first, because our credit will suffer and the minister will be confronted with difficulties the magnitude of which he contemplates but does not care even to mention; and, second, because it will bring disaster to confederation itself and destroy the very fabric of this dominion.
Mr. J. II. BLACKMORE (Lethbridge): In rising to take part, in this debate I should like first of all to commend the Minister of Finance (Mr. Dunning) for this budget. I regarded it as having been carefully studied and very well arranged, and it was given to the house in good form and with a clear and pleasing delivery, which seems to be a rare thing in this house. I did not find in this budget evidence of that progressiveness of outlook which I believed the people of Can-

The Budget-Mr. Blackmore
ada were justified in expecting of the Liberal party. There are in evidence no changes of policy for the future. The budget, I feel impelled to say, is reactionary and strictly of the old order. The great problem for us and for Canada at the present time is that of getting purchasing power into the consumers' hands. This budget actually is designed to take purchasing power out of the consumers' hands. This it does by an exceedingly painful sales tax, and we know that a sales tax is the most effective means of tapping, shall we say, the purchasing power of every individual, particularly the poor and those who are struggling with small incomes and endeavouring to raise families and carry on the responsibilities of life. It is precisely in this class that we must have the purchasing power. While I do not blame the Minister of Finance for getting money where he can, I deplore this as a definite means of taking purchasing power away from the very people in whose hands purchasing power should be, and, I contend, must be, if this country is ever to recover its economic stability.
I noticed that there was no plan designed to replace this purchasing power either immediately or ultimately. As I see it, the great thing we require at this time is monetary reform. I heard a good deal of the propaganda which our Liberal friends used throughout the last election, and read a good deal of what appeared in the press. As a result of- all that I was encouraged to believe that there was to be monetary reform; that the Liberal party was committed to it. I therefore came here expecting to find that very early after this parliament assembled, definite and progressive steps would be made towards monetary reform. Either no such steps are being taken, or my vision is too thoroughly dulled to enable me to see them. Monetary reform must take two forms: First of all, a method of obtaining money without interest and without debt; second, a method of distributing the money so that it can get into the consumer's hands.
We are living among changed conditions. I deprecate therefore the tendency to continue as though we shall be able to get out of this depression, as people have come out of previous depressions, by natural, normal means. I feel distinctly alarmed, as the previous speaker also expressed himself, because I do not find evidence that we are in normal conditions. I find no evidence that we are, as Stuart Chase tells me that people were, in previous depressions; rather the indications seem to be that we are in conditions such as our fathers have never known.

A number of men, I find, have a similar idea to this. May I draw to the attention of the house some studies which have been made recently in the capitalistic system. I hold no opposition whatsoever towards the capitalistic system. Just the same, we must be warned when signs of decay such as are here indicated are brought to our attention, Mr. Arthur H. Adams, in an article called Key Ratio to Balance, appearing in the American Federationist magazine, November, 1934, makes a definite contribution to the study of the present system as we are experiencing it to-day. He uses a fraction. He makes the numerator of that fraction the real wages of consumer goods workers, and the denominator he makes by taking the output per man hour. It is designed to be a scientific critical study of conditions as they are. He finds that real wages must increase as fast as productivity. Now, sir, this is the very condition which we find no longer exists in our economic life, either in the United States or in Canada. He finds that if his ratio, arrived at by his fraction, falls to 90 per cent the economic life of the country is in danger; if it falls to 75 per cent, the economic system is unworkable. In 1922 his ratio was 100, which is normal; in 1929 his ratio was 73, which was impossible, and in 1934 his ratio was 75. I neglected to say that these figures are based upon conditions in the United States. Our country is economically so closely knit to the United States that I assume conditions are very much the same here. He uses these words in commenting upon his findings:
The unbalance we have reached this time is so big that natural or automatic restoration of balance, or recovery, cannot occur. The buying power of all consumer goods workers in the United States needs to be raised about 35 per cent on the average, and with no increase in their producing power, before an intelligent man should even hope for business to become self-sustaining at normal levels.
Hon. members will find the investigation described in Stuart Chase's fine book, Government in Business, at page 99.
Another student of the situation Chase says is a man named A. A. Berle, Junior. This man published his findings in a book called Liquid Claims and National Wealth, published by the Macmillan Company in 1934. He has an entirely unique and startling way of attacking the problem, but he feels that it is thoroughly worth considering. He discovers, in going back over past years, that the amount of liquid money existing in a community has a definite bearing upon the stability of that community. He finds, for example, that in

The Budget*-Mr. Blackmore
1880 sixteen per cent of the total wealth of the United States was liquid. Of course we all know that "liquid" means money which is readily available through bank deposits or through the sale of gilt-edged bonds and the like. In 1912, he found that twenty per cent of the money was liquid. In 1926 he found that the percentage was twenty-eight per cent. You notice, Mr. Speaker, a most alarming rise there, indicating that new conditions were developing the like of which man never saw before. In 1929 he found that the percentage was thirty-eight per cent; that was the year of the depression. In 1930 it was forty per cent. In 1933, notwithstanding the heroic efforts which were put forth to recover conditions in the United States, thirty-four per cent, or one-third of the national wealth, was found to be liquid. He makes this general observation, that if a country has fifteen per cent of its wealth liquid it can weather a depression, but if it has twenty per cent liquid its chances of weathering that depression are very slight. He makes this statement:
It was a stampede for liquidity which closed every bank in 1933, a phenomenon unheard of in any former depression.
This will be found recorded in the book of Stuart Chase to which I referred before, at page 102.	_	_
Another interesting study of this situation, scientifically conducted, is that by Professor Rautenstrauch, of Columbia university. He approaches the question again from another most unexpected angle; he finds that in 1917 producers among the workers of the United States comprised sixty-three per cent of the total employed. That is, the farmers, the miners and the men who were producing totalled sixty-three per cent of those employed, and they received one-half of the national income. But in 1932 see the surprising change that has taken place; he finds that fifty per cent of the employed were producers and that they received only one-third of the national income. In other words the producers had dropped from sixty-three per cent to fifty per cent of the total employed between 1917 and 1932, and instead of receiving one-half of the national income they received only one-third. This is an alarming change in such a few years, and again indicates that it is doubtful whether we can get out of this depression by normal means. Professor Rautenstrauch according to Chase has this to say:
In other words, in 1917, when producers got one dollar for making goods, overhead people got another dollar for the various services leading up to the sale of goods to the consumer. But in 1932, when producers got one dollar, overheaders got $2.30. In 1929 they
got $1.60. Overhead costs marched rapidly forward during the 1920's, and broke into a run with the coming of the depression. Business on the down grade; overhead on the up grade-Here is abundant evidence of shocking management.	_	_
If the ratios between direct and indirect labour were about right in 1917, to recapture them we should now need to:
1.	Shift 12,300,000 more workers to the producers' group.
2.	Increase producers' income about 56 per cent.
3.	Increase farmers' income about 216 per cent-as their proportionate share in the producers' group.
Again, Mr. Speaker, this outline was discussed at page 104 of Stuart Chase's book Government in Business. Let me repeat that according to Chase the article I have just read was by Professor Rautenstrauch, entitled Who Gets the Money, appearing in Harper's Magazine in 1934. This is a serious situation indeed. It does not by any means indicate that hon. members on either side of this house are justified in taking this matter calmly. Rather it indicates that we should be bestirring ourselves with a great deal of energy, not expecting to go sliding along on a laissez faire policy. Unless we bestir ourselves we are going to be held accountable by an indignant people who sent us here to make things right.
Now let me refer to another serious matter which has been discussed in this house many times. I refer to technological unemployment. I have a number of excerpts dealing with that question which, with your permission, sir, I should like to quote. The first comes from Stuart Chase's pamphlet Technocracy, an Interpretation, at page 15:
From 1912 to 1917 the Buick Motor Company increased its production 1,400 per cent and its labour force only 10 per cent.
I intend to quote these excerpts, which I have found at random in my reading, because a number of people are disposed to smile at these changes which have arisen, thinking they will pass by. These signs which I have found do not indicate any justification whatever for any such optimism. In The Problem of Unemployment, at page 122, Paul H. Douglas says:
There were in 1929 approximately 500,000 or nearly six per cent fewer wage earners in manufacturing than there had been a decade before, while there were 300,000 or 15 per cent fewer workers on the railways.
Notice that these figures are taken from the period before the depression; consequently we must look upon them as being drawn from normal times such as we hope will return. My next quotation is from Stuart Chase's

The Budget-Mr. Blackmore
book Men and Machines, at page 210, where 1 found the following words of interest:
The decline in 1929 registers over 2,000,000 and all recent counts of factory workers show a greater output with not only relatively, but absolutely, fewer men. For a hundred years every census tabulated an increasing number of persons employed in factories; now suddenly since the war, with an increasing population, there are fewer persons in factories. Something cardinal has happened; some mighty corner has been rounded.
That is exactly my contention. Let us be well advised before taking too much for granted. Something cardinal has happened; some mighty corner has been rounded. The next extract which I found of interest also comes from Stuart Chase's book Men and Machines, at page 210:
Evans Clark in the New York Times shows the phenomenon by index numbers.
Factory
employees Production
1914	
100	1001919	
129	1471924	
116	1581927	
115	170
Production sailing upwards; employees
dropping since 1919; with 1927 less than 1924. Between April, 1923, and April, 1928, more than 1,250,000 factory workers were permanently laid off, according to a recent survey of the United States Department of Labour.
Again there is evidence of some mighty corner having been turned. Then, from page 209 of the same book, I read the following:
Again it is agreed by all competent economists that purchasing power has not kept step with invention.	Purchasing power is the final
arbiter of all jobs under the prevailing financial system. Unless prices fall as fast as labour saving devices increase, the saved labourer must whistle for employment. With a static price level, he will have to keep on whistling.	Prices have not been declining
rapidly in recent years.
At six o'clock the house took recess.
After Recess
The house resumed at eight o'clock.


Mr. BLACKMORE:: When the house rose at six o'clock I was proceeding to show how changed are conditions confronting us from those which confronted our fathers when previous depressions occurred, and I was making reference to the technological unemployment which exists in our civilization to-day, largely as a result of the development of machinery. I had cited evidence from certain authorities to show that we had turned some mighty corner. Going on with the evidence to bear out this contention let me cite the following from page 214 of Men and Machines by Stuart Chase:

Mr. Ethelbert Stewart, a most qualified observer, sees the higher level of unemployment in the spring of 1928 as perhaps only the beginning of a more or less permanent unemployment, because a growing number of industries are equipped to produce more than consumers have money to buy, together with the supplanting of workers by machines.
Quoting again from page 214 I read:
Mr. Horace Taylor is sure that "all evidences point to a steadily increasing technological unemployment," and many competent economists agree with him.
Before I proceed further may I point out that a considerable amount of disagreement exists, and there is a tendency to quote one authority against another. Making all due allowances for all just differences of opinion I believe we are safe in assuming what the testimony of these men tends to bear out. Quoting from Technocracy, an Interpretation, page 30, I read;
The automobile industry created 4,000,000 new jobs out of thin air. There is no such industry on the horizon.
In other words, although by reference to certain industries such as the automotive industry, we can see some evidence that new machines create new jobs-and a great deal of argument is adduced to show that this is so far true as to justify a great deal of optimism-notwithstanding that fact, unemployed continue to exist in terrifying numbers.
As an example of a man who argues that increased machinery does produce new jobs we might mention William J. Cameron of the Ford Motor Company, whose article is printed at page 4 of the March 25 issue of the Christian Science Monitor. His message is that going back over forty years the evidence tends to show that machinery has increased the number of jobs. It is strange to observe that against this man's contention all the evidence I have cited to-night bears overwhelmingly. It may be true that a large number of new jobs are created by new machinery. For example, when the automobile business developed we know the garage business had a corresponding development. But we shall find that the displacement of men is not equalled by the replacement of men. So frequently do the new jobs require so little of men's time and so quickly are machines developed to take the place of men that I feel quite certain we are justified in going forward upon the assumption that there will be in our civilization a permanent technological unemployment which must be met by adjustments in our economic behaviour sufficient for the occasion.

The Budget-Mr. Blackmore
Another serious evidence that we are in a changed condition is to be found by reference to agriculture. A few days ago I made a citation, but there were so few in the house I shall impose upon the good nature of hon. members to the extent of reciting it again to-night. Quoting from Government in Business by Stuart Chase I find this startling information at page 39:
Even in such a prosperous year as 1927, "Recent Economic Changes" shows a net loss of $1,717,000,000 to farmers as a class, a loss enormously accelerated by the depression. Agriculture has failed as a self-sustaining sector of private business.
If these considerations I have adduced are not sufficient to show that we are living in changed conditions which have brought upon us an alarming new situation, then I simply have not the power to draw sound conclusions. Notwithstanding all of this there is no cause for great alarm, provided we go forward to meet the situation calmly and sanely, and do not assume that it will right itself. Although the patient is desperately sick it is possible to perform an operation which will save his life, if we approach the problem in time and with sufficient skill.
In the first place there is no need for poverty. Throughout this dominion, sir, there is absolutely no need for it, and any government which continues to permit poverty either does not know what to do or is not trying to find out. We have plenty of food; we can produce, in greater abundance than we need, practically all the food we can consume. Lately I have found among hon. members the disposition to argue academically about this matter. But on this occasion let us appeal to common sense.	Is there any
hon. member who questions that Canada can raise all the wheat she wants? Not a soul. Does anyone question that she can produce all other grains she needs? Not a soul. Or that she can produce grain products such as flour, oatmeal and the like? Not a soul. It is absurd to make such a suggestion, is it not? Will anyone argue seriously that we cannot produce all the beef, pork, mutton and other meats that we need? It is absurd to raise that question, is it not? Will any person doubt our ability to produce all the dairy products such as butter, milk and cream that we need? If we were unable to do so we would find the prices of these products at something like a living rate, instead of at a level so low that they are driving men out of production. Will anyone seriously question our ability to produce all the potatoes we need, or to produce all other vegetables we require? Can we not produce the greater portion of the fruits we require?
While we are not so abundantly equipped for the production of fruits, yet our production is surprising.
Turning from that to clothing we know that certainly we can produce all the woollen goods we require, all the shoes we need and a wide variety of other articles of clothing. Therefore there is no need of any lack of clothing, even if there are some things we cannot produce. Will anyone seriously question our ability to produce all necessary shelter? We have an abundance of building material, and no person would attempt to question our ability to build. Right here in this Canada of ours all we need is to set men to work to produce those needs. Is there anyone who will seriously question our ability to produce all the fuel we need to keep us warm? Think of the vast coal fields of Alberta and other sections of the country. It is simply absurd to suppose that we cannot produce all the fuel we need in Canada. Again, we are able to produce all the entertainment we need. Why should our people go without entertainment in this country?
I turn to education and culture. Surely we can get in this dominio'n all the education we want. We have our teachers and our schools. Why cannot we ge,t all the education and culture we need in Canada? It- is here, and what we have not here we can soon get through the intelligent people we have.
Again, our transportation facilities are abundant. No one should want for transportation in this country, equipped as we are.
Take health and other services. The means of obtaining these things are here. Numbers of men are to-day unemployed who could doctor our children and do their dental work. Why should we not have health service?
I contend, Mr. Speaker, that in the light of present day conditions it is utterly absurd that we should even seriously contemplate the idea of having poverty in this land. The question is: How are we going to proceed to the solution of the difficulty, because there are manifest difficulties in getting this plenty available? There is a reason why. For a number of years we have been much concerned over the causes of this depression, but most of the authorities whom I have read are now agreed that the cause of all the trouble is money. It centres right around that one thing, money, and the question how we can get the money, and, second, how can we get it into the hands of the people who need it, are the two great questions that face this parliament and the country to-day. Most of the men whom 1 have studied are of opinion that we can have national money issued nationally. If we are afraid to issue national money lest the banks

The Budget-Mr. Blackmore
might get it, and on the basis of that national money extend credit to dangerous proportions, thereby risking inflation, we can issue national credit. May I quote a few statements from a man whose standing must be recognized in this house. I know that a great many members look with a certain amount of indulgence and smiles upon the social credit people, thinking us somewhat crazy, but I am now going to quote someone whom I think everyone in this house will treat seriously, the Hon. Robert L. Owen, senator of the United States, living in Washington, D.C. He has been, I am told, director of a United States bank for forty-six years, and president of a bank for ten years. There is a man, I submit, who ought to know something of what he is talking about, and the words he utters we can safely give credence to. In his article entitled, Money, appearing in the Instructor for April, 1936, I read on page 54:
- It is the failure of governments to discharge their constitutional duty of regulating the value of money, including bank money, which has caused the enormous disaster from which we have recently suffered.
This gentleman is prominent in the monetary movements of President Roosevelt. While many may question President Roosevelt's wisdom, we may one day wake up to find that he is a long way ahead of anyone else in the Anglo-Saxon world in the matter of monetary reform; at least, there is a serious chance that he may be so. I quote from the same article, at page 60:
When one-half of our money supply is destroyed, it means that one-half of the market price of American property is destroyed. It is of supreme importance that the administration and its advisers should clearly understand the necessity for expanding the money supply until working capital is made available to the small business enterprises in sufficient volume to restore to employment the unemployed millions who still walk the streets unable to sell their labour at any price.
Again, at page 87, I read:
When the government creates an adequate supply of money to furnish all the working capital required by our people for transacting the business possible in this country, under favourable circumstances, there would be available the money that is needed, with which to employ all employable people and pay them good wages for reasonable hours.
Again, at page 92, I read:
A study and the understanding of money, how it is manufactured, and by whom; the study of constitutional money created by governments and how governments can regulate its value, is a solemn patriotic duty resting upon every adult citizen, more particularly members of governments, federal, state, .provincial and municipal.

There is no doubt in. that man's mind, is there? I contend that the solution of the problem which confronts us lies somewhere along the path of money. I know there is a good deal of easy merriment about the matter and a good deal of discussion whether it would not produce inflation and all that sort of thing. It is a good deal like irrigation. I come from a land where they irrigate. Unless you are careful in applying the water to your land, you will wash your young plants away and destroy your soil, but if you use irrigation as it should be used, expertly, wisely applied, it is a blessing. It gives the plants ju9t the thing they need to grow. I't is so with money power. If you use it with wisdom it will do no harm; it will be a blessing. Only when unwisely used does it cause trouble.
Of course, in order to make sure that this inflation or abuse of new money will not occur, the banks would have to be controlled to prevent inflation. I maintain that one of the duties of this government, a thing which I expected it to do and which it may yet do for all I know, for the session is not yet ended, is to appoint a banking commission to investigate the whole banking situation and determine the absolute truth about our money needs, so that the government may be prepared to handle banking and money scientifically. In addition, I think this government should begin to plan and encourage industry where industry is needed. There are many processes which could be introduced into this country. Processing plants could be established that would be of manifold advantage to the Canadian people, producing the things we need. There are for instance, the potato processing plants that I referred to the other night. Think of the tremendous advantage that coal processing would be to those coal areas where miners are to-day languishing in unemployment. It would change the whole aspect of the country, and we should be able to produce an abundance of goods which we are now importing, thereby helping to bring upon ourselves an unfavourable trade balance. We could introduce more sugar factories, but all I have seen anyone do since I oarne here is to put blocks in the way of the sugar industry. Canada produces only fourteen per cent of the sugar she needs. Where would we foe an case of war? Why should we not ourselves produce all the sugar we need, in case of difficulty? Why are we not doing this? Those are just a few samples of what we could do. There are mills for processing trees and pro-

The Budget-Mr. Hayhurst
cesses of many other kinds which would enable us to help ourselves and help us use a new money system more safely.
Why should we not have in this country a Canadian Brookings Institute to provide us with the actual economic facts about Canada? You cannot quote in this country a book that people will accept because there is nothing to tie it up to, and so we have to quote from figures in the United States. I say that that condition does not reflect credit on the Canadian people. We have men in Canada intelligent enough to find out these things for ourselves.
Having once established a system of getting new money, I contend, Mr. Speaker, that the day is coming when we must unquestionably have scientifically planned methods of getting the money into the hands of the people. I know there are plenty who laugh at that kind of thing, but before I sit down let me quote one set of figures to show that the thing is not quite so silly as it might at first appear. If you turn to page 49 of Stuart Chase's book, Government in Business, you will find, according to his figures, that the United States already had 51,000,000 of its total population receiving money from the government directly or indirectly right then. We are rapidly approaching that condition, so why should we not organize on a scientific basis so that -we can effectively give men purchasing power? How else are we going to get into their hands consuming purchasing power? The day will come when we shall look back at this time and wonder how we could have been so short-sighted as not to see that distribution of consumer credit was the solution for our problem. We should be taking measures to find out the exact conditions in our economic and national life and we should be preparing ourselves for the production of new money nationally created, nationally backed, so that it will be sound money, and nationally managed in the interests of all the people of the country.
We should be prepared to distribute purchasing power to the fullest possible extent by giving people work, yes, through reforestation, the building of roads, the erection of great public buildings and that kind of thing. But still the day will come when there will be vast numbers of our people who can never again be profitably employed and we must be prepared to give such people purchasing power through the direct issue of purchasing power. You may call it $25 per month, dividends, or anything else, but that must be done. These are the suggestions I offer. We should take forward looking measures and not
depend upon laissez faire and the hope that in some way we may grow out of this condition. I contend that we are suffering from a malady out of which we cannot grow.


Mr. WILLIAM HAYHURST (Vegreville):: Mr. Speaker, before I begin I should like to quote a few words of the Minister of Finance (Mr. Dunning). He said that extremes defeat their own purpose and that violent fluctuations one way or the other are mere leaps in the dark. I know there are many people who consider that the great province of Alberta, of which some Canadians are very proud, is making an experiment which is a mere leap in the dark. The Minister of Finance also said that he was not an alarmist, that on the contrary he was confident that common sense and sound economic policies could solve our immediate problems. We believe that the proper solution to our problems is different from the solution suggested by the orthodox economist, those to whom the previous speaker (Mr. Blackmore) referred to as laissez faire economists. I believe in the integrity, honesty and good judgment of the Minister of Finance and of this government, but the world has progressed and, as the previous speaker has said, we are living in a new age. New times demand new measures and new men.
When the Minister of Finance referred ta leaps in the dark which would be unwise to take, possibly he was thinking of untried experiments in finance. That is quite likely as he is the Minister of Finance. The greatest experiment being attempted to-day is the one being tried in Alberta. We wish to see that experiment succeed. We do not believe that all people are equal. I have heard it said by some in this house that giving dividends to all citizens would make them equal with each other; that to do so would be attempting to standardize humanity. We do not believe that all people are equal, neither do we believe that is is possible to give an equal opportunity to every individual. This cannot be done because of the fundamental difference in individuals in their capacities for taking pains, which is genius. We differ according to our genius and ability.
However we do believe in removing poverty and distress by giving dividends to everyone irrespective of whether they are poor or rich, We do not believe in making fish of one anc fowl of the other. According to biologists all living things furnish an infinite variety of form. If you observe the dandelion on the lawn or by the wayside you will see that no two are alike. People say that persons or things are alike as two peas in a pod, but we
The Budget-Mr. Hay hurst

know that no two peas in any pod are alike. There is a tremendous variety of form in all living things around us and we believe that all people are different. Because we believe this, we believe in removing the stigma of poverty or the dole from people so that they may be able to develop their own initiative and personal welfare, become real citizens of this great Dominion of Canada and contribute something to the greatness of our country.
Modern education realizes that all children are different, and we are proud of this. I have a family of my own and I know their individual differences. The natural capacities and attitudes of each individual should be developed to the full. That is the new education, and because it is the new education, we need a new economy and a new line of thought entirely different from the old. We believe that the payment of dividends will permit a greater choice of professions. Thus, the talent to be found in our young people will be given an opportunity to express itself. Poverty must be abolished so that the activities of mankind may have an opportunity to develop themselves in a more varied way than they have in the past.
The urge is to push back the frontiers. The mysteries of science and the wisdom of philosophers will ever challenge our mental capacities. We should try to abolish toil and drudgery. That is what science is for. Every little tool ever invented was invented in an effort to remove toil and drudgery so that our lives might be made more attractive. Life is made less sordid when our environment is cleaner, broader and happier. Initiative and competitive spirit will find an outlet in better production.
Social credit, which is not mentioned very often in this house, will not pave the way to a loafers' paradise, as so many people would have us believe. Some people hold the view that men will not work simply because they are receiving basic dividends, but labour will always be required to attend to the machines. Social credit will lead to more leisure, which in turn will bring about an increased production in necessities and luxuries. The social credit movement aims at economic security for every man and woman. Once the hazards of our physical maintenance are removed we shall be able to develop our individual differences unhampered. It has been stated by the members of the government, especially by the Minister of Finance, and by the leader of the opposition (Mr. Bennett), that a tremendous change took place in the financial world between October, 1929, and October, 1930. Is it reasonable to assume that the world was suddenly impoverished in those years? It is well known that for every loaf 
of bread which was baked we could have baked four. There was a surplus of practically every form of goods and there was also sufficient machinery idle to have increased the supply of goods threefold. The main trouble was that the purchasing power of the people had been largely destroyed.
The question is often asked: Where is the money to come from? Why should there be periods when there is a great insufficiency of money or purchasing power in the hands of the people, in these days when money is mostly paper in the form of cheques and bank notes? Money that is created by banks is usually called bank credit; it represents merely figures written in a book. There is no value in money of itself. Its proper function should be that of tickets to purchase goods, and the number of tickets to be created should be in precise ratio to the quantity of goods made for the people. The tickets would thus serve industry and the number would rise or fall in proportion to the amount of real wealth produced.
The first step in setting up the necessary machinery would be the establishment of a national credit account. We have heard nothing from the government about the establishment of a credit account, which is absolutely essential if we are to have, a new and better economic and social order. This account would give an estimate of all the nation's real wealth as represented by buildings, factories, railways and the capacity to produce. Money is the life-blood of industry and should be taken from the control of private individuals and handed back to the state, and the state should appoint experts to carry out the will of the people. Political democracy without economic security is a farce. The fact, which has long been obvious to a few and is now being recognized by many, is that the industrial nations are suffering poverty and insecurity in a world of enormous physical wealth simply because the incomes of individuals are too small to purchase goods. Modem power production with the wonderful machinery of to-day could supply the wants of everyone. Producers cannot now sell their goods because the incomes of the majority of people are not large enough. Incomes cannot under present conditions be issued fast enough to enable people to pay the prices asked for the goods produced.
The immediate need of the people to-day is a national dividend to enable them to purchase the plenty and security which money can buy. It has been proven conclusively, I think, by the previous speaker that an age

The Budget-Mr. Hayhurst
of potential plenty is at hand. Real wealth is possible immediately, but we are cheated out of our heritage, like Esau with his mess of pottage, by a faulty economic mechanism. Money in itself is worthless; it derives its value only from real things. If there were no real things for sale, things that people desire, money would be actually worthless. Does anyone deny that there is an abundance of real wealth, food, shelter, clothing and services, or at any rate that real wealth can be produced? The main purpose of production is to satisfy human needs as long as our productive powers permit. In this day of plenty the problem of production has been solved. Our financial system provides the means of distributing the things we produce; it regulates the distribution, collection and cancellation of money. The earliest distribution of goods was conducted on a barter basis; that is, goods and services were exchanged for goods and services. In time, however, we find a series of currency tokens. At first these tokens had an intrinsic value-cattle and gold, for instance-but such tokens eventually gave way to tokens without intrinsic value, which nevertheless can readily be exchanged for goods and services.
The trouble with the present financial system is that the ultimate control of money rests with the banks. In the Encyclopaedia Britanniea there appears this statement:
Banks lend by creating the means of payment.
This is a significant statement. They do not merely lend the means of payment but create it. Banks control the supply of cheque money and make it plentiful or scarce at their pleasure. Naturally moneylenders do not wish the people to be well off because they might cease to borrow; and what is worse, these financiers buy and sell money of other nations. They realize that people must have money and it is in their interest to keep it scarce. In times of inflation such as 1929 the banks were able to create nine or probably ten times as much new money as there was on deposit. The Right Hon. Reginald McKenna, in his book with reference to post-war banking policies, says that the amount of money in existence varies only with the action of the banks. This simply means that they are able to create credit at will, and as this credit performs the functions of money the bankers have the power of creating and destroying money at will. We are not opposed to bankers; they are men like ourselves. But we want them to carry out a policy which will be in the interests of mankind in general.
Credit should bear an accurate proportion to the amount of real wealth; but financial credit as we understand it, that is debt, does not do this. Credit which is provided by the modern financial institutions, and which is commonly called financial credit, is really debt credit. The monopoly of credit by the financiers should cease. These monopolists wish to keep the supply of credit and money scarce so that they may charge interest on it. Because the bankers control this money they are the real rulers. It is time the community took control; Canada should control its own credit. The credit of Canada, which needs no financing, may be called social credit. The attempt made by international financiers to gain control of the world by financial means, through the setting-up of international banker settlements, should be stopped. The Canadian people should be given their economic freedom and control of their own credit. Greater liberty and security would thus be given all the people. Canada could become overnight rich beyond the dreams of avarice. WTe have the potential capacity, the sources of supply; all we need is to control credit in the interests of all the people and not of a few.
It is evident that our difficulties lie not on the productive but on the financial side. Why do nations search for gold? I know in the budget speech it was said that this government will not propose discriminatory taxation with respect to mines. Of course we want all possible encouragement of enterprise in the development of mines. Under social credit gold because of its export value is just as valuable as under any. other government. The minister stated:
While the present government is in power, mining enterprises can depend upon treatment at least as favourable as that accorded to other industries under the corporation income tax.
It seems strange that nations should search for gold as they do, presumably because they believe gold gives more backing to currency expansion. Of course we know that even in Canada that is a fallacy. Periods of prosperity have always been coincident with new gold discoveries or produced by increasing the amount of currency relative to the amount of gold. Gold being a scarce metal has tended to make money tokens scarce. Currency manipulators who are interested in international finance and in the manipulation of currency and credits for their own selfish benefits are attempting to wreck a scientific age. Discoveries of gold have made nations rich, but surely the purchasing power of our people should not be subject to chance.
The Budget-Mr. Hayhurst

Gold or any other metal is a poor basis of money, because the value of money is governed by its quantity, and the quantity of paper money issued can be readily controlled according to the real wealth of the nation. Each nation should control its own credit and currency, and this should be issued in proportion to its production.
Possibly the greatest curse which has operated to control trade in the past has been the gold standard. It has been said that the gold standard is the basis of hatred; it begets war. It has been said that you might as well talk about a standard of love as talk about a standard of gold. It would really be better to call it a standard of hatred. It is a standard of scarcity, and because nations want to keep goods within the nations scarce, and export their surplus, very often they go to war with their neighbours to create markets. That has been the work of a few financiers' interested in the creation of debt in all countries. Upon no subject are the people as a whole so blissfully ignorant as upon that of finance, by which the wealth of moneylenders is increased at the public expense. Money should be controlled by the people of a state in the interest of all its citizens. Why give the control of the blood-stream of society to a few to use it for their own personal and selfish acquisition of power? The happiness of the citizens of any nation depends upon the policy of those in control of its credit, and that nation wherein the control is exercised for the good of the people will become the greatest nation in the world.


Mr. ISNOR:: I wonder whether the hon. member would give us a short definition of just what he means by "credit control."


William Hayhurst: That is something
which is very subtle. For instance, we have the idea of a national government controlling a national bank. I do not know what the Liberal government proposes to do with regard to this national bank, but I understand they are going to bring forward a measure to buy fifty-one per cent of the shares. The bill has not yet come before the house, so I cannot speak with certainty, but fifty-one per cent of the shares would enable them to control the group of men who will sit at that caucus table, and through them, direct banking policy. We believe that the government should control the men who sit at that table. They should employ experts in finance who will control Canada's finances in the interests of the people. They should build up a national credit account, an account which will show all the imports, all the production of the nation, all the real wealth of Canada, and put

it down in a book, much as was done in the Domesday Book in England away back about 1080. The real wealth of the nation is shown on the credit side of the account, and we should constitute what we shall call a debit account on the other side. I may say that we did not hear anything in the budget speech about either a debit or a credit account. The debit account would record all the real destruction of property as it goes on to-day; it would show also our total exports. If at the end of the six months' period we had not more goods or a greater supply of real wealth than we had when we began, there would be something wrong with us as Canadians. We should have a greater capacity of production as the years go by and our credit power grows and develops. The balance would be the difference between real consumption and real production, and the surplus would be given to the people as a dividend, so that they could purchase the overplus, or the supply which to-day is destroyed.


Gordon Benjamin Isnor: May I ask the hon. member
one more question? If I understood him correctly, he stated that credit control must come through the Bank of Canada.


William Hayhurst: No, I did not say it
came from the Bank of Canada.


Gordon Benjamin Isnor: The hon. member built his
whole argument round it.


William Hayhurst: I am going to answer
t-he hon. member's question if possible. I say: If the people of Canada demand that the government of Canada control the policies of the banks, and if the people get behind the government, then they can control banking policy, because their representatives would not dare to oppose them. If the people of Canada demand a dividend they can get it, because they could elect enough people to see that that policy is carried out according to the real principles of the new economics. It is a unique opportunity for every person to get behind the movement for the emancipation of the people from the present money control. Orthodox economists call us heretics. Probably we are. In days gone by there were religious heretics; there were also political heretics; our fathers had to fight for political and religious liberty. But the greatest battle is still to be fought and won; it is the fight for economic liberty.
Think of who control the finance of Canada to-day. Have hon. members considered that wealth is more and more going into the hands of a few people? That being so, how can one expect to raise the standard of the people who are living in poverty and distress?

The Budget-Mr. Hayhurst
Dozens of them call at my home in the city of Ottawa, the capital city of this great dominion, asking for the bare necessities of life. There is plenty of wealth in Canada, but it is controlled by a few absolutely for their own welfare; they pocket the dividends. I am sorry that the Minister of Finance did not put a larger tax on some of the biggest incomes.
If each nation would control its own credit and its own monetary policy, it could be rich, in terms of real wealth, beyond the dreams of avarice. Skill in every human endeavour is wealth just as much as the farmers' wheat and the bakers' bread. The economic difficulties of the present time are largely due to the lack of the occupations for which many young men and women have spent time and money in training themselvesi. The previous speaker mentioned educational systems. Not long ago I read in the press that McGill university needed money in order to enable its young people to get a better education. There is the university; there are the professors; there are the young men and women, but they need money in order to provide an education. It is a tragedy that men and women at this stage of life should have their hopes shattered and their enthusiasms broken for lack of money. This would naturally lead us to the conclusion that there is something fundamentally wrong with society as it is constituted at the present time.
Possibly the subject least understood, because in past years it was considered a sacrilege to question it, is the subject of money, which controls our education, our life work, and which causes untold suffering through fear of insecurity, poverty and an old age unprovided for. Money is so vital to our welfare that the question of its control is the most important subject facing mankind to-day. Money may be said to exist in three forms, coin, notes and credit, of which a bank cheque is the most familiar example. Nine-tenths of all the world's money consist of credit of one kind or another. Control of our bank credit should be vested in the people, and the struggle for this control is the great problem with which the people of all modem nations are confronted. We have fought for our personal freedom. In the United States they had to fight in order to free the slaves. I suppose, sir, your ancestors were practically serfs; I know mine were. To-day, however, in the new age in which we are living, with the development of machines and so on, all that need not exist. In a degree we have obtained our political freedom, as hon. members know, through the reform acts of Great Britain as they have been applied to Canada. Our men and women have been given full
voting privileges, but to-day we must fight for our financial freedom. The great bankers of the world, practically without exception, have used expressions such as that used by Rothschild, who said, "Those who control the credit of a nation control in the hollow of their hands that nation's destiny." This subtle power which exercises control over parliament and industry, and which in turn is controlled by a feiw men for their own selfish interests rather than for those of humanity as a whole, must be brought within the control of the people of the nation.
We are now at the cross-roads of history. We have heard that expression before, but I believe it to be true. One road leads to untold prosperity through the organization of our power and technological improvements. The other leads back to the dark ages, which were the ages of scarcity, manual toil and human drudgery. The financial system as at present constituted must have booms and depressions. We talk about the boom of 1929 and the depression of 1932. We must have these booms and depressions in order that the financiers may retain control. It is the aim of the financial system to prevent good borrowers from accumulating money of their own, so when a boom has reached its peak those who have loaned money begin to call in their loans. Otherwise those borrowers would become too rich to want to borrow any more money. After a boom has progressed so far, high prices rule, and with high prices more and more money is required to carry on trade. Bankers have to honour their promises to pay, and as money is withdrawn from circulation the demand for goods decreases and goods fall in value, less money is loaned and a depression is started on its course. The banks follow the policy of alternate expansion and contraction of their loans and their purchases of securities. The business cycle which is caused by this policy brings in its wake bankruptcy, debt and the curtailment of industry. That is what we have passed through, a period of bankruptcy, debt and the curtailment of industry, through the curtailment of this purchasing power which should have been distributed more freely to all people.
The great prizes of this earth go to those who are in control of the financial machinery, bu't we believe that with human initiative and enterprise unchained it will be possible to have "a car in every garage and a chicken in every pot."


Some hon. MEMBERS:: Oh, oh.


William Hayhurst: That sounds very nice to my hon. friends across the way. So many think that because we are financially poor, of necessity we must be really poor. We

The Budget-Mr. Hayhurst

know that money is not real wealth, but it becomes scarce and goods cannot be purchased. Money is one of the most ingenious and potent inventions of man, but people buy and sell money as a commodity, as other people buy and sell wheat. Real wealth decays, like the potatoes 'to which the right hon. leader of the opposition (Mr. Bennett) referred this afternoon, but financial credit and debt have taken on the spirit of immortality. They are always growing; they always increase. We borrow the money with which to construct a building. The building deteriorates, but the debt increases. ^ I am reminded of those words of Goldsmith's:
111	fares the land, to hastening ills a prey,
Where wealth accumulates, and men decay.
Even in the days of Goldsmith they recognized the truth of the statement that finance controls the destiny of the people. The debts of countries and of individuals increase with each succeeding year. Thus we are establishing a debt creating structure whose subtle charm seems to hold the people in a hypnotic power. That is quite poetic for me. It is not suggested that credit should be so plentiful that unlimited quantities of money would be required to purchase the bare necessities of life. What financial expert would permit such a condition? At all times the credit supplied would bear a just proportion, neither too much nor too little, to the real wealth which a nation produced. It is like a man rowing in a boat on lake Superior. Would he jump overboard if he wanted a drink? Naturally we would not create huge amounts of credit, even though it only consists of figures in a book.
There are many monetary reformers today, as the house knows, but they are mere adventurers. When asked if they believe in dividends for all the people they immediately reply: No, we do not believe in people; we believe in the money system. They have no faith in their fellow men. Control and power mean more to them than the general uplift of all the people. How often has unemployment been held up as an incurable curse, when it should be looked upon as a triumph, and those unfortunate enough to be unemployed should have the satisfaction of knowing that they will always be paid. What a tragedy it is for those on the dole; there is the fear, the threat that to-morrow's dole may cease to be. Think of the tragedy of little children under the stigma of relief which has no permanency and which instils a fear of insecurity into their minds. I wonder whether any hon. members are living next door to families on relief. Will people be

able to unlearn the things they have learned and to alter the direction of their thinking before a greater crisis arises? Some people are afraid of a new crisis. We need not fear it, because a new crisis would take away the fear of poverty and insecurity. That nation, which I hope will be Canada, which produces real wealth in abundance should be the .greatest nation on earth, and will be the greatest nation if it gives purchasing power to its people.
Industry and all mankind are travelling in a vicious circle. Here is the question: Why cannot goods be sold? The answer is this: Because people have not the money. Why have not people the money? The answer is: Because wages are low; people are on short time, or are unemployed. Why are their wages so low? Why are they on short time or unemployed? Because factories cannot sell their products. Why cannot factories sell their products? Because the people have not the money to buy. No wonder poverty increases; no wonder bankruptcies and insanity increase. Perhaps there is no insanity in eastern Canada, but I am sure some hon. members think we in this comer of the house have a certain amount of it. I know, however, that in Alberta insanity is one of the greatest problems we have to face.


An hon. MEMBER:: Hear, hear.


William Hayhurst: It is the same in Ontario, so you do not need to say, "hear, hear." And all the insanity is not on this side of the house, although we are all a little insane, you know.


Mr. GRAY:: Or we would not be here.


William Hayhurst: In our province insanity is becoming one of the greatest problems, and that insanity is due to a fear of insecurity.


Mr. SPEAKER:: The hon. member has spoken forty minutes.


Mr. DENTON MASSEY (Greenwood):: Mr. Speaker, last Friday afternoon hon. members listened to a most able presentation of the 1936-37 budget. Some of us who know the personal record and career of the gentleman who is now Minister of Finance (Mr. Dunning) could not help at least silently congratulating him upon the success of his career and the manner in which he carries the honours which have been heaped upon him. Concluding his speech the minister used this language, as reported at page 2391 of Hansard:
The government of Canada is making earnest and sustained efforts to meet this challenge and to grapple with the manifold problems of the country. I would ask the house and the

The Budget-Mr. Massey
country to accept the proposals I have made to-day as part of a conscientious effort to promote the best interests of the people of Canada.
Not for a moment would any hon. member question the sincerity of the minister, but perhaps some of us do not subscribe fully to the "efforts" or to the methods of "grappling." In the first place, not so many days ago, to be exact on Monday, April 6, we listened to the Minister of Finance use this language when speaking about the housing problem of Great Britain:
The great bulk of it has been, carried forward by the degree of confidence and leadership inherent in the people themselves, by the abolition of fear and the creation of confidence in the minds of men and women who have a little money, who need a home, to spend that little money in cooperation with the money of the state, possibly, in order to acquire that which they need. That is the sort of leadership we need in this country. We need confidence on the part of those who could do things by cooperation if only they did not fear so much.
Then, speaking on Friday when introducing the budget the minister said, as reported at page 2383 of Hansard:
That purpose the government intends to pursue steadily as an essential condition of the restoration of business confidence and the free functioning of private enterprise. This, it is believed, will contribute more effectively to the solution of the problems of unemployment and depression than any other single thing which governments can do.
I am not an alarmist. On the contrary, I am confident that common sense and sound economic policies can solve our immediate problems.
I wonder whether it tends to restore confidence to call the attention of the consumer, every time he makes a purchase, to the fact that his country is hard up and that he must be taxed accordingly.
Introducing the question of the sales tax the minister referred in his speech to the necessity for the tax. As I listened to him speak last Friday afternoon I could not help remembering "the forgotten consumer." My mind carried me back to the campaign of last year, during the course of which from one end of Canada to the other we heard presented the case of "the forgotten consumer." I am not standing in my place tonight to plead the case of the forgotten consumer or to draw attention to him or to her. Many people listened to what was said during the course of the campaign. If we may judge by the vote, many people felt that the forgotten consumer would be remembered.
I wonder whether it tends to create confidence in the present government when, in the first budget brought down after an elec-
12739- 162i
tion in which the forgotten consumer was proclaimed so loudly, we find an increase of 33J per cent in the sales tax. It seems to me that confidence must be shaken in the present government-and the minister has admitted that confidence is essential to recovery!
During the course of the last campaign many statements were made in an attempt to convince the electorate that the country faced a most serious situation. It was either "King or chaos," the insinuation being, of course, that chaos, if not already at hand, was just around the corner. On the air from coast to coast we heard language descriptive of that condition. There was a certain innocuous old gentleman who had a nasty mind, who was called "Mr. Sage," I believe. Mr. Sage had certain things to say, but they apparently did not mean very much, one way or the other. In one of the special committees we have spent a great deal of time in the last few weeks inquiring into who this innocuous but nasty-minded old gentleman was.


Mr. CHURCH:: They ought to give Mr. Sage a gold watch and an illuminated address.


Denton Massey: I hazard the guess that
when prominent gentlemen, citizens of this country, take the air and proclaim from coast to coast that chaos is just around the corner far more serious harm is done than could possibly be done by an innocuous old gentleman with a nasty mind, who does not mean very much.
Confidence was shaken by many things that were said during the course of the last campaign. Confidence was shaken in the minds of many people, judging by the fact that they listened to the cry of "King or chaos." The first part of the speech introducing the budget should, I suggest, be spread from coast to coast and every Canadian should read it, for it is the written record of the results of the activities of the late government, and of which activities any government, Conservative or Liberal, might well be proud. This afternoon the right hon. leader of the opposition dealt fully with that fact.
In the second place, Mr. Speaker, and still along the lines of confidence, I would draw the attention of hon. members to page 2376 of Hansard where the hon. Minister of Finance (Mr. Dunning) used the following language on Friday last:
I direct attention to the fact that in the last fiscal year nearly 62 per cent of the dominion's revenues were required to meet fixed and uncontrollable expenditures, such as interest: war and old age pensions and superannuation; care of returned soldiers;
The Budget-Mr. Massey

subsidies to provinces and certain other outlay of this nature. In the year 1913-14, the last fiscal year prior to the war, only 19 per cent of the revenues were allotted to items generally regarded as uncontrollable, and even in 1929-30, when the effect of the war cost had been shown in our expenditures, the proportion was but 44 per cent, as compared with 62 per cent last year. Although it is not possible at this date, except by certain arbitrary assumptions, to make_ exact calculations, nevertheless it is obvious from an examination of the expenditure statements that the burden of the war cost, both direct and indirect, is even to-day a major factor in our budgetary situation.
We to-day as a nation, as part of a great empire, are definitely concerned in international affairs. We read the daily press with great care and much interest, and we realize that to-day once again over in Europe there overhang war clouds. The dispatches which we read are dated from London, Rome, Paris, Addis Ababa, or wherever it may be, but do we see a single dispatch on the war situation dated from Ottawa, Canada? Are we not a member of the League of Nations? Have not the people of this country a right to expect that those of us who are here representing them in this House of Commons should interest ourselves directly through the government in international affairs? War is preventable only when nations do not want war. Disarmament alone is not enough. Nations must be educated against war. There has grown up a generation since 1914-18 that knows not war, that had no experience with it. Figures such as I have quoted from the budget speech of last Friday are startling, and the minister says, "The burden of the war cost, both direct and indirect, is even to-day a major factor in our budgetary situation." His language should echo and reecho throughout this country to impress upon those who are young, and perhaps more foolhardy than those of us who are growing slightly older than we were, what the burden of war may mean.
There is in Canada a League of Nations' Society. Of its activities I have nothing to say. Unfortunately it is not a very prominent society. It is attempting to do its best in its own way, but does it receive support from this government? I am sure, Mr. Speaker, that confidence in Canada is the most important factor in her recovery, and one way in which Canada must demonstrate her confidence is to convince herself that in her own active field she is doing her bit to prevent war.
In the third place, Mr. Speaker, no one would question for a moment the desirability of balancing the budget. No one could question for a moment the desirability of taking
[Mr. Massey.l
steps in that direction. But what is the cost of balancing the budget? What is the cost of attempting to balance it to the degree suggested by the Minister of Finance? What confidence may be shaken in the process? Confidence! We have to-day in Canada a national radio. This is a medium that can be put to fullest use by this government for its own needs, not as a partisan government, but as the government of the nation, in an attempt to educate the people of this dominion that after all Canada has in the affairs of the nations of the world a position of which she may well be proud, and that, after all, we are not facing chaos but are, or at least were, on the road to recovery. Have we made any attempt to develop further any sort of newspaper or magazine campaign directed towards the restoration of confidence?
There also is the great question of the reestablishment of youth, on which on two occasions I have already spoken in this house. The other day some hon. member was speaking on pensions for those who voluntarily might retire from work at the age of sixty, and of what might be done in that regard. It was suggested by the hon. member for Melfort (Mr. McLean), I think, that it would cost 8522,000,000 to put such a plan into effect, a figure so astronomical that even the most powerful political telescope could not even locate it. Actually the cost of such a scheme might well be estimated at around $10,000,000, and what would such a scheme mean to the youth of Canada to-day as far as the opening up of jobs is concerned? What if the deficit is $100,000,000 or 8110,000,000 when the extra 810,000,000 might be put to such a service as that? To break the depression, means that confidence must be restored. I quoted from the words of the hon. Minister of Finance on April 6, referring to what the restoration of confidence had meant to the United Kingdom in connection with their housing program if in no other way.
In the fourth place I wonder, Mr. Speaker, whether it builds confidence when industry commences to lose its position in its own home market. What does it mean when Canadian workmen lose their jobs or fail to get jobs as a result of the influx of foreign goods? How far-reaching is the effect? It might be said that there are only a few jobs lost, but what does that mean to a whole municipality, to a whole industrial centre? Five or eight hundred men out of work as a result of a change in the tariff may be a very small number as compared with the total number of men at work in

The Budget-Mr. Massey
Canada, but what is the effect so far as confidence is concerned? Who is going to be next? Those of us who live in industrial centres know full well the effect of the loss of a few jobs as a result of governmental action, and by a reduction of tariffs at a time such as this we are inviting the foreign manufacturer to sell in Canada, hoping, we are told, that perhaps we may be able to sell a little to him in return. Speaking on Friday last the hon. Minister of Finance, as reported at page 2368 of Hansard, said:
Imports from the United States for the full year just ended were $319,610,706, which is an increase of 16 million dollars over the preceding year. 7'2 million dollars of this increase were recorded in the first three months of this year under the operation of the trade agreement.
Over 56 per cent of our imports come from the United States. At the same time they take only 37 per cent of our exports.
One cannot listen to such figures as these without some degree of alarm. I have in my hand a report from the Department of National Revenue, showing the duty collected for the months of March, 1935 and March, 1936. In 1935 in that month, $8,395,859 was collected in duty while in the month of March of this year, $7,508,479 was collected. Thus in one year the loss of duty would be equal to one-half of the increase in sales tax revenue which the minister intends to collect if we may assume that that loss in duties is maintained for twelve months. In the face of such facts, do we contemplate further tariff reductions?
Let us take one class of goods only by way of illustration, the tariff on which is reduced by this budget. I refer to farm implements. I realize that in so doing I place myself in a peculiar position. My family's name has been closely identified with the implement industry in Canada for upwards of ninety years. Perhaps I may be accused of impropriety in introducing this subject and I do so at the hazard of being misunderstood. I should like to attempt to make my position as clear as I possibly can. I and my family have no connection whatsoever with the Massey-Harris Company, nor have I had for nearly four years. Some years ago I started to work in the shops of that company and until 1932 I was employed there. I left in 1932-I was not fired, I may say-to enter another sphere of activity. I worked in all the shops and ultimately became works manager of the Toronto factory
When I left, I left behind me in that factory a great many friends, men who had been pals of mine, men who earn their living with their hands, grand fellows in every way. As a member of parliament, I have an obligation to those men, not simply because they are friends of mine but because I know their problems.
When I speak of the men in the Massey-Harris factory I know whereof I speak. I have an obligation to them and I would be remiss if I did not raise my voice in this house on their behalf. It is on their behalf I speak. I am not much interested in the implement industry as an industry, but I am deeply interested in the men employed in the industry and in their jobs. I am a protectionist. When I say "protectionist" I do not refer to the protection of industry; I refer to the protection of jobs. That is the way I interpret protection, and that is why I am a protectionist.


Mr. BAKER:: That is what protection is.


Denton Massey: It seems to me that the way in which we can increase our home market most effectively is by paying wages to men. The reduction of the duty on farm implements to 7J per cent does one thing and one thing only; it spells disaster to the implement industry of Canada. This means that the jobs of 18,000 men are threatened by the introduction of this tariff.
Let me refer to one particular company, the Massey-Harris Company. In the last ten years that company has paid in wages and salaries, $37,312,000; it has paid in commissions to agents, $10,817,000; in pensions, $1,020,000, a total of $49,149,000. That is not a bad contribution to the pay-rolls of Canada. Has there been exploitation of the farmer during the course of this business?


Some hon. MEMBERS:: Sure.


Denton Massey: Those who do not know say, "sure." This company has experienced a loss, from 1930 to 1935, of $25,700,000. Does that	look like	exploitation?	Then in thetwenty years from 1916 to 1935 there has been a net loss of $7,400,000. Many weeks ago we listened to the Minister of Agriculture (Mr. Gardiner) reading a long list of implement prices, showing changes from 1913 down to the present day. Do hon. members know that since 1913 wages have doubled, western freight rates have increased 38 per cent and eastern freight rates, 83 per cent, and that there have been	many changes in design	due to thedemands of the farmers themselves. For instance, there has been developed a one-way disc seeder which performs simultaneously the four operations of ploughing, harvesting, seeding and drag-harrowing. This machine sells at a	saving of	$286 to the	farmer eventhough its selling price is $420.50, or the cost of four machines needed to perform the four	operations	it performs	would total
$706.50. The operating costs of those four machines would be $1.40 per acre, whereas the operating cost of the one-way disc seeder is 47 cents per acre.
The Budget-Mr. Massey

The Canadian implement companies have been challenged in connection with Canadian as against American prices. It is interesting to compare American and Canadian prices in a list of thirteen major machines, including an eight foot binder, a twenty double-disc drill, a five foot mower, et cetera. Taking the prices at Oswego, Montana, and Consul, Saskatchewan, the Saskatchewan prices are only 94-54 per cent of the Montana prices. Taking prices at Sweet Grass, Montana, and Coutts, Alberta, the Canadian prices are 98-96 per cent of the Montana prices. Taking Pembina, North Dakota, and Emerson, Manitoba, the Canadian prices are 99-73 per cent of the American prices.
Will a reduction in the duties mean a saving to the farmer? That is the question. Let us see what has happened. In 1935 the total volume of implement business in the United States was valued at $360,000,000, whereas the total volume of the Canadian implement industry in the same year was valued at only $16,000,000. In 1935 one company in the United States had a turn-over in that one year greater than the turn-over of all Canadian companies in nine years. Take the years from 1926 to 1935, in some of which the duty was low. There were $139,000,000 worth of implements produced and sold in Canada as against $165,000,000 worth of implements imported into Canada. How long can an industry expect to continue with that sort of set-up?
Why should I, with no interest in the industry as an industry, stand here and attempt to plead its case? Why should I or any other member rise in this house to plead the case of this industry? Was there not a committee set up to investigate this whole matter, to give the implement industry of Canada a chance to present its own case before anything was done? Was there not a committee set up to see if the farmer were being damaged and if the implement industry were playing the game? I believe that committee is still sitting. There were handed out to the implement industry questionnaires which would require some three months to answer at a cost of many thousands of dollars, many of these dollars having been spent already, but has the industry yet been permitted the opportunity to plead its case? Why should I or any other member stand and plead the cause of the implement industry when there is a tariff board before which that industry might have appeared? For the reason that the case has been prejudiced! The alleged criminal has been apprehended and sentenced before trial. That is not British, Mr. Speaker.

I am sent here by an industrial riding; I am sent here to represent the industrial worker, and so long as there is breath in my body and red blood in my veins I will plead his cause. And I say to-day that the jobs of 18,000 men are at stake. Yes, and how many more jobs are there at stake in industries which contribute raw materials? Sympathize with the farmer? Of course I do. I know something of his problem for I have been privileged to stay on farms and I know many farmers. Of course I sympathize with his problems. This country owes him a debt of gratitude which it can never repay. But will this tariff benefit him? That is the question. And will the government juggle with the jobs of 18,000 men hoping that perhaps it may benefit the farmer? And to what end? Why pick on one industry? Let us consider other commodities which the farmer buys. Tlhe price per pound of implements is 12-80 Cents in Canada. The prices per pound of a number of articles the farmer uses are as follows:
Article-	cents
Water pail, galvanized.. ..	11.46
Steel range	 13.00
Steel bed	 13.25
Washer, hand	 14.46
Steel sink	 15.60
Davenport	 15.75
Wood pump	 16.00
Wringer	 16.00
Incubator	 17.72
Post drill	 17.40
Chain hoist	 24.77
Swivel vise	 25.00
Churn (five gallon)	 33.50
Sewing machine	 35.93
Sprayer (hand)	 41.87
Axe	 46.25
The average price per pound is 22-37 cents. These are all articles purchased by the farmer. Yes; why single out the implement industry only? Why not inquire into those industries having protection running up to 35 per cent and down as low as 15 per cent, whose products are listed above, and whose prices are more per pound than those of the implement manufacturers? Out of every $100 the farmer spends, he spends only $3 on farm implements. There was an increase in the prices of farm implements on January 1, 1936, of 3J per cent which means, to the farmer, ten cents out of every $100 he qpends; and yet there was a shout to high heaven that made the welkin ring with the hideousness of the cry.
One must admit and admit readily, that prices of commodities purchased by the farmer, implements included, are definitely out of joint with the prices of the things

The Budget*-Mr. Woodsworth
he produces. But is it reasonable to expect to estimate the price of a binder in accordance with the price of a bushel of wheat and have that relationship always hold true? Yes, and why take just one industry? Among all the industries that sell goods to the farmer, why single out one and expect that a slight difference in price will readjust the whole situation for the farmer?
I have said what I have said only because I am a member of parliament representing an industrial riding and it is my pledged duty to do all in my power to protect the jobs of the people who elected me.
I am at a loss to understand the attitude of some hon. members who cry free trade in farm implements and make that cry without lack of knowledge of what they are saying when they advance the mouldy doctrine of free trade. Surely the creation and preservation of the home market is dependent upon the payment of wages. Let us assume-and this figure is the best one I could possibly obtain-that the average family food bill in Canada is $400 a year. This means that the annual family food bill of the families dependent upon the implement industry is $7,200,000 a year! Let us assume that the price of implements is reduced by the full 17i per cent of the duty that has been taken off since the first of January of this year. That would mean to the farmer 52J cents out of every S100 he spends. And for this are we prepared to jeopardize a market, his market, to the extent of $7,200,000? Is that reason?
In conclusion, and in words similar to those of the Minister of Finance, let it be assumed and hoped that the government of Canada is making an earnest and sustained effort to grapple with the manifold problems of the country. Confidence-it has been the keynote of what I have attempted to say to-night. Confidence-it is a great word. Confidence- it is the prime prerequisite to complete national recovery. Confidence-let every step taken by this government be a step towards restoring confidence.


Mr. J. S. WOODSWORTH (Winnipeg North Centre):: I must congratulate the
Minister of Finance upon his very clear and comprehensive statement. I welcome the downward revisions in the tariff; that it seems to me is all to the good, notwithstanding the position taken by the hon. member who has just sat down (Mr. Massey).
A recent writer pointed out that the ancient Romans built roads and the Chinese built walls. The Romans went forth to conquer the world while Chinese civilization became very largely stagnant. I believe there is a little parable there for us all. We cannot
very well live behind walls; we must build roads to the wider society about us. But I venture to say that in these days we need to build not merely physical roads and we need to do more than lower tariff barriers; we need to build roads along new lines instead of trying to conserve old institutions and to hide behind them. Instead of doing that we should strike out along new lines. The alternative is build roads or build walls.
The minister admitted that agriculture was very far from being in a satisfactory condition, but he did not suggest any means by which we could materially help that industry. I was reminded of the statement of the Minister of Labour (Mr. Rogers) a few days ago to the effect that it was useless to repair the superstructure of our economic life as represented by our secondary industries if its foundation, as represented by our primary industry, is crumbling away. I regret that although he made that statement, he actually advocated back-to-the-land policies, and certain members talked of a better balance between the cities and the country. I would urge upon the house that it is largely useless for us to try to bolster up the secondary industries, as we have been doing in the past, and as we are continuing to dio, if we allow our primary industries to languish. It is all very well to point out with pride that we have moved up from the eighth to the sixth place among the nations in total world trade. That does not help very much unless the majority of the people of this country are living a satisfactory life. I was surprised that in his excellent speech the hon. member for Greenwood (Mr. Massey), although he was able to quote quite extensively concerning the financial condition of the agricultural industry and the prices of farm implements, and although he was pleading for the workers in industry, had nothing to say with regard to the real wages paid. I should have liked to have him give at some length the wages paid to all grades of labour in the agricultural implement industry.


Denton Massey: Would the hon. member
permit an interruption? The average for 1935 was 45 cents an hour for all classes of work.


James Shaver Woodsworth: Does that include salaries?


Denton Massey: That includes hourly wages. Putting in salaries would make it too high; the hon. member might question it.


Mr. GOLDING:: I should like to ask the hon. member for Greenwood where he gets these figures of the average wage in the implement industry.
The Budget-Mr. Woodsworth


James Shaver Woodsworth: Possibly it is a
little out of order for the discussion to go on, although I too would like to secure the source of these figures, and also the sources of some other figures used by the hon. member for Greenwood. I should like to know where he got the figures as to what proportion of a farmer's income was used in the purchasing of farm implements.


Mr. ROWE (Dufferin):: Anybody can get those who wishes to work out the statistics.


James Shaver Woodsworth: Well, possibly. I would point out, coming back to agricultural matters, that Canadian farmers were in the happiest condition before we developed industry in this country at all. At that time they lived a self-contained life. Instead of industry helping the farmers to a fuller and richer life, it has in fact impoverished the farm life of this dominion. I think we must recognize that.


Some hon. MEMBERS:: Oh, oh.


James Shaver Woodsworth: I for one do not want to go back to the past. I do not think you can turn the clock back. But I do say that a readjustment is necessary, and that in that readjustment the farmer must not be neglected as he has been in the past.
The minister tells us that industrially and commercially conditions are beginning to show improvement. He pointed out that an analysis of the record of earnings of 241 leading Canadian corporations discloses that net earnings are about eight per cent greater for the fiscal year than for the previous fiscal period. That statement in itself might be satisfactory, but let me put two others alongside of it. The second statement he made was that common factory labour was up 2-4 per cent. I was not quite clear whether that meant that the total wage bill was up 2-4 per cent or that individual wages went up 2-4 per cent. But in any case I do think it is very unsatisfactory. We find a rise of eight per cent in industrial improvement, that is for the industry itself, and only a 2-4 per cent rise in the wage bill. The minister seems not to have taken those two into consideration and placed them side by side, or he would hardly have gone on to increase the sales tax from six per cent to eight per cent, because that tax falls most heavily upon the poorest of our people. It may be said that the corporation tax was increased. That is true. But the corporation tax is very largely passed on, as the minister knows. The minister shakes his head. I am sure he must have read the financial statements of the great corporations where they 
definitely arrange for the corporation tax before even declaring their dividends.


Charles Avery Dunning: Yes, but, if my hon. friend will permit me, the corporation tax is definitely a tax on earnings. I agree with him that most taxes are passed on, but this is a tax which is not payable unless the earnings are made. That is, it is definitely payable out of earnings.


James Shaver Woodsworth: But it does not come out of the individual; it comes from the general public. My point is that the individual's tax is not readily passed on, whereas essentially the corporation tax is passed on to the general public.


An hon. MEMBER:: No.


James Shaver Woodsworth: In the next year's budget. It does not rest on the individual as an individual income tax does. The sales tax also is a burden on every individual consumer. It seems to me that if the minister had put those two statements of his together and looked at them carefully-the one statement that industrial and commercial earnings are up eight per cent-


Charles Avery Dunning: I did not say that.


James Shaver Woodsworth: "An analysis of the record of earnings of 241 leading Canadian corporations discloses that net earnings are about eight per cent greater for the fiscal year than for the previous fiscal period." Those were the exact words that the minister used. I say that if they are up eight per cent and factory labour is up only slightly over two per cent, we might have expected that the taxation on the industries would have been greater and that on individuals would have been lessened, instead of having the sales tax increased as it is.
The minister declares that dominion credit must be protected at all costs. In that, he represents the attitude of big business. I am one of those who challenge the attitude of big business in that regard. In a general way I recognize that our interests are all interrelated, but I do not think it follows that because big business is prosperous the great majority of the people are necessarily prosperous.


Charles Avery Dunning: Neither do I.


James Shaver Woodsworth: I am glad of that. But the credit of the country, we are told, must be maintained at all costs. That means in effect that in several western provinces we have to cut down on the costs of relief, of education, and of social services of all kinds. "Credit must be maintained at all costs!" A few weeks ago the minister said he was quite

The Budget-Mr. Woodsworth
sympathetic with the idea that there should be pensions to the blind, but under present conditions he could not find the money. The credit of the country must be maintained at all costs! Mr. Speaker, I respectfully submit that the credit of the country so-called can be maintained at all too great a cost to the mass of the Canadian people. The minister makes that argument the basis for the proposed loan council legislation. Personally I think some such legislation as that is almost an inevitable development. But I submit that it is a dangerous thing to centralize financial control unless at the same time we centralize responsibility for social services. If we are going to take the position that the dominion government should take care of our education, our hospitals, our unemployed, our old people, then a good deal might be said for some such arrangement as a loan council. But if it means, as I think it must mean, that financial men will be very largely in control and that they will assume the attitude which the minister has enunciated, that is that the dominion credit must be maintained at all costs, then I say that the situation ahead is very serious indeed.
The minister made another statement which is half true and half false, when he said that foreign trade was the very lifeblood of Canada. Well, it is consoling to know that we are to have an increase in the dressed and dyed rabbit skins that come to us from Belgium. I do not know whether that is an indication of how vital trade is to this country, but I should like to quote a statement by the dominion statistician under date of December 20, 1932. The proportions are not much different to-day, I should think.
It would appear that in 1930-
This was at the last census, I assume.
-the net value of production (i.e. value of products less the cost of any raw materials involved), amounted to $3,216,747,000 in value, whereas our exports amounted to $885,996,000.
The difference was consumed in the country.
The minister exalts something like one-quarter of our entire production to the predominant position. I do not think that is a fair way to look at the situation in Canada. Foreign trade, says the minister, is the very lifeblood of Canada. Well, it should be remembered that it is only a quarter of the entire production which is given that exalted position. If we swept foreign trade aside altogether, we would still consume in this country three-quarters of the entire production. I quite agree with the hon. member for Greenwood when he urges that we should develop the home market. We should do that; we should pay wages to everyone, and see that the wages are as high as possible.
That would be the surest way of taking up the apparent overproduction that we have in certain Canadian industries.


Charles Avery Dunning: Who would be here to pay the wages?


James Shaver Woodsworth: We would all be here to pay the wages. As to foreign trade I quite recognize that certain commodities can be produced to greater advantage in other countries than in Canada, and we should have a certain amount of what really should constitute trade, the exchange of the things that we could produce to advantage for the things that could be produced to advantage elsewhere, but I urge that it is not the profit motive which should lie behind an exchange of that kind. As I have said before in this chamber, I believe that the old basis of foreign trade, which is the shipping of our production in order to make profit, will have to be altered, and that the foreign trade of the future will have to be on the basis that I have just indicated.
Again, the minister says that in the fiscal year just ended our gold sold abroad amounted to $119,000,000. I like the phrase, "our gold," but I should like to ask the minister who owns most of the gold mines in this country. If I am rightly informed a considerable amount of the stock of those gold mines is owned abroad. It should be "our" gold, but it is not "our" gold. The dividends about which the minister thinks so much are paid not so much to the people of this country as to foreign investors. Who owns the gold mines? It is true that the miners get wages, sometimes very pitiable wages too, but in the gold mines they are always in danger of that dread disease silicosis, which is carrying off so many of them. We hear very little about that. Oh, no, it is not "our" disease; we do not boast of that, nor do we boast of "our" wages that are paid to the gold miners, but it is "our" gold! Again, there is in this connection something into which I have never inquired very carefully, but I should like to ask the minister to explain at some time just what are the arrangements with regard to depletion allowances. It has always seemed to me that, if we are going to make depletion allowances, one of these days, especially with the very high percentage that is allowed, depletion will theoretically be complete. My idea would be that if these mines have been alienated from the crown, and if allowances are made for depletion, once the depletion is complete the mines should revert to the crown. Why not?
Then there was a statement made by the minister which I was very glad to hear, that there was a payment of $272,000 to maintain reserves in the government annuities fund.

The Budget

Mr. Woodsworth
In this connection perhaps I should call attention to a mischievous article which appeared in Saturday Night of April 25 of this year, entitled Life Insurance versus Social Security, by some writer named Mr. W. A. McKague. I quote one statement from that article:
The dominion government has some $23,000,000 of deposits in its post office savings bank, and some $40,000,000 belonging to those who have paid for annuities. Where is this money now ? ... what we find is that there are no real assets-the money turned in by depositors and by purchasers of annuities, has been all drawn into the bottomless pit of expenditure, and has gone the way of other receipts from taxation and borrowing.
Is that true, Mr. Minister? If it is not true I think we should have a statement from the Minister of Finance. It does not seem fair that we should allow such propaganda, condemnatory of governmental institutions and containing so many misleading statements as are contained in the article to which I have referred, as well as some other articles in the same issue.


Charles Avery Dunning: Did I understand my hon. friend to ask me a direct question?


James Shaver Woodsworth: Yes, and some time I should like to have the minister answer it.


Charles Avery Dunning: If my hon. friend desires to know whether those moneys are in the form of gold or some tangible form of wealth, in that case of course the answer is no.


Richard Bedford Bennett: They were paid into the consolidated revenue fund of Canada.


Charles Avery Dunning: Yes, they were paid into that fund, as they have been from their inception.


James Shaver Woodsworth: Then the minister regards this as perfectly safe?


Charles Avery Dunning: As long as the government of Canada continues to honour its obligations these funds are perfectly safe, and I cannot conceive of a government of Canada not honouring its obligations.


Some hon. MEMBERS:: Hear, hear.


James Shaver Woodsworth: I am very glad to hear that statement from the minister; I wanted to get that. Would the minister mind explaining just how this payment of $272,000 to maintain the reserve in the government annuities fund is handled?


Charles Avery Dunning: It is part of the consolidated revenue fund. From its very inception payments made by annuitants have gone into the consolidated revenue fund. The contracts represented by the annuities are a charge on that fund, which is the money of

Canada. The money owned by the people of Canada is charged with the annuities. That is about the simplest way I can express it.


Richard Bedford Bennett: It is the same with the superannuation fund.


Charles Avery Dunning: Yes, it is the same with the superannuation fund.


James Shaver Woodsworth: I do not wish to
have the time for the minister's explanation taken off the time allotted to me to speak, but possibly he could explain briefly how the payment of $272,000 to maintain the reserve in the dominion annuities fund is handled.


Charles Avery Dunning: It is a payment made
to bring the reserve up to the actuarial requirements stated to exist for the fund. It is to keep up the basis. Perhaps I would take too much of the hon. member's time if I were to give a detailed explanation, but I do not believe any recent Minister of Finance has been quite satisfied with the actuarial basis of the annuities fund. I can give a reason for it in two words; it is still based upon the mortality table of years ago. The expectancy of life in the meantime has increased, tending to lower insurance rates but to raise annuity rates. My hon. friend follows me?


James Shaver Woodsworth: Yes.


Charles Avery Dunning: Consequently several
of my predecessors and I have looked into the matter, and at present I may tell the hon. member that an inquiry is being made into the actuarial basis of the fund. Meantime, when there is a shortage, such shortage is made up by a payment such as the one to which the hon. member refers.


James Shaver Woodsworth: I introduced the
subject simply because I had been reading the Saturday Night article a few days before, and felt quite assured when the minister made that statement, although I did not know exactly the way in which the fund was managed.


Charles Avery Dunning: I am not criticizing the article; I am just trying to give the facts.


James Shaver Woodsworth: May I also recall
that the minister stated that the interest burden last year was $134,550,000, or an amount which used up 36-2 per cent of our total revenue. I should like to emphasize what a heavy burden that is.
We have heard a good deal about old age pensions, but in this year old age pensions use up only 4-51 per cent of the total revenue. Therefore, heavy though the charge

The Budget-Mr. Woodsworth
may be, It is veTy small when compared with what we pay to those who hold the bonds of Canada. Then, although we have heard a great deal about unemployment relief, and the terrifically heavy burden it has placed upon us, we find that relief expenditures last year were only $51,987,307, including expenditures on public works and in the drought area. Hon. members say that is an enormous sum? Yes, but it is not much more than a third of the burden entailed by interest charges.
The minister has said that we must do something to make an appreciable approach to balancing our budget. He desires to have a definite and positive program which will assure the attainment of our financial objective within a limited period. Is it not possible that the government now only entering office might have something like a five year plan, under which we could look ahead not for one year but for five years? I was interested to note that Mr. Thomas Bradshaw, president of the North American Life Insurance Company, made the following statement at the general meeting held on January 20:
Whatever we may think of Soviet Russia's five-year plan, or that set forth in the recently issued book. The Next Five Years, and to which - general support was given by a group of 152 of Britain's outstanding men and women, representative of all shades of thought, there is much to be said for the intelligent planning of the future over a definite term of years, and adhering as closely as possible to program.
It seems to me that notwithstanding the uncertainty of the future something of that kind is much better than what might be called the hand-to-mouth policy prevailing to-day. We plan only a few months ahead. I do not like to be too severe in my criticism of the government at this time, because it seems to me that it is facing a task of trying to work a system that is rapidly becoming bankrupt.
To-day the leader of the opposition referred to the sales tax as a possible indication of the approaching end of the capitalist system. There are many other indications. The large number of people on relief that cannot be absorbed into employment is a good indication that the system cannot be maintained much longer. It is true that the minister is making some little effort to balance the budget. He is not nearly balancing it this year, and I cannot see that he has given any ground for hoping that he can balance it next year. When we have reached the point where we can balance our budget only by increased borrowing, thus pyramiding our debts, it seems to me that this is another
indication that something is radically wrong with the system.
The minister points out that there are two main obstacles to balancing the budget, the cost of unemployment relief, amounting to $51,987,307 and the deficit of the Canadian National Railways amounting to $42,590,000. The sum of $5,818,000 has to be added for the eastern lines, making a total of about $100,000,000. Let me point out that in this connection the minister did not mention the large amount of $134,000,000 for interest charges. That is, in singling out these great obstacles one might also have thought the Montreal Star was talking.


Charles Avery Dunning: Oh, no; that is the
unkindest cut of all.


James Shaver Woodsworth: The minister mentioned the millions spent on unemployment relief and other millions spent to cover the railways deficit, but why did he not go on to point out this great burden of interest debt?


Charles Avery Dunning: I had already done so;
the hon. member has quoted it.


James Shaver Woodsworth: But the minister
did not point it out in that connection, and I want to point out that it amounts to almost one and a half times the sum of the entire obstacles he mentioned. Further than that, may I say that apparently the minister has done nothing towards the conversion of the enormous burden of debt.


Charles Avery Dunning: My hon. friend does me
an injustice. Read the speech. I am sure he would not intentionally say something that is incorrect.


James Shaver Woodsworth: In what respect
do I do the minister an injustice?


Richard Bedford Bennett: In reading his speech.


James Shaver Woodsworth: I wish to point out that so far as I could gather in listening to the minister's speech he has taken no steps towards converting these bonds and lessening the debt. I have not since read all the speech.


Charles Avery Dunning: If my hon. friend would permit me, may I say I pointed out that last year for the first time in years the actual interest burden of Canada decreased.


James Shaver Woodsworth: Yes.


Charles Avery Dunning: And I gave the reason
why it had decreased. The leader of the opposition referred to the matter again this afternoon. It is brought about as a result of conversions at a lower rate of interest.


James Shaver Woodsworth: Yes; as some of these bonds have matured they have been
The Budget-Mr. Woodsworth

renewed at a lower rate of interest, but the amounts are not relatively very great, and we are not doing anything on a large scale to bring down this enormous burden of interest charges. That is the point I want to emphasize. Further than that, the budget might be balanced in another way, and that is by increased revenue. I would point out to the minister that the income tax amounts to only $66,808,000. Is not that correct?


Charles Avery Dunning: No.


James Shaver Woodsworth: I will go on in the meantime. I took the figure from the minister's budget statement. One-third more would go a long way towards overcoming the obstacles which the minister sees in his way, but the minister apparently does not propose to increase this kind of taxation. Indeed, why not go a little further than income tax and make a levy on wealth? We have very large sums of money concentrated in a few hands. Why should there not be a levy on wealth in order to lessen the burden of the debt? They are doing it in other countries in one way or another. They have an inheritance tax in Great Britain, but there is nothing of that kind in Canada so far as the federal government is concerned. Why cannot we balance the budget by levying a very much greater proportion of the taxation upon large fortunes?


Charles Avery Dunning: I have before me the correct figure on the income tax. I said in the budget speech:
The increase in tax revenue is more than fully accounted for by the income tax which yielded $82,700,000 as compared with $66,808,000 in 1934-35.
My hon. friend took the figure for 1934-35, and did not allow for the very large increase which took place in income tax revenue in the last fiscal year.


James Shaver Woodsworth: I was quoting the figure given in the statement of the minister for last year.


Charles Avery Dunning: No.


James Shaver Woodsworth: I will take the minister's figure, but I was quoting the figure for last year.


Charles Avery Dunning: No, last year's figure was $82,700,000.


James Shaver Woodsworth: I was quoting the figure for the yeaT before from the minister's own statement of revenues.
With regard to income tax, two considerations stand out sharply in an examination of1 the income tax returns for Canada: (1) The folly from a financial point of view of taxing small incomes, and (2) the wide range remaining for higher taxes on the higher incomes. An analysis of the 1934 returns yields the following:	93,316 taxpayers with incomes
under $2,000 paid $989,083; 6,133 taxpayers with incomes of $10,000 to $50,000 paid $12,199,435; and 307 taxpayers with incomes of over $50,000 paid $8,785,854. The income classes are defined as "taxable incomes." The minimum exemption in 1934 was $1,000. Consequently the "net income" for this group ran as high as $3,000. Therefore the revenue of $989,083 comprises the total derived from all taxpayers whose income was not more than $2,999. I would submit that in taxing small incomes the Minister of Finance is evidently not influenced by financial considerations. He could get far more revenue by taxing a little more heavily the people of greater wealth.
The real measure of the severity of income taxes is the income which is left to the taxpayer after his tax is paid. The person of small income pays his full share of the cost of government quite apart from income taxes. The head of a family with a small income pays heavily in customs taxes and in sales tax. The amount of these taxes paid by the wealthy head of a family is not a great deal more than that paid by a person of small income. Certainly the greater amount paid by the man of wealth does not increase proportionately to his wealth, very far from it. An analysis of the tax revenues of the dominion in 1934 shows that the most profitable source of revenue for the Finance minister, from the financial point of view, is the group of classes whose taxable income ranges from $10,000 to $50,000. An analysis of this group yields the following results, and Mr. Speaker, with the permission of the house, I should like to place this table on Hansard:

The Budget-Mr. Woodsworth
Analysis of Income Tax Returns, 1934-$10-50,000 Groups
(1)	(2)	(3) Total	(4) Minimum	(5) Average	(6) Minimum incomeNumber of	taxes	individual	tax	Income class	taxpayers	paid	income	paid	paid$	$	$	$	$10-15,000	2,735,469	10,000	833	9,16715-20,000	2,032,264	15,000	1,620	13,38020-25,000	1,881,997	20,000	2,830	17,17025-30,000	.. 349	1,439,868	25,000	4,125	20,87530-35,000	.. 228	1,289,887	30,000	5,657	24,34335-40,000	.. 162	1,114,983	35,000	6,883	28,11740-45,000	947,111	40,000	8,165	31,83545-50,000	
Total	.. 6,133	757,856 12,199,435	45,000	10,105	34,895
The first three columns of this table are taken directly from the publication of the Dominion Bureau of Statistics entitled: Incomes Assessed for Income War Tax in Canada 1934. Column 4 is the minimum income for the class and is, of course, subject to addition for exemptions. Colunm 5 is the result of dividing column 3 by column 2. Column 6 is obtained by subtracting column 5 from column 4.
To single out a few instances from the table above, in the income class from $10,000 to $15,000 there are 3,284 taxpayers, and the total taxes paid by this group amounted to $2,735,469. The minimum individual income was $10,000 and the average tax paid $833. The minimum income after the payment of tax was $9,167. A significent entry in the table is column 6, which shows the wide margin of income remaining after payment of tax. None of these taxpayers would be poor if his tax were doubled, and most of these taxes would stand trebling. Take, for instance, the man with an income of from $25,000 to $30,000. The minimum income he had left after the tax had been paid was $20,875. So he would be very far from poor. It follows, of course, that there is also abundant room for increasing the taxes above $50,000. The materials for detailed analysis are, however, not available. In fact, the former Minister of Finance told the house that the information was not in the public interest.
In closing, may I point out that while the minister is apparently trying to preserve a very conservative point of view with regard to public financing, the situation is very rapidly changing the world over, making changes in policy highly imperative. I might quote the concluding paragraph of an interesting pamphlet, the Formation of Capital, issued by the Brookings Institute:
At the present stage in the economic evolution of the United States, the problem of balance between consumption and saving is thus essentially different from what it was in earlier times. Instead of a scarcity of funds for the needs of business enterprise, there tend to be an excessive supply of available investment money which is productive not of new capital goods but of financial maladjustments. The primary need at this stage in our economic history is a larger flow of funds
through consumptive channels rather than more abundant savings.
I cannot see why taxation should not be definitely and consciously used for an adjustment of the wide discrepancies which now exist in the distribution of wealth in this country. The Minister of Finance the other day had this to say:
There must always be a limit to the extent to which money can be taken from all of our citizens of Canada to be given to some of our citizens of Canada.
He had in mind that there must be a limit to social services such as unemployment relief which, in his opinion, took from all-


Mr. DEPUTY SPEAKER:: I must inform the hon. member that his time has expired.


James Shaver Woodsworth: I will just finish my sentence, Mr. Speaker. As I understand the Minister of Finance, he says that there must be a limit to these social services which involve the gathering from all to give to some, but may I point out to him that to a considerable extent his budget is taking from all of us to give to a very small group of the people of Canada. This government is becoming a vast debt collecting agency through which we turn over the greater portion of our revenues to a small group of bondholders and other people who to-day are largely the recipients of those amounts now classed as "uncontrollable expenditures," which constitute some sixty-two per cent of the entire revenues of this country.


Mr. VICTOR QUELCH (Acadia):: Mr. Speaker, it would hardly be correct for me to say that I am disappointed in the budget. Realizing, as I d'o, that the Liberal party is a reactionary party, I do not look for any
The Budget-Mr. Quelch

really progressive action which would lead us to permanent prosperity. I do not believe there is any solution within.the narrow confines of the present capitalist system. It is true that rates of interest on the new dominion loans have been reduced, but as the national diebt is only a fraction of the total bonded debt of Canada and as these low rates are not being extended to the provinces and municipalities, it is hardly to be expected that the bonded debt of Canada will decrease. At no time during the last twenty-three years, even in times of the greatest prosperity, has Canada proceeded without going progressively further into debt. So long as we continue to operate under a debt-creating system, so long shall we be bound to go further into debt.
Many of those who voted in the last elections were of the belief that the government of Canada would issue its own credit, but from the statements of various Liberals, it has become very clear that such is not the policy of the government and that it intends to still go on pledging the real wealth of Canada to the financial interests. Such action can be continued only by keeping the standards of living down to an unnecessarily low point. We shall find that the present intolerable situation will be made even worse by the placing of an eight per cent sales tax on the consumer which will undoubtedly tend further to reduce his purchasing power.
The main problem to-day is that of stimulating the purchasing power of the people to a point where it is equal to the capacity of industry to produce and deliver goods. Any necessary increase in taxation should be made against surplus incomes, that is, incomes sufficiently large that the recipients are under the necessity of spending only a portion as purchasing power.
Some people take the stand that the government has no right to issue credit against the real wealth of the nation held collectively, when it is actually owned individually. We are actually doing that to-day in the form of dominion bonds. Bonds are nothing more or less than promises to pay at a future date. These bonds are recognized as a sound basis for the issue of money, for the issue of legal tender. Legal tender is recognized by the banks as a sound basis for the issue of credit up to nine or more times the amount of money held by them. That being the case, and as the federal government issues the bonds, why cannot the government issue credit backed by legal tender, with the full resources of the nation behind it?
I believe this example has been given before, but I should like to give it again just to

bring out my point. In November, 1932, the federal government sold to the chartered banks of Canada $35,000,000 of treasury notes bearing interest at four per cent. The banks increased the government deposit by $35,000,000. Then, in a short time the banks applied to the treasury board for a currency loan of $35,000,000, under the provisions of the Finance Act. The government issued the new currency and charged the banks three per cent, the security put up by the banks being dominion government notes. Why could not the government have credited themselves with
835,000,000 of currency in the first place and thereby saved the nation many millions of dollars annually? This is pointed out by Sir Thomas White in the November, 1935, issue of the Canadian Bank of Commerce Review, which states:
When credits are created in favour of customers, whether borrowers or savings depositors, a bank must be always prepared to meet cash demands of depositors-in legal tender. This is the reason why a bank must always keep liquid to the extent found necessary under the experience of bankers in the conduct of the business along safe lines. To maintain the requisite degree of liquidity, varying with varying conditions, banks must hold a considerable percentage of the assets (about ten per cent of their liabilities) in legal tender.
When 'the banks received the loan of $35,000,000 in currency they were then in position to loan out from $300,000,000 to $350,000,000 at interest. The currency loan itself was based upon treasury notes, which in turn were based upon the real wealth of the nation. We claim that the nation could have issued that credit in the first place, thereby saving the people of Canada millions of dollars in interest. I know many people would call this inflation. For instance, the hon. member for Huron North (Mr. Deach-man) is reported on page 1854 of Hansard as follows:
When you give something to the unemployed you in reality give them a call upon goods; and when you do that by printing money I do not think you will get very far, because your money will not be of much value and you will find it a great deal more difficult to finance than you did before. When you borrow money what do you do? You take from people who have and give them in return a certain allowance called interest; we pay them for the use of their money with a promise, which I hope we shall make good, of repaying them in due course when the time comes. But when you print money what do you do? You start upon a course of inflation-
I am sure the hon. member for Huron North would not have u>s take that statement too literally. He said, "When you borrow money you take from the people who

The Budget-Mr. Quelch
have," and yet Sir Thomas White says, "The banks can loan up to about ten times the amount of their cash deposits." The Macmillan report states on page 34:
It is not unnatural to think of the deposits of a bank as being created by the public through their deposits of cash, representing either savings or amounts which are not for the time being required to meet expenditure. But the bulk of the deposits arise out of the action of the banks themselves, for by granting loans, allowing money to be drawn on an overdraft, or purchasing securities, a bank creates a credit in the books which is the equivalent of a deposit.
I quote from a speech delivered by the Right Hon. Reginald McKenna, in January, 1925, as follows:
I am afraid the ordinary citizen will not like to be told that the banks can create or destroy money. We do not like to hear that some private institution can create it at pleasure. It conjures up a picture of an autocratic and irresponsible body which by some black art of its own contriving can increase or diminish wealth and presumably make a great deal of profit in the process.
We find, therefore, according to these financial experts that when we borrow money from the banks instead of borrowing money already in existence, we are borrowing newly created money, and the total deposits of the banks are written up by that amount. The point is that it is new money. Therefore, if under certain conditions when we borrow money from banks it is inflation, so also under the same conditions if we borrow money from the government it will also be inflation. On the other hand, if under certain conditions the oreation of credit by banks does not cause inflation, then the creation of credit by the government under the same conditions cannot cause inflation. So long as only sufficient credit is issued to balance effective purchasing power with the total collective volume of prices of goods available for distribution, instead of having inflation you have stabilization. This is upheld very well by charts of Mr. Carl Snyder, chief statistician of the New York Federal Reserve Bank. These charts were published in the May, 1931, issue of the Royal Bank of Canada Economic Review, and Doctor Donal Marvin, Royal Bank economist, commenting on them, says, in part:
This relationship between volume of production and trade and volume of credit is one of the most important discoveries which has ever been made bv the statistician. It implies that there is a mathematical relationship between the volume of production and credit on the one hand and the price level on the other. In fact, by dividing each volume of credit by the corresponding volume of production, the level of prices at any particular moment is approximated.... Can it be that
had the growth of credit paralleled the increase in the volume of production and trade, there would have been no substantial changes in the general price level, no major business cycles, no booms, no severe depressions? This is indeed a startling concept, affording hope that the social injustices inherent in all major changes in the general price level might be avoided by proper control of credit.
It would seem therefore, according to Doctor Donal Marvin, that so long as you do not issue more credit than the volume of production and trade, there is no real danger of inflation. Nevertheless I realize that it would be a dangerous procedure to endeavour to equate the volume of effective purchasing power with the volume of potential production of ultimate goods unless first of all effective means were introduced to control prices so as to establish a fair price level based upon cost of production. The actual level would not be so important as would be the bringing about of a fair relationship between wages and prices and ensuring that the price of one article was commensurate with the price of another. Then, once having established a fair relationship, the purchasing power of the people could be raised until it was equal to the total collective volume of prices of ultimate goods, by an issue of credit direct to the consumer. This payment would have to be made outside the present industrial system because as credit passes through the industrial system it accumulates costs in excess of the purchasing power it distributes, thereby failing to bring about an equation as between purchasing power and prices of ultimate goods.
Whilst advocating a change in ownership of the banks, I realize that this in itself would be useless unless the policy of the banks were also changed, because owing to the policy of the banking system at the present time the volume of financial credit in circulation at any given time bears no relationship to the requirements of the people. It is argued that the restriction of credit is forced upon a banking system by their knowledge of conditions. This claim, however, is not upheld by some notable authorities on banking. Mr. W. L. Baker, former superintendent of branches for the Standard Bank of Canada, in a criticism of the system and not as a monetary reformer, referring to the great deflation of midsummer, 1921, states:
The reduction of $43,000,000 in three months was not a national slacking-off of industry, but was without doubt due to the concerted action of the banks in curtailing and calling in loans in all directions, and contributory in a general way to other conditions which were calculated to stagnate industry.
So we may believe from this statement that instead of loans being called in on account of
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a general falling off of business, it is just the contrary,, that business falls off on account of restriction of credit by the banks, resulting in the closing down of factories and increased unemployment. This action is to a certain extent no doubt forced upon the banks on account of their practice of loaning promises to pay up to ten times the amount of their actual cash, with the result that in times of great expansion they become panicky as soon as their margin of safety has been reached.
To quote again from Mr. Baker:
Bankers easily take fright. As demands for loans increase, in direct ratio comes their unwillingness to lend. When result of curtailment comes in decreased business activity, they raise the cry, "Now is no time to borrow; we are calling in our loans; you must restrict operations." And the cycle of deflation sets in, hastened by an ever-increasing timidity of bankers.
As an example of such panic I would refer the house to a statement made by the hon. member for St. Lawrence-St. George (Mr. Cahan) in a speech at Toronto in November, 1933. He is reported as having stated that from September, 1929, to September, 1933, $932,000,000 was taken out of circulation. No one would suggest that that was a natural slacking off of industry.
Money is termed a measure of value, but we find it at present to be a very elastic measure, at times swelling and at times shrinking, and we have placed the power of expanding and shrinking the dollar in the hands of a private monopoly so that they can manipulate this measure to their own advantage. When they expand credit at a greater rate than production the dollar shrinks, and when they restrict credit so that it fails to keep parallel with production the dollar expands, bringing about in a general way a depression with its consequent misery and bankruptcy. At such times we find the credit houses taking over these bankrupt concerns at a fraction of their real value., and later on selling in a time of expansion at a considerable profit to themselves. Such cases I have known in the west. Such power should not be placed in the hands of any private corporation, because their large profits can be made only by the general exploitation of the public.
Then, again, we are told that the banks are anxious to loan money to-day but that they cannot find reliable concerns willing to, borrow. Industry is not prepared to expand until it is assured of a market for its products, and as industry fails to distribute sufficient effective purchasing power to -buy back its own production, consumption has to be financed by direct relief or a program of capital goods

production. This condition applies not only to Canada but to a majority of nations, with the result that every nation is endeavouring to sell more goods than it buys. But, if we take the world as a collection of nations endeavouring to sell more than they buy, the absurdity of the situation becomes apparent, resulting in international friction.
We in this comer take the stand that the main justification for foreign trade is to export our surplus production and exchange it for those commodities which we cannot produce economically in Canada. The chief point to remember is that if there is an insufficiency of purchasing power available to buy the total production of the country, there will also be an insufficiency of purchasing power available to buy the goods for which our surplus products are exchanged. Therefore we contend that the main problem confronting this government is to stimulate the puchasing power of the people until it is equal to the capacity of industry to produce and deliver goods. In the past we have endeavoured to accomplish this by production credit, and we have failed in our objective, for the three following reasons: Every creation of credit has been at the same time the creation of a new debt. By the very nature of its existence it has been interest bearing. Lastly, as this new credit passes through the present industrial system it will create as many additional costs as it subsequently cancels, thereby failing to bring about an equation between consumption and production. We therefore claim that in the future we must recognize the absolute necessity for financing consumption by consumption credits. This credit money might well be .paid in the form of a dividend directly to the consumer so as to ensure as high a standard of living for our citizens as our total productive capacity might be able to supply.


Mr. NORMAN JAQUES (Wetaskiwin):: I desire to make a few remarks during this debate. I wish to say something about unemployment and sound money, because I believe those are the keys to our trouble.
In bringing down the budget, the Minister of Finance (Mr. Dunning) stated that while trade had largely recovered, employment had not kept pace with production. That is true also in the United States. We have been told that the vital things to-day are to balance the budget and to put everybody to work. But I suggest that the vital thing to-day is to abolish poverty and destitution, and that the way to do this is neither to balance the budget nor to put everybody to work, because I believe that it is quite impossible designedly

The Budget-Mr. Jaques
to do either, let alone both. We cannot tax ourselves into prosperity, and we cannot borrow ourselves out of debt.
It is claimed that England has balanced her budget. But that is a result, not a cause. It is the result of spending vast sums of money on munitions and housing and other national programs, and her budget has been balanced only by going further into debt, while there are still two millions unemployed and half her population is undernourished. An individual may balance his budget by saving, but a nation can balance its budget only by spending more money.
Worth while employment and really sound finance are the results of sound economic conditions, which are the maximum production of goods and services, and that is absolutely dependent upon maximum consumption-the exact opposite of tightened belts. The latter policy, which is called sound money, is really unsound. For sound money is scarce money, and scarce money means underconsumption, and therefore underproduction and unemployment. What we can and ought to do is so to adapt our financial system that we can produce to the limits of our powers and consume to the limits of our desires. We can do no more, and we should do no less.
I have heard in this house a great deal in favour of hardship and poverty, and that these twO' conditions are necessary for the morale of the people. If this is true, then unless members of the House of Commons are supermen many of us are in deadly peril from working under very pleasant conditions and being by no means badly paid. Evidently this does not worry a number of the members. It does not worry the advocates of sackcloth and ashes; but then, of course, they are supermen. My belief is that we are no better and no worse than the people who send us here, and if it is right and proper that we should work under these pleasant conditions and should not be-as we certainly are not-destitute, then I say it is right and proper that those who send us here should work under the most pleasant conditions possible and be as far removed from destitution as this country can possibly afford.
I agree with the Dean of Canterbury when he says:
It is a poor estimate of mankind that would hesitate to cure its ills for fear of its misuse of health.
He says, also:
Poverty is a dangerous disease. It breeds sickness and evil manners, and in our efforts to avoid it wre feed the very fires which produce the ruthless and acquisitive man.
Neither of those types is altogether desirable as a citizen; still less are they desirable as legislators.
It is proposed to encourage or to force people back on the land to do subsistence farming. This seems to meet with favour in this house, especially from those who know nothing about it and who have no intention of learning. The test is simple: Would you desire it for your wives and children? Well, I know what it means, because I have lived it. I say it is not good enough for my wife and children, and therefore it is not good enough for the wives and children of those people who sent us here. Absolutely, it is not good enough. I believe that true Christianity, sound economics and common sense are inseparable. If it can be shown-and it can be -that subsistence farming or any other unnecessary work or hardship, for that matter, is not common sense, then I submit that it will neither help to balance the budget nor preserve our morals. It will do the very opposite. In the main these people are unemployed because they have been replaced by machinery, and if the products of the machines are to be distributed those who have been displaced must be provided with enough purchasing power to buy back those products, or the machines must stop. Farming to-day is highly mechanized, yet it is proposed to turn thousands and perhaps hundreds of thousands of people into the bush armed with axes and picks and shovels, to make a living practically with their bare hands. I have seen the results. These people have no purchasing power; they cannot even buy tea, sugar or coffee, still less radios, decent linen and the other commonplaces of modem production. They cannot even send their children to school, because they have not the clothes with which to send more than one child at a time. Of what possible use are such people to the industrialist? Subsistence farming is not common sense to-day. There is much to be said for the simple life, but the simple life is not a sordid struggle for a mere existence; it is not a philosophy of "root hog or die," and it is quite impossible without economic freedom.
No man can serve two masters. No man can serve sound money and the people of this or any other country. What of the majority of those who are working in industry? Sweated wages cannot buy back the products of sweated industry. That is common sense. But if scarcity cannot be induced in the home then tyranny cannot be imposed in the factory. That also is common sense as well as true Christianity. We social crediters say that the object of industry is neither work nor wages but the production and distribution of goods

The Budget-Mr. Jaques

and services, and1 the only sound economy is that which will produce and distribute the maximum amount of goods and services with the minimum amount of work and trouble. That is pure common sense. Further, we claim that under the existing financial set-up it is impossible to distribute enough purchasing power to sell what is produced; that is a mathematical truth. The orthodox economists deny it, but they are paid to twist the facts to fit theories, whereas we try to fit theories to the facts, and that also is common sense.
Let us for a moment consider the replacement of men by machines. I remember some years ago working in a jam factory. It was a cooperative affair, and the local berry growers used the factory as much for the purpose of obtaining work and wages as they did for making jam, so that no effort was made to instal machinery. While that lasted, of course,
it was all right,	but after a	time other	companies came in	who wanted	to make	jam,pure and simple. Well, they installed all the machinery they could and employed as little labour as possible; consequently they were able to undercut the prices of this cooperative factory. The cooperative company got into difficulty; the	government	foreclosed	themortgage and they went out of business. Two or three years ago I was through that factory again, and the superintendent showed me all this automatic	machinery.	Where I	had
pushed and shoved there were belts, conveyers and every modern convenience. I congratulated the superintendent upon his ingenuity and he said, "Yes, it is all very fine as a factory, but what I would like you to tell me is this: If we do not pay out the wages who is going to eat the jam?" If anyone can answer that question I should be very glad to hear it, because outside social credit I do not think there is an answer to it. It may be said, of course, that machinery as used in those factories will cause work of other kinds. I happen to know the history of many of those people who worked with me in that factory, and I can assure hon. members that to-day if they get their bread they certainly are not getting any jam on it.
What is the remedy? We believe that we must finance consumption so that what is produced can be distributed. Let us look after consumption and production will look after itself. We propose national dividends. We consider Canada to be one great going concern and its citizens to be shareholders, and as such entitled to dividends. No one is better qualified to speak on this subject than that very great Englishman, Doctor Hewlett Johnson, scholar, scientist, engineer and Dean of Canterbury.


Walter Edward Foster: Eleven o'clock.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Wednesday, May 6, 1936