May 11, 1936

LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

I am sorry.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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CCF

Thomas Clement (Tommy) Douglas

Co-operative Commonwealth Federation (C.C.F.)

Mr. DOUGLAS:

I have only forty minutes, and it is passing very quickly.

Turning to our expenditure, we find in the estimates, in round figures, $13,377,000 for national defence; $4,130,000 for the air force; and in the supplementary estimates $5,317,000 for national defence, making a grand total, in round figures, of $22,825,000, or an increase over 1935-36 of $1,284,000. That is what we are spending on military estimates and national defence. We are spending on our legation at Geneva $614,890, a decrease of $10,502 from last year. In other words, Mr. Speaker, we are spending over forty times as much for war preparations as we are in the interests of peace.

We do not expect the minister to find the money growing on gooseberry bushes. We know he has a limited amount of money to spend, and there are a great many demands upon him, but we submit that pensions for the blind, an extension of the old age pension, some type of health policy, and legislation to take care of those who are crippled and incapacitated, are all items which ought to have a place in the list of expenditures. When it comes to finding money for these things the reply is: We have not the money. But when it comes to finding the money for interest charges-that is a fixed charge.

The Budget-Mr. Douglas

What is the government's policy as revealed by the budget? I think I am right in saying it is three things: Extension of external trade, a balanced budget, and protecting the credit of Canada. The Minister of Finance said that our external trade had increased by ten per cent, but at the same time he said, as reported on page 2363 of Hansard:

One of the most disappointing features of the business improvement so far is that the numbers of those on relief do not decline at the same pace as business activity recovers.

I think the government will come very slowly to the position to which we have come, that even with return of normal business activity we shall not have a return of prosperity, and a return to the former volume of trade and business activity will not mean the wiping out of unemployment or the solving of our economic difficulties.

The second feature which the minister stresses is a balanced budget. That can mean only one thing. There can be no cutting down on the fixed charges representing 62 per cent of the budget, and so it means that any cutting down must be on the other 38 per cent, unless we are prepared to tax these bondholders or cut the interest or principal of their bonds. Then a balanced budget must mean the cutting down of relief, pensions or some other type of social services. I wish to submit that wherever that has been attempted it has been a failure. It has meant higher taxes, fewer social services and a lower standard of living for the great masses of the people.

The other suggestion is that we shall protect the credit of Canada. What we mean when we talk about protecting credit is that we shall prevent any type of inflation which would hurt the creditor and help the debtor. Deflation has always been in the best interests of the creditor; inflation has always hurt the creditor. The Minister of Finance shakes his head, and yet is it not true that the creditor who has invested his money when money was cheap, and then experiences a period of deflation such as we have had in the last five years, finds that the return he gets from his money is a return in a dollar which will buy two or three times as much as the dollar he invested? Consequently a period of deflation is a paradise for him, but it is very different for the debtor who must pay back. Therefore, when we talk about protecting credit we really mean we intend to prevent anything which might upset the present state of deflation. In this corner of the house we are not inflationists, but neither are we deflationists. We have advocated managed currency, namely that currency and credit should be issued in proportion to goods.

In Germany there was a state of true inflation; she issued money which was valueless. Why? Because that money had nothing behind it. She did not produce goods in proportion to her money, so her money was worthless. In Canada we have done the opposite. We produce goods in abundance, but we have not produced sufficient money in proportion to purchase those goods, and the result is that we have deflation. Money without goods back of it is bad, but goods without money to purchase them is just as bad. It can be only by the issue of currency and credit in proportion to the goods issued that we can hope to establish a managed currency which will give the people purchasing power to consume the goods which they themselves have created.

A few days ago the Minister of Labour (Mr. Rogers) said that he did not mind going forward, but he wanted to know where we were going. He believed in progress, but he said that he wanted ordered progress. I look over the budget, and I wonder whether the government knows where it is going. Is there any ordered progress? I look through public works expenditures placed here and there in a haphazard fashion, and I see no concerted financial policy.

It is true that during the election campaign hon. members such as the hon. member for Vancouver-Burrard (Mr. McGeer), the hon. member for Rosthern (Mr. Tucker) and the Minister of National Defence (Mr. Mackenzie) did enunciate some type of financial policy which might have been of value, but to date we have heard very little about it in the budget debate. As a matter of fact we have heard nothing constructive, and nothing to suggest that the government knows where it is going. Instead of that the tone of the budget and the demand of the minister on May 1 was: Back to May 1, 1930.

I submit that this is no time to go back. We can hardly expect a policy which brought us into this mess to pull us out of it. If a program could not prevent the greatest economic crisis in history, then it cannot hope to pull us out of it. Surely no hon. member thinks we can get out of the mire by tugging at our own shoelaces. This is not the time to tread beaten paths; it is time for the government to blaze new trails. The slogan of the government ought not to be: "Back to 1930"; it ought to be: "Forward, to greet the new day."

The Budget-Mr. Green

Topic:   THE BUDGET
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CON

Howard Charles Green

Conservative (1867-1942)

Mr. H. C. GREEN (Vancouver South):

Mr. Speaker, listening to the budget speech delivered by the Minister of Finance (Mr. Dunning), and reviewing it with its various statements and tables as reported in Hansard one could not help being impressed with the seriousness of the problems facing Canada; neither could one fail to realize the burden being borne by the Minister of Finance, and for this reason, and also because he bears his burden with a smile, I cannot find it in my heart to deal harshly with his budget. I must say, however, that in many respects I dislike it; time alone will tell whether or not he has been wise, and in due course he will have to answer to the people of Canada for any mistakes. Meanwhile I wish to offer one or two suggestions in regard to the budget, and to place squarely before the house the question of aviation in Canada.

Dealing, first, with the budget, I would earnestly suggest that the minister reconsider the provision whereby goods valued at not more than $100 may be brought into the country free of duty by Canadian residents, after an absence of not less than forty-eight hours. Surely a provision such as that should apply only to travellers or tourists, and not to shoppers. If it is properly restricted there is some justification for the provision, although as all hon. members are aware, it will seriously affect the revenues of the dominion. I suggest, however, that the provision in its present form is simply an invitation to Canadian people living near the border to shop in the United States. As such it will seriously affect Canadian retail business and will set up one more magnet to draw our people to the south, instead of having them transact their business east and west in our own country.

Let me give as an illustration the situation in the city of Vancouver. The people on relief and those who are not fortunate enough to own a car, will have to buy their goods at home and probably at higher prices; they will have to pay a sales tax on most of the goods they need, which, by this budget, is increased from six per cent to eight per cent; in other words the poor people will get no help from the provision. On the other hand the man fortunate enough to own a car could quite justifiably get into his car in Vancouver on Friday night, after his day's business is concluded, drive to Bellingham or Seattle and return Sunday night, bringing with him, under this provision in the budget, groceries valued at $100; or if he chose he could bring back S100 worth of clothing; he could even go there and buy furniture on a time payment plan; for example, he could buy a vacuum cleaner valued at, say $90, making an initial

payment of $9 or $10 and agreeing to pay the balance under a hire-purchase agreement; and he can bring those goods back to Canada free of duty and free of sales tax. Surely the minister does not intend to have the provision go that far. If he does not, then I would suggest that the length of absence from Canada be extended beyond a period of forty-eight hours; that the exemption be cut from three times a year to twice a year; that a traveller be required to produce receipts showing that he has paid for the goods he is bringing back. Finally, I suggest that the exemption should be limited to purchases incidental to the trip, a provision which, I believe, appears in the United States tariff.

May 1 further suggest that the exemption be reduced from $100 to $35 or $50. It is so hard for us to remember that we have a population only one-twelfth that of the United States and to remember that most of our people are settled only 100 or 200 miles away from the border, which is not the case with the people of the United States. I do not think it is reasonable for us to expect to have everything the people in the United States can have, and to do everything that they can do. I suggest that if their exemption is to be $100 ours would be more than ample if it stood at $35 or $50.

I have this further suggestion in regard to the budget: I would ask that the minister reconsider the terms of the exemption from sales tax in connection with crushed stone or crushed gravel. At the present time the exemption reads as follows:

Crushed stone or crushed gravel to be used exclusively in the building or maintenance of provincial, county or township roads.

That leaves out cities and municipalities.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Will my hon. friend permit me to state that cities and municipalities are already exempted with respect to crushed stone, etcetera, which they use themselves? This is an additional exemption.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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CON

Howard Charles Green

Conservative (1867-1942)

Mr. GREEN:

Take the city of Vancouver; perhaps they purchase some of their crushed gravel and crushed stone, but I believe that in most cases they have the work done by contract. If they are going to have work done by a contractor they must pay that sales tax, and I do not see why there should not be an exemption for cities and municipalities. After all, in my province of British Columbia there exist no county organizations and no township organizations, which means that the exemption will apply only to provincial roads, whereas a great deal of the province is under municipal government; I suggest that in all fairness the municipalities and the cities

The Budget-Mr. Green

should get the benefit of the exemption. When the history of the last five years comes to be written it will be found that the municipal governments have borne more than their share of the burdens; they are bearing more than their share at the present time, and I do not think it is fair that they should be discriminated against in this w-ay.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Of course they are not, in fact.

Topic:   THE BUDGET
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CON

Howard Charles Green

Conservative (1867-1942)

Mr. GREEN:

Now I have a word of praise for the minister. I am pleased to see that he is trying to do away with uncertainty in mining taxation. The same principle of doing away with the uncertainty of government interference could well be applied to other industries of Canada, such as the farm implement industry, but as I do not represent an agricultural constituency I have nothing more to say as to that. However, as far as mining is concerned, no one can question that that industry has played a cheering part in the dark days through which this nation has just passed. The prospector, the miner, the engineer, the promoter, the financier, and all others engaged in mining have done much to raise the morale and the spirit of the Canadian people. I think we should accord them our admiration and our praise, and anything within reason that will assist them should meet with our approval. The industry has been greatly aided by aviation. Many of these mines would never have been developed but for aviation, and I suggest to the government that the time has now come when Canada should adopt a bold and aggressive air policy.

Let me tell the house in a few words the present position of civil aviation in Canada. I intend to treat the question in a nonpartisan spirit; it is a new problem and one which, in my opinion, should be dealt with in a non-partisan way. I wish that it were possible to discuss more of our difficulties in that way; we would get much further ahead.

First of all, let me give the house the bright side of this picture; that is, flying in northern Canada. I think it may fairly be said that flying has made possible Canada's great strides in gold mining and has advanced by decades the development of the northern section of our country. This is well set out in an article by Mr. J. A. Wilson, our own controller of civil aviation, to be found in the February issue of the Engineering Journal, from which I quote the following extract found at page 68:

The surveyor, geologist, and prospector were not slow to follow the example of the forester

and use aircraft as a better means of transportation and observation throughout the unsettled areas of Canada.

The result of this policy has been that to-day there exist generally throughout northern Canada efficient commercial air services which have been self-sustaining, have required no subsidy, and which give access to the remotest districts of the country. More has been learned of northern Canada during the past ten years than in the preceding three hundred. The forester, surveyor, geologist, prospector, mining engineer; the clergy, the doctors, the nurses, the police; in fact, all w-hose activities lie in northern Canada find their task greatly lightened, their range of action multiplied many times and their efficiency increased by the use of aircraft. Journeys which a few years ago meant weeks or months, and sometimes even years of toil and hardship, are now performed in ease and comfort in a few hours. The expansion of Canada's mining industry has greatly helped to tide Canada over the dark days of the depression and this development has been immensely assisted and hastened by aviation. Many of our most promising new mining fields owe their discovery and their opportunity of present development entirely to aircraft.

The figures of passengers, freight and mail carried by air in Canada during the last few years show the remarkable progress which has been made. I give the approximate

figures: Passengers carried in 1933, 85,000; 1934, 105,000; 1935, 177,000-practically all in northern Canada. Freight carried, 1933,

4.205.000 pounds; 1934, 14,440,000 pounds; 1935,

26.439.000 pounds. It has almost doubled in the last year. Mail carried, 1933, 539,000 pounds; 1934, 625,000 pounds; 1935, 1,126,000 pounds.

Details of the air mail carried are given on page 2146 of Hansard. The Postmaster General (Mr. Elliott, Middlesex) said, as reported on page 2140, that this mail was carried actually at a profit to the post office. All this development has been brought about by private enterprise, without subsidy of any kind from the government other than payment for mail, which, as I have remarked, wascarried at a profit to the post office. In addition to opening up northern Canada, civil

aviation has been the means of training airmen who are without superior anywhere in the world. For instance, we have Hollick-Kenyon and Lymburner, two famous Canadian airmen whose exploits have not been properly recognized by this nation, two airmen who have done wonderful things in the last few months in the antarctic.. These men were trained through flying in northern Canada. I suggest that this is sound national develop-' ment for Canada. Our future is in the north. I believe that our destiny is to become a great northern nation, not a vest pocket edition of the United States of America.

The Budget-Mr. Green

I turn from the more pleasant side of the picture to aviation in the more thickly settled parts of Canada. What do we find? Quite a lot of flying has been done on fishery patrol on the coast of British Columbia. There are five mail routes, and five only, in the settled part of Canada, each one, with the exception of the route from Moncton to Charlottetown, being from Canada to the United States in order to get the mail down to the transAmerican airways. These five routes are to the south from Montreal, Winnipeg, Vancouver, and Victoria, and the one from Moncton to Charlottetown. So far as the trans-Canada airway is concerned, I understand it is hoped to complete the airway from Winnipeg to Vancouver in the summer of 1937.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

During the year 1936.

Topic:   THE BUDGET
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CON

Howard Charles Green

Conservative (1867-1942)

Mr. GREEN:

So much the better. And from Winnipeg to Halifax in 1938-[DOT]

Topic:   THE BUDGET
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

That is correct.

Topic:   THE BUDGET
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CON

Howard Charles Green

Conservative (1867-1942)

Mr. GREEN:

-with feeders to the principal cities off the main route. When that is done we shall have an air mail service across Canada by which letters will go from Montreal to Vancouver in from eighteen to twenty hours, whereas it now takes four days, and from Montreal to Halifax in five more hours. Apparently this development has been brought about in this way: Municipalities along the main air route have constructed what are known as airports; these are the main ports of call. The government has adopted the policy of supplying all the aids to air navigation. If I am wrong in any of these statements the Minister of National Defence (Mr. Mackenzie) will correct me. I understand that these aids consist of intermediate aerodromes located every thirty miles or so, many of which are still to be constructed; airway lighting, comprising beacons; meteorological services; and radio services, consisting of radio beam stations; and in addition general research work by the technical departments of the government, leaving flying to private companies. In other words the government does not intend to carry on any of the actual flying.

Let us just realize what that means. Private companies will have to carry on this flying. They will have to acquire planes and train personnel for night flying, which is not carried on in Canada at the present time. They will have to train them also for very fast flying; I understand that the mail planes will have to fly about fifty miles an hour faster than our Canadian planes fly at present. All this means

that the company or companies concerned must know well in advance the definite plans of the government, because it will take some time to prepare to give the service.

Then I come to the position of aviation in Canada in relation to world aviation. All other nations have far more extensive air services. Canada is the only nation not subsidizing civil aviation extensively. For example, in Great Britain the Imperial Airways is heavily subsidized by the British government, and as a result that government is able to say that certain mileage must be flown and certain routes must be kept open. The trans-Canada airway is one of the few important air routes in the world that have not yet been opened up. The only other two are the transatlantic and transpacific routes, and the former is to be completed shortly. I understand that test flights for the transatlantic air route will be made during this summer. The route over Canada is the shortest air route between Great Britain and the orient being three thousand miles shorter than the shortest route possible over United States territory. Let me repeat that: the air route from Great Britain to the orient over Canada is three thousand miles shorter than over United States territory. Yet here we are in the middle of the empire, the leading dominion, and we like to think, and I believe, the most progressive dominion, almost in the position of preventing the completion of an empire wide air service.

There is the picture, Mr. Speaker. I urge the government to adopt a bold air policy at once. Let them announce their plans; let them rush the trans-Canada airway to completion; let them establish a trans-Canada air mail service, and do everything possible to aid aviation. I am convinced that it is a workable policy, and that it would be comparatively inexpensive. The hon. member for Gloucester (Mr. Veniot), who was formerly Postmaster General of Canada, dealing with the air mail service, said, as reported at page 2141 of Hansard, that he thought it could now be operated at a profit. In any case the cost of establishing this air service would be very, very small. The government have a great majority and there is no reason why they could not go ahead with a progressive scheme such as this. Incidentally I believe that if they did so they would have the support of the official opposition.

Such a course-the initiation and development of an active air policy-appeals to me particularly for two reasons. In the first place I am sure it will help to draw the provinces together. Coming from British Columbia I

The Budget-Mr. Poole

am always worried about the provinces of Canada drifting apart, and I am sure hon. members from the maritimes have felt the same way. Any policy within reason that will help draw the provinces together will have my support. I think at all times we in this national parliament should do everything possible to bring the provinces of our nation closer together. After all, during the depression the provinces have been hard hit and there have been many rumblings, many questions asked as to whether or not confederation was worth while. I think we must remember that it is our duty here in parliament to do everything possible to hold the provinces together.

I am also interested because I do not think anything will do more to strengthen the morale and raise the spirit of our people than to make Canada a leader in aviation. After all, the morale and spirit of our people are worth a great deal, far more, I think, than many realize. Look at our background in aviation. In the war we had a far higher percentage of pilots in the air force than any other part of the empire. We had outstanding leaders in the air during the war, men such as Colonel Bishop, Colonel Barker, Colonel Collishaw and Major Don MacLaren, the last two from my own province of British Columbia. Men like these were known all over the empire as famous war aces, and there were dozens of other famous Canadian airmen. That is the background of Canada in aviation, and we also have the deeds that have been done by our fliers in the north. There is no reason why we should not go ahead and lead the world in aviation. We have a people of courage and initiative, and I suggest that this Canadian parliament should give the people of this nation bold and aggressive leadership on this question.

Topic:   THE BUDGET
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SC

Eric Joseph Poole

Social Credit

Mr. E. J. POOLE (Red Deer):

Mr. Speaker, as seconder of the amendment to the amendment, it gives me a great deal of pleasure to say a few words in connection with the budget on this occasion. First of all I want to thank the hon. member for Huron-Perth (Mr. Golding) for the kind remarks that he made the other day concerning this little group, when he appealed to the Liberal party at least to listen to those representing a new line of thought, or at least a line of thought foreign to this house. I thank the hon. member for his kind consideration, but we in this corner have noticed the lack of interest shown in anything coming from Alberta. It is unfortunate that such should be the case, in days such as these when we are faced with new conditions. I do not believe that any government in any country of the world to-day can afford to sit down and simply try to

uphold the old status quo. We must be

always on the look-out for new ideas to alleviate the distress that is with us.

I have read the budget; I have followed the debate keenly, but I have not noticed anything startling in what has been proposed. We in this corner have been patient, thinking that as time went on some new policy would be outlined, some hope would be given the Canadian people, but in everything that has been suggested the cause of all our economic ills has been left untouched. The minister made quite a lengthy address on May 1, which I enjoyed as I believe every member of the house did. In the first part of that address the minister spoke of trade, and he made some startling statements. He said- and I believe this has been the opinion of the Liberal party-that our hope for internal prosperity lies in the expansion of our external trade. There has been also an old theory tarried on through the years, inherited from mediaeval days, that the way to measure internal prosperity is by your favourable trade balance. Yet the surprising thing is that when we look into our Canada Year Book we find that in 1932, which was recognized as the depth of the depression, we had a favourable balance of trade. Of course it may be said in answer that the volume of trade was less. That is true. But again the minister said that these conditions prevail because of the policy of economic nationalism in every nation of the world, and that we have no control over the policy of other nations. With that I agree. But those conditions are not being faced by the government, because if they recognized that nothing can be done externally to improve the lot of the Canadian people they would see that their attention must be focussed on internal problems.

An hon. member on the other side some days ago told us that the machine was not displacing labour; that the machine provided more work. How that statement can be accepted by anyone is surprising in view of the fact that we have a million Canadians unemployed. We find that in. 1919 the leader of the Liberal party, Sir Wilfrid Laurier, recognized this fact more than do the government to-day. In his last address on January 14, 1919, he direw attention to the changed industrial conditions, and spoke of the necessity of cooperation between capital and labour and of the displacement of men from industry. But the Liberal party that promised so much to the people has not recognized this in 1936. There is, however, one thing that we can agree on-I suppose we have to be thankful for small mercies- and that is the reduction of the debt burden

The Budget-Mr. Poole

through conversion and refunding. The only criticism we have to offer on that is that it is not broad enough, does not take in enough territory. I have been interested in observing the inconsistencies of government members. We may not be able to get our views over in this house, but at least we have an opportunity to listen to other hon. members, and we take advantage of it. I notice that in the policy Laid down by the government so far as the unemployment problem is concerned the Minister of Labour (Mr. Rogers) provides for subsidies to industry. Then I turn to a statement by the Minister of Finance in his budget address, in which he tells us that if we speed up industry the inevitable result will be overproduction and breaking the market. I wonder whether the Minister of Labour and the Minister of Finance (Mr. Dunning) should not get together on this question and really decide upon the policy, because the inconsistency is glaring.

Referring to the criticism levelled by the hon. member for Huron North (Mr. Deach-man) at us this afternoon in which he spoke of social credit theories, and I believe was endeavouring to prove us inconsistent, I know my leader would like to defend himself on this and I suppose the opportunity will present itself some day. The hon. member referred to the inconsistency of our leader when he spoke of protection or subsidies to the sugar beet industry. I would point out that the conditions prevailing in that industry are different from the conditions which prevail in many industries in this country. It is a matter of national protection to subsidize an industry that produces a consumable necessity which we must have during a time of war. I believe that was the whole purpose in advocating that. If war were to break out in Europe we would be dependent upon importations of sugar, although we can manufacture it here, because we cannot compete with sugar producers from outside.

I quote again the article that was read in the house by my leader some days ago, because the hon. member for Huron North has got a little mixed up. He told us that production in the United States was $60,000,000,000 and that the total amount of purchasing power was only $45,000,000,000, and he wanted to know where the difference went. Part goes back into savings, as this article describes, but part of it, the difference between $50,000,000,000 and $60,000,000,000, was never in existence. That is one thing which this group have endeavoured time and time

again to make clear, that under the present system you cannot place in the hands of the people through the medium of wages, salaries and dividends sufficient purchasing power to purchase the total price values. Then, he says, these people suggest paying a dividend even in prosperous times, and he wanted to know what we would do when the depression came. I wonder what my hon. friend means by depression. A depression infers that we are short of something, but surely there is not a member of this house who would suggest that we are short of goods. They were never so plentiful, and if we were short of goods surely we have available productive power in Canada to produce more. There is no depression to-day. There is poverty, however, and nothing suggested in this budget will alleviate that condition. Tariffs might help some, but the minister says that we have no control over economic nationalism ; that we cannot compel the nations to accept those things which they do not desire. If we could have brought prosperity to Canada by removing the barriers of economic nationalism, surely that could have been accomplished at one of those numerous international conferences which have taken place during the last five years.

When you take the tariff out of the Liberal platform you have nothing left; it is the peg upon which they hang their whole policy. When that falls, Liberalism falls. They must recognize that the purpose of an economic system is first and foremost to increase the standard of living for the citizens, not of China, but of Canada, and the only purpose of an export market is to exchange our products which we do not need at home, because we have such abundance of them, for those which are not common to the production of this country. In this year 1936 we are starting along exactly the same lines that have been followed down through the years, raising the same old ghosts. We have an unemployment problem. This is what Mr. R. J. Scrutton said in Prosperity, April, 1935, quoting the same article which was criticized this afternoon. This, I think, puts the situation plainly:

It is useless trying to find work for the unemployed until the present financial system has been changed. Productive work merely increases the glut of goods and adds to our problems. Non-productive work such as road making will certainly provide wages, but those wages must be taken by taxation from those engaged on productive work. This is a method of sharing out the nation's poverty; and in no way shares out the machine made abundance.

The Budget-Mr. Poole

And that is all that we have accomplished in this budget. What do you do when you borrow $75,000,000? You place a chattel mortgage on the future of the country; that is all you do. You do not solve the problem. We have spent $600,000,000 in the last five years and the problem is just as great as it ever was, plus this fact, that while our trade has increased unemployment remains the same. That is important in view of the statements which have been made in the house to the effect that machinery is not displacing man power. When you displace men you displace wages, and we claim that the wage system has broken down; it will no longer distribute goods. It was all right in the days when we had markets on which to throw our surplus production or could invest money in other nations for capital expansion. But those days are gone. The Minister of Finance told us that we have no control over the policy of economic nationalism which has been adopted by other countries. I agree. That being true, are we going to solve the problem or restore prosperity by indulging in a public works program ? When you tax you deflate; when you tax you reduce the standard of living of the people. What happened in the United States two or three years ago? They poured out money. W hat followed ? A man getting $15 or $20 a week found that his money would not buy as much as it did before. Prices began to increase when new money was poured in. I want to continue quoting from this article because it is valuable. It is something well worth putting on Hansard; if many members will not listen to the social credit party in the house they may in spare moments look at Hansard:

T There is only one way out of the difficulty, it we intend to keep the machines then we must devise a method of giving people the u ages of the machines which do their work. Incomes must be based on wealth produced and not on human labour performed. In order to do this our financial system must be based on the capacity of a nation to produce goods and services instead of a gold or sterling standard which bears no relation to our real wealth. Then, if we produce goods priced at $10,000 we can create and provide the people with $10,000 to spend. The balance sheets of all industrial and business concerns, containing a special item giving average profit on turnover, would provide the government with the necessary information. By this means the total prices of consumable goods produced during the preceding six months would 'be made available, together with the total purchasing power issued in the form of wages, salaries, and industrial dividends. The total of prices would be found to be far higher than available purchasing power and would provide a figure representing the goods unsold and now glutting our markets. (According to the 12739-173

National Bureau of Economic Research, American industry paid out $45,548,000,000 in the form of wages, salaries, dividends, bonuses, pensions, compensation, etc. The value of consumable goods produced for the same year was $60,366,000,000. When savings and investments were deducted from these incomes only forty billion was available as purchasing power to buy goods valued at sixty billion.) We propose that these surplus goods form the basis of new money which shall be created by the government and issued free to the people so that the goods shall be bought. At present only production is financed. This takes place when the banks create and lend money to industry.

Under social credit the government would finance consumption by the method outlined. It would not borrow money but would follow the practice of the banks, creating money on the basis of something which is already in existence and which, I may add, is a sounder money system than the one under which we live to-day. The only basis for many of the bank creations is hot air. I think it is becoming evident throughout the world to-day that the system under which we live has served its purpose. Capitalism was adapted to general expansion, and while that expansion was possible capitalism could provide men with a livelihood through the agency of wages. But when you arrive at the point where you can no longer export goods, then the system is ready for the scrap-heap. Unfortunately we have inherited many conceptions that are not- true. We have led men to believe that the only purpose of an economic system is to provide work. Hon. members will persistently tell us that we shall get out of the mess which we are in to-day. Surely that is absurd when you look at the increasing national debt-and it is bound to increase. In the budget debate some criticism has been levelled at the late administration because of an increase of a billion dollars during their regime. Surely that is not the fault of the late government; if it is, then the Liberal party might well be accused of the same thing, because the national debt of Canada has always increased. It increased from 1921 to 1936, not merely from 1930 to 1936, and the time is coming not only nationally but in every municipality when fixed charges will constitute the largest item. The amount available for what I consider uncontrollable expenditures, that is for public services, for relief, for indigent people, for the incapacitated, for pensions and so on, is becoming less, while the ability of governments to tax will diminish as time goes on, because the debt structure is top heavy.

The hon. member for Huron North this afternoon told us that we have our cultural

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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BEYI8ED EDITION COMMONS


The Budget-Mr. Poole heritage. Maybe the hon. member has, but there are thousands who have not yet had it. I have in mind the ex-sendee men of Canada, the unemployed of this dominion. I wonder whether they have got their cultural inheritance. I do not think so; I do not think they have been considered very well. I recognize, of course, that as fixed charges increase the ability to give them any kind of inheritance which would be beneficial to them will decrease. On the other hand, I believe the only heritage the old line parties will ever leave to the dominion, if they do not change the monetary system, will be one of debt and mortgages. When we borrow $75,000,000, when we launch into public works schemes, for the purpose of giving bread and butter, we are looking for something to drop from the sky to help us out of the mess we are in "o that we may remain politically secure, and twenty years hence it will be just another mortgage, another one of these fixed charges. What I want the government to tell this group in this sectioq. of the house is this: In view of the fact that we have had a favourable balance of trade during the depression years, in other words, sold more than we purchased; in view of the fact that we have goods here, and in view of the fact that all the evidence which is required exists, showing that there is a downward trend in the standard of living and an increase in our national and all other debts, I wonder whether they could tell us, when they talk of putting men to work under the conditions that prevail, how they expect to do this and at the same time to reduce the national debt. There have been two Liberal members who have the idea, the hon. member for Rosthern (Mr. Tucker) and the hon. member for Vaneouver-Burrard (Mr. McGeer). They are the monetary reformers. They know that the axis upon which this economic system turns is money. They know that the monopoly which controls it controls this government. It controls the ability of this government to collect taxes.


LIB
SC

Eric Joseph Poole

Social Credit

Mr. POOLE :

It does. I will go further if

you wish, and prove it. During the deflationary period what does a bank do? It takes that which is just as necessary as the blood to the body; it takes purchasing power by restricting loans to industry, and by calling in loans already out, driving prices down and reducing property values. That is why the western farmer is in the mess he is in to-day. During the inflationary period what does a bank do? It gives to production something. It gives to agriculture financial credit based upon something. What? Some-

thing that belonged to the depositors? That is nonsense. It was something that belonged to the agricultural industry. The banker may give it with pen and ink, basing it upon the ability of the farmer to produce, the land and the machineiy of production he has, and the desire on the part of people associated with him for the goods of production.

Topic:   BEYI8ED EDITION COMMONS
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LIB
SC
LIB

Robert Emmett Finn

Liberal

Mr. FINN:

Does the government of

Canada or does this parliament of Canada, of which my hon. friend is a member, control or undertake to control the loans made by the banks to individuals or to corporations?

Topic:   BEYI8ED EDITION COMMONS
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SC

May 11, 1936