Evening star., 1943-06-25
Canadian Subsidy
Program Discussed
Further Price Rise Held
Assured Unless Government
Supports Ceilings
To the Editor Of The Star:

To the Editor Of The Star:
AS a Washington housewife born and
raised in Canada and still In touch with
Canadian conditions, I read with great
interest your editorial, Canada Fights
Imitation" In your issue of June 81. I
agree with your writer that Canada's
record is superior to ours and that the
Dominion "offers us an example by
which we can profit in many ways"
1t seems to me, however, that your
writer unduly played down Canada's
highly successful use of subsidies In the
stabilization of the cost of living. The
strategic use of the subsidy weapon in
the battle against imitation is indeed
one OF the striking lessons OF Canada's
price-control experience. Your writer
dismisses the subject of subsidies with
this one sentence: price rises were
sometimes averted by Government sub
sides, granted, not so much to hold down
the general price level as to assure con-
tinued adequate production of essential
goods or products in specific lines" This
statement, by leaving out essential facts
Is likely to create a misleading and even
false impression in the minds of readers
not familiar with the Canadian record
Canada has two main classes of sub
sides. The first kind is subsidies to
relieve the squeeze" on producers and
distributors caused by the price ceiling
In such situation. II the price ceiling
Is maintained without relief produc-
tlon would suffer and many firms would
De thrown out Of business. Subsidies
give relief, maintain production and vet
keep the ceiling prices for the consumer.
In this country Mr.. Henderson wanted
10 institute such a system Of subsidies
particularly on foods after the General
Maximum Price Regulation was issued
congress turned thumbs down on the
plan. and as result the ceiling prices
OF those foodstuffs which were under
price control had to be adjusted I'm
and up. 1t seems to me that American
housewives have right to demand that
ths country take leaf out of Canadian
experience and keep the cost of living
down by strategic and we'll placed SUBJ
sides.
Last winter Canada embarked on O.
second use OF subsidies-to finance q
rolloack in the prices of cost-of living
hecesslties. l should like to quote a few
paragraphs from the recent report Of
the Canadian Wartime Prices and Trade
Board which describes the purposes and
'he results of this program:
Although the application of the nrics
celhng at the end of 1941 was effective
In checking the strong infiationarv trend
tnen IN progress, some prices particu.
Iarly those of staple foods, continued IN
creep upward. Between October / 1a41
and July 2. 1912, the cost-of- living
!noex rose by "a points, necessitating
tne payment Of an increased cost-of-
h'lng bonus of so cents week. OF this
rise over 80 per cent occurred in the
Iooo index. -Four months later IN
november l, 1912, the index had risen
Dy another Z points and it annearad
PROBABLE that before long a furtbsr
increase In the cost-of Living bonus
~oulo become necessary. CThe bonus
increased or decreased at intervals
OF tnree months provided that the cost
ol-LVlng index has moved up or dou,,
oy at least one full point since the date
oi ene last bonus re-calculation.)
increases In the bonus tend tn raise
production costs. To some extsnt IN
creases IN industrial costs are met out
oi tne public treasury either because
Lne INDUSTRY Is working directly for the
government or because it is subject 10
tne excess profits tax. For other prours
4ncfeaseo costs become the basis of an.
pncatlon Tor increased prices which IL
granted, increase other people's costs
ana II not, create widespread demand
lor subsidies which may well be verv
oilncuit to administer. Successive in
creases IN the cost-of Living bonus there.
lore' are source of danger to the CIV
ernments anti-infationary policy ord
at oest provide temporary and in.do
quate protection against increases IN
living costs. "'eS Al
On December 8, 1912, the Minister
oi FINANCE announced that the govern.
ment had decided on direct action n
orlng the cost of living at least mart
way BACK to the level of the basic neriod
by tne payment of subsidies ord l.r
remission of taxes and duties, the retai,
prices OF certain basic articles of food
were TO be lowered with the object NJ
reducing the total cost of the consumers
ouoget. There was another imnortspt n
reason, In addition to those mentioned
ABOVE, Tor undertaking the nolcv of
maintaining prices. A rise in the cos+
OF hVlng affects every one, whereas cer.
tam important groups-small pronrie-
tofS, farmers, pensioners, etc.-do not
receive the cost-of-living bonus. Hence
greater equity is obtained bv checkiro
the rise in the cost of living than he,
paying the bonus. ~
MILK. oranges, tea and coffee were
the articles selected for the nrice reo
oucEons AS a result of these nrioo
reductions, together with some season 81
price movements, the cost living indev
oeclned between December /. 1a42 and
January l, 1943, by 1T points tn ,1s .
lcf