Evening star., 1941-08-06
Tells How Canada
Pays Share in War
Writer ExpIoins Methods
Of Financing Adopted
By Northern Neiehbors
BIZ James Pope,

Correspondent for The Star and MANA.
OTTAWA, Ontario, Aug. 6.-To get a
rough and sobering idea Of what total
| war means to q country-even one re-
moved from the heat of battle-take
look at Canada's financial problem.
In the first World War this nations
| war expenditures never exceeded 10
per cent Of the national income. For
the whole period from 1914 to 1920, the
| outlay on fighting services was only
| $1,672, 900 900.
Canada's total war spending in the
present fiscal year, March 81, 1941-2,
| will be more than 81 900 900 .0oo which is
between IS and 40 per cent OF the total
estimated national income.
Add to this all the ordinary expenses
Of government. federal, municipal and
provincial, and 1t becomes clear that
Canadians, to foot the bill, must give up
this year about 50 cents Of every dollar
they earn.
In terms of the total estimated income
of the United States, Canadas war
spending Is equivalent to an expenditure
of about $35, ,000, 100000 in a single year
for American defense and aid to Britain.
To appreciate the deft manner in
which Canadian fiscal management thus
far has financed the staggering burdens
of war, 1t Is necessary to recall how
woefully weak Canada was at the outset
of the last war. She had little economic
machinery, no broad-based tax structure,
no domestic money market to borrow
from and no central bank to control
and coordinate the economics of the
country. The government, in fact, had
never sold bond in Canada.
The result was frantic borrowing in
London, then New York. then from
the Canadian public. Imitation de-
veloped, with all its crushing after effects
of tension, pressure groups, sectional
revolt.
Canada In the last war was an
adolescent. She came out of it into
national maturity, set up the Bank of
Canada to protect her economy and be-
gan scientific broadening Of the tax
base.
Thus, in September, 1899, the Cana
dian government had economic weapons
with which to cope with modern war.
The first and most important step was
creation of the Foreign Exchange Control
Board.
Chairman of the board was Graham
Towers, youngish governor Of the Bank
Of Canada, who is said to be next in
line for Montagu Norman's job as
governor of the Bank of England.
The whole setup had been planned
almost year ahead, but intense secrecy
was necessary. Representatives of the
banks were called into Ottawa, told the
| story and kept in one room until bank
| ing hours were over.
Next morning, in their newspapers,
Canadians learned that they could not
| sell their foreign securities without gov
ernment permission and could not travel
into the United States at all, unless
some friendly American paid all ex-
penses.
The objectives OF the F. E. c. B. were
and are:
l. To insure that imports which are
essential to Canadas war effort have
the first call upon proceeds OF goods
and services sold abroad by Canadians
and that foreign exchange will be avail
able to meet other Canadian commit
ments abroad
2. To prevent the dissipation of the
| securities and other assets owned by
Canadians in foreign countries, 50 they
can be used by Canada if needed in
| the war effort.
3. To prevent the fight of capital
| from Canada.
Canadians not only cannot visit the
United States; they cannot buy Amer
lean cigarettes or any American products
that compete with Canadian goods This
is not an unfriendly gesture-it is just
routine action made necessary by war.
The exchange control board has sue
ceeded in conserving Canadian capital
and also in protecting s6.7000Oo,0OO of
foreign investments in Canada. Divi-
dends still are paid to American security
holders.
Actually, Canada still spends heavily
| (almost too heavily for her economy In
the United States. The money goes for
war necessities instead of nom essentials.
Canada will spend around $1,000 10000
in the United States this fiscal year, or
about one-sixth of her total income.
She sells us many products. too; but this
year Canada's trade deficit with us will
be about $450,000,000.
BY 1912 Canada will be selling us more
and more nickel, aluminium and other
war essentials, and very likely our trade
will reach q balance before the end of
next year.
Besides her own enormous commit
ments, Canada rather amazingly has
managed to finance about three-fourths
Of Britains deficit with her. Canada
has told Britain not to worry about her
shortage Of Canadian money - that
reckonings can be made when the war
is over. During this fiscal year Canada
will in effect lend Britain another $780,
100000, with half billion already
loaned.
How does she do it, little nation of
100000 of people, only recently come
to financial and economic manhood?
Partly by intelligent planning and lead
ership, and partly by unlimited public
support for any plan, however self
sacrificial, which seems likely to help
the job of beating Hitler. The money
comes, OF course, from the people, by
familiar process known as taxation.