May 12, 1936

BANKING AND COMMERCE


First report of the standing committee on banking and commerce.-Mr. Moore.


PUBLIC BUILDINGS-COAL


On the orders of the day:


CON

Alfred Johnson Brooks

Conservative (1867-1942)

Mr. A. J. BROOKS (Royal):

Mr. Speaker, on April 29 I asked the Minister of Public Works (Mr. Cardin) for information regarding the contract for the supply of coal to dominion public buildings in the maritime provinces, for the coal year 1935-36. I understood that the minister would table a return containing the information required. As yet I have not received- this return, and I should like to ask the minister when I may expect it.

Topic:   PUBLIC BUILDINGS-COAL
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LIB

Pierre-Joseph-Arthur Cardin (Minister of Public Works)

Liberal

Hon. P. J. A. CARDIN (Minister of Public Works):

I will undertake to make inquiry to ascertain the cause of the delay, and will have the report tabled as soon as possible.

[Mr. Bennett.)

Topic:   PUBLIC BUILDINGS-COAL
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THE BUDGET

DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE


The house resumed from Monday, May 11, 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, and the proposed amendment -thereto of Mr. Mac-Innis, and the proposed amendment to -the amendment of Mr. Hansell.


SC

Joseph Needham

Social Credit

Mr. JOSEPH NEEDHAM (The Battle-fords) :

When the house rose last evening

I was asking how the government could justify its action in regard to the budget in not presenting some real monetary reform. At the outset I said I wished to deal with debt, and the interest incurred in connection with it. That is the theme I want to discuss.

Our problem as I see it throughout the dominion is one of interest. The interest on the debt of this country, federal, provincial, municipal, etcetera, is so staggering at the present time that it has become a question of deep concern to almost all our citizens. Faced as we are this year with another deficit of $100,000,000, the prospect does not look very bright. I say that interest is the biggest problem we have to face. Two questions were asked at the beginning of this session. One was: How much is the -national debt at the present time? The answer given was that on January 31, 1936, the national debt stood at $2,895:,124,222. The other question was: How much interest has the dominion paid since confederation? The answer given was $2,823,245,404. So you see the national debt and the amount of interest that has been paid are practically equal. This raises the question which is in many people's minds at the present time: Why should the federal government pay interest? This is a question which I want to consider with hon. members for a little white this afternoon.

I say -there is a feeling in the minds of thousands and tens of thousands of people in -this country that the national government should not pay interest on money, because we see that if we have to pay interest we are bound to go into debt more and more. If the country could be relieved of this one item we would have little or no debt. That is the problem I want to present. Without interest we would have practically no debt, and with interest we cannot help but have debt. Look at it in this way: If a person borrows money, say $1,000, and has to pay

The Budget-Mr. Needham

eight, per cent interest, eighty dollars a year must be provided from somewhere. Where is it to come from? He cannot make it. He can produce goods, but the bank will not take goods. He can produce wealth sufficient to pay his loan and his interest perhaps over and over again, but that wealth cannot be used to retpay the loan; it will not be accepted. You will agree with me that every dollar that leaves the bank leaves it as a loan to someone. How can it be paid back when the borrower cannot make that with which to pay it back? May I use a simple illustration which will perhaps bring out the point clearly. Suppose a community starts up and a bank goes in there with say $20,000, and there are twenty people who borrow that $20,000, $1,000 each, at eight per cent. They go out and work, and when the notes are due in a year suppose ten of them have been very active, have produced and sold their products and have acquired the .amount of the principal and interest due on the loan. They go to the bank and pay their loan and interest, which would aggregate $10,800. How are the other ten going to make out? They are bound to 'be $800 short, assuming there is no other money in that community but the $20,000; they can pay only $9,200. So there you have 81,600 that cannot be paid. They may have produced wealth sufficient to meet it, but they cannot find money, which is the only thing the bank will accept. What are they going to do? The bank has the $20,000 back, just what it loaned them, but there is a shortage of $1,600. The bank can again lend that $20,000, but in order that the ten people may again secure $1,000 each they will first have to borrow to pay the interest. That is the problem that we are up against at the present time. It does not matter ho-w you analyze it; I do not see any other solution.

Take it from another angle which may present a point that has been raised very often during this session. Suppose a bank starts in a community, and twenty people deposit in the bank $1,000 each. The bank therefore has $20,000. All right; eveiyone in the community is working. Someone goes to the bank and says, "Will you lend me $1,000? The bank make inquiry and decide to make the loan. They place $1,000 to the credit of the borrower do they not? The $20,000 is in the bank; that is all right. The banker does not ask the other twenty people whether they will agree to lend the $1,000. But after that $1,000 has been lent those twenty-one people could write cheques for $21,000, yet there is only $20,000 there. Where does it come from? There is the situation. As you

analyze these things they show the situation that exists at the present time.

As I said before, we have no quarrel with the bankers; it is the system that is wrong. Bankers are just as necessary as farmers or any other class of people in order to carry on the business of the country. I want to read an article taken from The Instructor, published at Gardenvale, Quebec, which shows how the thing works out:

In 1919 the dominion government loaned to the Garden City Press the sum of $126,500 under its housing act, same'to be paid back with interest in twenty years as follows: $3,157.50 on the first of every January, and $7,058.45 on the first of every July. These payments have been made regularly and on July 1, 1939, the full amount of the loan with interest at five per cent will have been paid back.

They have had the benefit of those homes. It continues:

When this loan of $126,500 has been all repaid (on July 1, 1939), it will have cost the Garden City Press $377,800.60-($10,215.95 a year for twenty years at five per cent compounded interest). Of this sum $126,500 was expended for the building of homes and the balance, amounting to $211,300.60 will go, not into the treasury of the dominion government, but into the pockets of the few individuals who own and control the banking system of Canada, which has been modeled after the British system.

If the dominion government had made this loan direct, or through a bank owned and controlled by the government, the dominion treasury would have been benefitted to the amount of $211,300.60. This is the amount, which the privately owned banking system of Canada will have made out of this loan, without any outlay or risk on its part. This amount is first paid into the treasury of the dominion government and the treasury hands it over to the privately owned banking system. This privately owned banking system did not even have the trouble and expense of collecting it. The dominion government does that work for the banking system of Canada, free of charge. Why all this generosity? No one seems to be able to give a satisfactory answer to that question, except that it has always been done that way.

That is one phase of it. We will suppose that the mayor of Montreal came to Ottawa and said, "We have a slum district; we would like to pull down five hundred houses and replace them with new ones. I believe we could dispose of the houses and in that way repay the money to the government. It would take a million dollars, and we believe we could pay you back $50,000 a year." The natural question would be, "Have you available the men required to do the work?" To which he would reply, "Yes, we have." The next question would be, "Have you enough carpenters, masons and other men in the build-

The Budget-Mr. Needham

ing trades?" "Yes." "Have you the necessary material-, such as bricks, cement and the like?" "Yes." What would prevent the dominion government from advancing that million dollars, and having it paid back ait 150,000 per year for twenty years, without interest? That is the question thousands of people are asking to-day. Where and how will the Minister of Finance (Mr. Dunning) take care of the $100,000,000 deficit, I suppose he will write a government bond issue in favour of some financial interests, and -they will give back what? They will give either figures or bills. Why could not the .Department of Finance do this on the credit of the country?

It is true the banks have not the wherewithal to lend one hundred million dollars. What have they?-just buildings and equipment, that is all. The minister has to give them the credit of the country, and in return he receives figures. If it cannot be done, I want the Minister of Finance to place on record the reasons why, because there are thousands of people throughout the dominion who want to know. If this action is feasible and if it is right, it is the first move that could be made to alleviate our present financial difficulties. In my estimation it is the action which should be taken.

We have heard this session about the staggering debt of Canada, and the statement has been made that we must furnish $350,000,000 per year to pay the interest on federal, provincial, municipal and school debts. It is a staggering amount-almost a million dollars a day for interest payments. But it is only part of the debt, because according to the Canada Year Book for 1935 I find that private company and indvidual loans on October 31, 1934, amounted to $1,015,472,167. This amount is in addition to the eight billions of government debts. When we remember that all revenue originates in industry, and that the greater the amount of revenue taken for interest on capital debt the less there is left for wages, one begins to wonder how industry survives at all. Of course the answer is that industry does not survive; it commits suicide. Ninety per cent of all industries fail. The average life of all industry is only seven years; only four per cent of our greatest industries have existed thirty years or more. The situation in Canada is serious, and it is not getting better as time goes on.

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

Thomas Vien

Liberal

Mr. VIEN:

Will the hon. member tell us from what source he got his figures?

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

Joseph Needham

Social Credit

Mr. NEEDHAM:

They were from The Instructor, published in Gardenvale, Quebec.

[Mr. Needham.1

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

Thomas Vien

Liberal

Mr. VIEN:

I am satisfied.

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

Joseph Needham

Social Credit

Mr. NEEDHAM:

Speaking a few days ago the hon. member for Huron-Perth (Mr. Golding) made this statement:

The Liberals have a tremendous majority in this house, but with that goes a tremendous responsibility.

There is no doubt about that. If ever a government was on trial in Canada, surely it is the present one. I take it every hon. member feels he represents all his constituents, and for that reason Liberal members in this chamber represent a great majority of the citizens of Canada. These citizens are looking to you for action and for relief. You are the dominion government; in reality you are the dominion people, between elections. Just so far as you know why you were sent here to represent your constituencies, and just so far as you are aware of the responsibility to which the hon. member has referred, to that extent will the government act as you decide. When I make that statement I refer not to the cabinet but to hon. members of the Liberal party generally. There is the responsibility which rests upon each and every one of you.

On every coin in this dominion there is a picture of the king, and I think the king's picture should be on every currency bill as well. I want to know by what authority any chartered bank got the power to print money and put on it a picture of Sir Herbert Holt or of M. W. Wilson or of some of the other bank presidents. By what authority do they do that? I have been told ever since I came to this dominion that these bills are not legal tender. If they are not legal tender, there is only one conclusion, and that is they must be counterfeit, and if they are counterfeit it is time this government took some action about it. If the banks have no right to do what they have been doing, and we asked them to return the interest which they have been receiving illegally, we could readily deal with the national debt, could we not? I say again that the picture of our sovereign should be on all currency that is issued in this dominion, backed by one hundred per cent of the wealth of the country.

I call upon this government to fulfil its pledge given on the eve of the election by the Prime Minister (Mr. Mackenzie King) in these words:

Usury once in control will wreck any nation. Until the control of currency and credit is restored to government and recognized as its most conspicuous and most sacred responsibility all thought of the sovereignty of parliament and of democracy is idle and futile.

The Budget

Mr. Motherwell

I wonder just what those words mean, "restored to government?" There is the implication that the control should be there now, and that the government has never legally transferred it anywhere else. That is what this country is looking to the Prime Minister to do, but so far we have had no indication of any move in that direction. I believe, Mr. Speaker, that the words of the Prime Minister which I have just quoted are a distinct pledge of the Liberal party, one of their main planks, and I believe that the two gentlemen who are responsible for that plank being included in the Liberal platform are the Hon. Mitchell Hepburn, now Premier of Ontario, and Hon. Ian Mackenzie, one of the members of the present government. I appeal to them to see that that part of their pledge is fulfilled.

I had thought, sir, of dealing with the question of monetary reform being taught in our schools, but that is really a provincial matter. I would, however, call upon the departments of education throughout the dominion to see that our monetary system is taught in our schools so that people will understand the conditions under which the present system is functioning.

One cheering aspect of this whole thing is that public opinion is aroused as never before on this question. The people are on the march; they are investigating, and public opinion, I believe, is the factor that will decide the issue sooner or later. If this government want to kill communism, if they want to check socialism, if they are not in favour of social credit, let them get busy and reform the present system themselves, or the people will put someone else in power that will. The opportunity is yours and the country is behind you; there is no doubt about that, and if you act now you can do something for this country that will make the Liberal party immortal. If you do not, I hesitate to say what may happen.

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

William Richard Motherwell

Liberal

Hon. W. R. MOTHERWELL (Melville):

Mr. Speaker, it has been my privilege to listen to fifteen budget speeches in this house and to about as many more up in Regina, and I do not think I have ever taken quite so much satisfaction and pleasure in listening to any of them as I have in listening to the one delivered by the Minister of Finance (Mr. Dunning) a week ago last Friday. It was a wonder for candour and comprehensiveness. I think I like it best because there were no phony money stunts in it, and that sort of thing-Doctor Townsend's plan, Upton Sinclair's, that kind of highly infectious economic disease that usually befalls the nation every time we have a period of great depression. I do not want to become too

personal but I must say that this house has not been entirely free from that infection. However, it is just a nursery disease that we get over easily and we hope that will be the case here.

There has been one notable omission in the debate that followed the excellent budget speech of the finance minister, and that is there has been no reference, with one exception, to the virtues of honest toil. Honest labour faithfully performed has ceased to be a commendable attribute in man, in the estimation of some of our people. I was brought up on the wholesome doctrine that early to bed and early to rise makes a man healthy, wealthy and wise. It may be foolish in some respects, but it is mighty sound in others-I hesitate to use the word "sound" for fear it means something unsound in these days. I am sometimes not only amazed but saddened when I hear hon. gentlemen in this house and in the country speak of hard work with disdain, as if it were not a desirable attribute of man at all, but something to be shunned, something that should belong to the age of scarcity. This is an age of plenty, we are told, and therefore we should talk more about leisure, how to put in our time, how to shorten the working day, and enjoy the comforts of modern civilization. So far as applying that doctrine to agriculture is concerned, I do not know any land that has become great as an agricultural land or any farmer who has succeeded by sitting down and counting the hours till sundown, and pleading for a shorter working day and a shorter working week. Agriculture is of necessity a seasonal occupation, and you cannot gauge it by the hours of industry and do justice to both.

The leader of the C.C.F., that abbreviation for Cooperative Commonwealth Federation, which is a disguise, and a thin disguise, for state socialism, suggested that farming could be run on a six-hour day, and that if we could not get our work done in six hours, then have two or three shifts as they do in industry. I do not think I ever heard anything so effective against the C.C.F. and their theories as when I heard that astonishing doctrine enunciated right in this room.

I like the budget, too, because I think it gives more consideration, especially from the tariff standpoint, to agriculture than has any other first budget of a new parliament as far back as I can remember. My recollection is that there were few if any changes in the first budget presented by the government of Sir Wilfrid Laurier and I know there were many but small changes in the first

The Budget-Mr. Motherwell

budget presented by the King government which came into power late in 1921. In fact, they were so small that those of us who were anxious to have larger changes made were a little dissatisfied. However, the changes increased in the aggregate until they culminated in the Dunning budget, which was condemned by the people of Canada but which is now being endorsed so successfully, not only in this house but throughout the country generally.

This is all the more so when we take into account the trade agreement recently entered into between Canada and the United States. When we consider the changes made under that agreement plus the changes made in this budget we find the largest number of worthwhile changes in respect to agriculture ever made by any government in Canada at its first session. There have been two or three challenges as to the soundness of this budget, but that is quite natural. As the farmers approve of the changes in the budget, so do the manufacturers and their friends not approve. In the session of 1930 the previous government shot the tariff upwards, especially with regard to agricultural implements. The duties on some implements were doubled; on others they were tripled and on others they were quadrupled. They were put up to twenty-five per cent. Under the trade agreement recently entered into with the United States, plus the budget reductions, the average duty on agricultural implements has been reduced to 74 per cent.

Can any exception be taken to these reductions? It is only a case of "as you were." If the manufacturers got a break in 1930, surely the farmers are entitled to a break now. Unless we do get a few breaks like this, we will soon be broke ourselves beyond mending. I look forward to the time when our manufacturers will be able to thrive under a low tariff just as they throve under the low tariff of the Liberal government from 1922 to 1930. It may be a little presumptuous of me to make a suggestion to the Minister of Finance, but I am going to do so because I realize he is in urgent need of revenue. I believe he could find additional revenue from one or two other sources. The free list does not produce any revenue, and only very little revenue is produced from a prohibitive tariff. I know it is almost like heresy for a Liberal to suggest anything like making a free article dutiable even temporarily, but this government is not a free trade government. The Liberal party is a low tariff party; we believe in the lowest tariff consistent with revenue requirements. The only ones in the opposition who do not believe this are those

who do not want to understand. There is a gentleman on the tariff board who used to use his spare time trying to prove that the Liberal party was the high tariff party; I wonder what evidence to that effect he will be able to produce now after this budget is completed? I think this budget shows that there is a real cleavage between the two major parties, notwithstanding the fact that the third party fondly tries to convince itself that there is no difference.

I suggest to the minister that he explore the possibilities of additional revenue by investigating the articles now on the free list. Many of these article could be taken off the free list temporarily in order to meet the present emergency. I want to help the minister in every way possible to get revenue, because we cannot balance our budget without revenue. I would not like to see the sales tax raised any higher, but I think additional revenue could be got in the way I am suggesting. I once had occasion to go over the free list and I saw how extensive it was. A small tariff could be placed against some of these items or an excise duty levied, if we want it that way. This could be taken off automatically in the course of two or three years, or whatever time might be decided upon. I am looking to the time when it will be possible to bring the remaining high tariffs down to a revenue producing basis. If that were done I believe we would obtain a greater amount of revenue and also ease the consumer's burden.

I leave these suggestions with the minister. It is only a layman's advice, but it is not long since the minister himself was a brother layman and I think he will understand.

The budget debate is sometimes used as a means of directing attention to the grievances of one's constituents. There has been a particular grievance in Saskatchewan, and perhaps throughout the west generally, namely that our wheat is being tampered with at the terminals before it is exported. Before 1900 there was no law governing the transportation and warehousing of our wheat, but in that year the Canada Grain Act came into force. Prior to that time the grain dealers had debauched the business so completely that they themselves applied for remedial measures, and they joined with the farmers in asking for the Canada Grain Act in 1900-it was then called the Manitoba Grain Act. But there has always been a tendency to go back to the old ways. Eastern members will notice that quite often a royal commission is being appointed to inquire into the grain trade. We get things fixed up for a time and then all of a sudden trouble breaks out some-

The Budget-Mr. Motherwell

where else. Practices prohibited under previous legislation are evaded in some way or other. I should like to show what I mean by quoting from Hansard of last year. On March 25, 1935, the house was in committee of supply dealing with the estimates of the former minister of trade and commerce, Hon. Mr. Hanson. I should like to quote from the discussion that took place'in connection with an item pertaining to the administration of the Canada Grain Act. The former member for Macleod (Mr. Coote) started the discussion, which continued for about an hour and a half, and I recommend the reading of this discussion to hon. members who are interested in this matter. I quote from page 2066 of Hansard of last year as follows:

Mr. Coote: Mr. Chairman, a few years ago the Canada Grain Act was amended so as to prohibit the mixing of wheat in grades Nos. 1, 2 and 3 northern, and before this vote is carried I hope the minister will tell us what steps are being taken by the grain commission to see that that provision of the Canada Grain Act is being carried out.

While I am on my feet there is another matter I should like to bring to the attention of the committee. Even if those provisions for the prevention of mixing may be carried out, another practice apparently has grown up which lowers the standard of No. 1 and No. 2 northern in particular so far as shipments overseas are concerned. It is quite a common practice, I am told, for cars of No. 1 and No. 2 northern wheat which are sampled at Winnipeg to be tested for protein content by the grain companies. Word is sent ahead to the terminal at Fort William, and if this wheat is of a high protein content in many cases it is binned by itself and certain bins apparently are held for what is called selected No. 1 northern, high protein. The result of this practice, it seems to me, must be to lower the grade of the bulk of the wheat that goes out to our overseas customers.

That is the complaint. While the mixing of grades was prohibited, the selecting of high class protein cars was not prohibited. We are told that there is a principle in law that you cannot do indirectly what the law prohibits your doing directly. In my estimation this is not only a wrong practice, but an illegal one. The best cars are skinned out, as it is termed, and sold on a premium basis in the United States. The depreciated balance is sent to the overseas markets where we have to meet the strongest competition in the world. That is wrong. Mr. Hanson admitted that it was being done, but he said that it was done in such small proportions that it did not materially affect the overseas shipment. He admitted however, in a statement which I will read, that if it assumed larger proportions 12739-174

then of course it would be another matter. Here is his reply:

With respect to the second matter to which my hon. friend alluded, namely, the special binning of wheat at terminal elevators, I am advised that a perusal of the grain act will show that this is a perfectly legal process under the provisions of the act itself. This special binning of select wheats by terminal elevators is legal under the grain act and is controlled by the commissioners, in so far as the special bins leased for this purpose have to be authorized by them. It would not appear that this matter is of any considerable importance. because out of a total of 62,000,000 bushels which came to the head of the lakes during the past season, only 820,000 bushels have been so binned. This is only about one and one-quarter per cent of the total. This facility of special binning is open to all interests, including the Canadian mills. In order to specially bin wheat it is necessary for the purchaser to obtain the owner's consent, thereby assuring an equitable return of the premium paid in this connection. An objectionable practice which was stopped in 1930 was that of permitting the diverting of special wheat without the owner's consent and frequently without any premium compensation being paid to the owner. I am advised by the commission that the only possible objection to this practice is that it more or less reduces the average quality of the outgoing shipments, that is the shipments which go to the export trade.

Think of the guilelessness of that gentleman-no, that is not a good word. He was a new minister and we felt sympathetic towards him, and he could not properly have been expected to understand the wheat trade in the few months he had occupied that position prior to this debate. So that I will not call it guilelessness. But call it what you will when he said "the only possible objection" would be that it more or less resulted in a deterioration in the quality of shipments that went overseas. The evidence is on record and I point to it once more this afternoon in the hope that when the report of the special committee on marketing is submitted and the government refers it, as I assume it will be referred, to a royal commission-that is what is forecast-the scope of the commission's inquiry will be sufficiently wide to enable it to deal not only with marketing but with these evils that have again crept into the handling of wheat at the head of the lakes. Let me read another Hansard extract from my own remarks:

Each year that this item has been under discussion up to the present time I have inquired of the previous minister whether there was any evidence of the restored mixing of wheat grades. The practice was general years ago. The answer which that minister gave was invariably, no. Well, each year I hear further reports of it. I am not making any charge just now but I want to put the

The Budget-Mr. Motherwell

government on their guard. It is easy to start these practices but difficult to stop them. These practices invariably begin under Conservative governments and then it takes the succeeding government nearly all their time in office to stop them. In 1930 an attempt was made by some of us to prohibit the mixing of grades and a compromise was reached, prohibiting mixing in the four top northern grades and permitting it in the rest of the grades. As a matter of practice anything that is not prohibited under the grain act is usually done; that is the substance of the matter. It is not particularly made illegal, but it is not prohibited and therefore it is gone ahead with. I have grave suspicions and pretty reliable information that the law is being broken with respect to the four top grades. I did not hear the first remarks of the hon. member for Macleod (Mr. Coote), but I understood him to be drawing attention to the special binned top grades. These grades are isolated and special binned for their quality and are sent to the United States, where a premium is paid therefor. That is exactly the way it started before, only it was with carloads; carloads were switched and cut out and sent somewhere- usually to our millers. To the extent that that was done, what was exported overseas was correspondingly impoverished in quality.

There can be no doubt about that. If you have a dozen apples on that table and you take out the three best, then the other nine will be of a lower average than the original twelve. Anyone can understand that. Mr. Hanson, replying to Mr. Vallance, stated as reported at pages 2069 and 2070:

As regards the degradation,-

He uses a stronger word even than I used.

-by reason of this special binning, of the quantity that goes into the export trade, I agree with the hon. gentleman. But it is permitted by the act and I do not think that any great harm is done where the quantity is so small. I believe that is the opinion of the commission. Of course, if it assumed larger proportions it would be a different matter.

I have not the exact figures from the bureau of statistics, but I know that the export of milling wheat to the United States has greatly increased this year. Earlier in the season it was estimated to be between 35 million and 50 million bushels. There is nothing however to indicate how much of that has been special binned in the manner I have described1, or how little, but the opportunity is there, and I think it is high time we dealt with that questionable practice.

About a year ago I received from a former superintendent of a terminal elevator at Port Arthur a statement to the effect that the mixing practices that had been prohibited, not only those that I have described but the actual physical mixing of wheat, had been reintroduced by some terminals in every conceivable way, as much as they dared and

IMr. Motherwell.]

could get by with. I have no reason to douibt the accuracy of that statement. I purposely refrained from bringing it with me, for I do not think it is wise to disclose the identity of this gentleman, because prospective witnesses sometimes have a habit of disappearing. I must ask the house to take my statement. I hope it is not stretching a privilege too far when I assure the house that I have in my possession a very lengthy document volunteered by a former superintendent of a terminal elevator indicating that these practices are being largely carried out now.

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

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

What year was that?

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

William Richard Motherwell

Liberal

Mr. MOTHERWELL:

1933 and since.

If that is so, I do not think there is an hon. member in this chamber who will not want our Canadian wheat protected from debasement. We speak of defaulting on bonds, defaulting on anything, and we shrink from it. When we do not live up to our wheat certificates, or for that matter our cheese certificates or any other certificate which the government of Canada is behind, we default just as much as we do when we default on bonds, and I hope that this will be the view taken by the committee, and that this investigation with respect to marketing will be sufficiently wide to take in the question of maintenance of quality. I hope to see this done, first, to remove the evil, and secondly, for the reason that the very first prerequisite of marketing is to have a good article to market. There is an old adage that if you buy an article right it is half sold. I do not know whether the chairman of the price spreads committee will agree with that. In order to buy properly you must buy in bulk, and that means mass buying. And this is equally true. In order to sell wheat or any other cereal or commodity properly you must produce right and deliver to the prospective customer right, and then your product is half sold. Anything that works to our disadvantage, anything that removes the edge we have over other wheat, puts us at the mercy of our competitors. We must compete against the depreciated currency of two of our veiy strongest opponents, the Argentine and Australia, but we have two advantages to offset that. I am going to make one admission now in the presence of the right hon. leader of the opposition (Mr. Bennett). After inquiry I believe we have a slight edge by reason of this six cent British preference on wheat. I will not go into that matter at length, but I think I owe the right hon. gentleman that admission.

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

Some hon. MEMBERS:

Hear, hear.

The Budget-Mr. Motherwell

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

William Richard Motherwell

Liberal

Mr. MOTHERWELL:

It is very slight, though. I mention this because we violated the conditions of the contract which entitled us to that preference when we sold wheat not at the world price but at sometimes ten to twelve cents above it, so that preference was liable to be taken away, which is not the case now. I had no opportunity at that time to make this admission, but if it will do my right hon. friend any good I make it now. Possibly I am doing this more for my own sake than for his, but I feel I should say that because of that preference we have a slight edge under certain circumstances. The other advantage is in the quality of our wheat. If in hard times we put our price too high and above competitive prices, the consumers are going to use just as little of our wheat as possible. Wheat must be sold at competitive prices with comparable wheat of other countries. There is no other way to sell it and still get your share of the sales; there never has been any other way and I do not expect there ever will be any other way. An attempt was made, for four years, 1932 to 1935, to sell our wheat in another way, but it failed.

That is about all I wish to say with regard to this question. Now that we have gone into this business of wheat marketing, we do not know for how long, let us all get behind that wheat board and behind any government which may occupy the treasury benches. Let us see that the quality of our wheat surpasses the quality of any other wheat which goes on the market, and in that way we shall be able to offset the disadvantages that are apparent. We are up against the problem of distance, for one thing; our wheat is grown away in the interior of a great continent, far from the ocean no matter which way you look. Then there is the disadvantage of the depreciated currencies, already referred to, of other countries. I think I will leave it at that; I think hon. members are sympathetic with these views, and I just wish to say to the house that this is a situation which cannot be taken care of if we confine this prospective royal commission strictly to what is called marketing, or marketing methods.

Well, Mr. Speaker, I think I have gone over that without making very much of a break, though I have had to do some plain and fancy skating, and that will be even more the case in connection with the next subject. If I had any hair, this question of debt would make it stand up, sometimes, when I think of it. The vortex, the maelstrom of debt in which we find ourselves, individually and collectively as a people, did not start yesterday or the day before or after the war. It started early in this century, or maybe before that.

Speaking of the west, which I know more particularly, in the early days we did not have any opportunities of getting into debt because until about 1894 no one would trust us. The early settlers went in there in 1882, and for the next twelve or fourteen years you might as well have asked a moneyed man to take a mortgage on a square mile of sunshine or atmosphere as on a square mile of land. There was an abundance of both, but land had no value as security for a loan until it was demonstrated what the land would do. Then we had a period of fair prices and large crops, and moneylenders crowded the money on to us until it nearly amounted to an orgy. As treasurer of a school district I was in a position to know how this thing was going on, and long before it was known publicly I was horrified at the number of men who were putting mortgages on their land. I often wondered how they were ever going to get them off, when the land became older and dirtier, the equipment worn out and the men themselves older and worn out. As a matter of fact many farmers did pay off their mortgages and then contracted new debts during the war, so they found themselves in a more difficult position than ever.

In the beginning of the borrowing era about 1894, mortgages were taken on a bunch of ponies, or any other chattels, for $300 or $400. That was all you could get. Then one or two private banks came in with plenty of capital, which permitted them to take pretty good risks considering the interest that was charged, ranging from 24 to 36 per cent. Then the chartered banks came in, sometimes two or three of them in a town like Indian Head. They would come out on the street and canvass for loans. In the old days of the open bar it used to be, "Come in and have a hooker." The banks said, "Come in and have a thousand, and later on when you sell your wheat you can pay it back." How could frail flesh resist that enticing offer and appeal? Then came the mortgage companies, competing for our business and vying with each other as to which one would give a farmer the largest mortgage. Later many began to find it difficult to pay back the money with interest at eight per cent, nine per cent, or whatever it was.

Then a great agitation arose for the government of Saskatchewan, of which I was a member, to go into the farm loaning business. Four other provinces were induced by pressure of public sentiment to go into the very doubtful business of lending money to their constituents. I do not need to enlarge on what happened to them; I think the Minister of Agriculture (Mr. Gardiner) knows. I believe

The Budget-Mr. Motherwell

Saskatchewan lost less than the others, because that government administered the money pretty carefully and handled the loans in a pretty businesslike way, but they all lost money, including this old province of Ontario. Then, not satisfied with that, public pressure came to the highest government in the land, the federal government, and induced it to go into the loaning business. That was started in 1927, with perfectly good intentions. Just as the legislation of last session and the session before, in regard to the Farmers' Creditors Arrangement Act, and the enlargement of the amount available under the Farm Loan Act, was intended to adjust farm debts and make farm loans, so the original federal Farm Loan Act of 1927 was introduced primarily not so much with the intention of doing a lot of lending but for the purpose of controlling interest rates, and it achieved that purpose. In Saskatchewan we have an act called the municipal hail insurance act that has been on the statute books for nearly a quarter of a century. It does not pretend to do everything in the hail insurance business, ibut it is a great factor in controlling the rates of private companies. It was with much the same idea that the federal farm loan board was created in 1927, not to make many loans but to control interest charges.

Then two years later came the smash, and all commercial companies loaning money to farmers disappeared. I do not know where they went; they scooted out of sight and were not to be found. To-day I do not know of any corporation or individual throughout Canada making a business of lending money on farm mortgages. The result is that we have unconsciously, unwittingly, drifted into the same position with farm loans as we did in regard to the nationalization of our railways. It was not with deliberate intent that the railways which now form the national system were taken over as a government proposition. There was an alternative, as we all know-put them up at auction, get what you could out of them. But that course was not taken. I am not criticizing that, but I am pointing out that inadvertently they came into the hands of the government, and now this government is pledged to give them a fair chance. That is our policy; now that we have them, give them a fair opportunity to make good.

I do not know whether I am in a position to say that about the farm loan board. I have a great many complaints about the farm loan board, about the amount of money borrowers are getting. The mania for borrowing has become so impregnated into the very fibre of our people that a great many seem to think

tMr. Motherwell.]

the best way out of one hole is to get into a deeper one. That has been tried all too often and has nearly always failed. We have exhausted every commercial means of borrowing. Surely the collective wisdom of the cabinet can devise some better rvay to assist agriculture than by the state lending money to its subjects. I submit that for consideration by the cabinet. It is said that fools rush in where angels fear to tread; well, on the other hand it was also said by the red men of yore that you cannot scalp a bald man. Believe me, it is in the interests of the country that we should hesitate at this stage before we go too far, and find out-but I am not suggesting another commission-whether there is not a better, a more abiding, a more effective way of helping distressed agriculture than by the state lending its subjects money. I cannot state what attitude I took in the Saskatchewan legislature except to accept my full share of responsibility back in 1917; I think my obligation as an adviser of the crown forbids my stating that; neither can I make it plain what attitude I took here in 1927. But I am at liberty at least now to warn the house of the danger, not only to the treasury-because half the money will be lost if provincial loaning experience goes for anything-not only is the treasury in danger of being smashed, but every government that administers a lending policy like that is itself in danger of being smashed, and the ultimate result will be of very doubtful benefit to the farmers themselves. Why? Because it is perpetuating the same idea, that the only way to get along is to borrow oneself into prosperity. That is wrong. A little borrowing may be a great blessing, but unlimited borrowing such as we have had is a great curse. I have sometimes used strychnine as an illustration; it is a great heart tonic, but if you double the dose you will soon turn up your toes. It is the same with debt. A moderate mortgage may be made helpful, but if we ever get on our feet out of this morass of debt I hope that whatever authority is in charge will see that there is a maximum limit put upon the mortgaging of farms, something that in reason can be paid back. If we do that we shall reap the blessing, but as it is now, we are reaping the curse. We have sown the wind in the past, and are now reaping the whirlwind. Canada is a young country; it is only a little over a hundred years since this city was founded, since Colonel By dug the Rideau canal. That is only a tick of the clock compared with the age of the old countries of Europe. We can easily correct these mistakes that have been made if we

The Budget-Mr. MacNeil

are so disposed. Some people say: What is the use of looking to the past? But what is the use of living if we are not to learn from the mistakes of the past? If we are going to commit them over and over again without heed to the lessons' to be learned, then we are living in vain.

I may be asked; How would I do it? What suggestions would I make to better farming conditions. After hearing the remarks of 'tihe hon. member for Carleton (Mr. Hyndman) yesterday, some of which I think were wise and some otherwise, I am going to mention one, the wise one. That hon. member takes the ground that dairying should be helped in some way, and I agree. Dairying is the chief cornerstone of eastern agriculture-dairying plus its allied industries, the raising of hogs and poultry. In theory we are all opposed to subsidies, and I think there is a more excellent way for the dairy industry to be helped than by subsidies, although I am saying nothing against that proposal as a last resort. In the budget debate of 1931 I made the suggestion to the then minister of agriculture that if the government were going to spend money on a building program some of the buildings to be put up should be for agricultural purposes; that would assist us to get back to normal. Inasmuch as agriculture is now and must be the major primary industry in Canada-of course mines have come to the front very rapidly, while timber and fishing are also important primary natural industries-I was speaking then more particularly on behalf of agriculture; I then took the ground that if you are going to have a building program the money should be spent for productive buildings, to help Canada to get on her feet again.

Now, how can we do that? I have had the opportunity of seeing the dairy industry of other countries, seeing their facilities for making cheese and butter-great, fine modern buildings, not too extravagant, but suitable for making all the major products into which milk is processed. If the market calls for cheese, make cheese; if for butter, make butter, and so on. There they are, well located, ready to make whatever products the market call for, in these combination factories. Not only that, but the turn-over is great; they manufacture in such large volume that they are able to keep down the cost per pound and thereby give the producer more for his milk. Now, that is no dream. It is contrary, I know, to the doctrine of the Bull Moose of the price spreads committee, that mass production and mass buying are evils. The man who tries to run a cheese factory on the basis of ten or twelve cheese a day will be convinced that it is going to cost a lot more than a larger make. Such a small factory cannot afford to hire the best cheesemaker and then the quality tends to go down. The principle of mass production and mass buying is sound generally. Lest some hon. members may think that is a theory which has not been well demonstrated in dairy practice, I may say-and I can talk all the more freely of this because it was started by a good Tory government- that in 1916, under the Hon. Martin Burrell, right in the middle of the war, the Department of Agriculture, the deputy of which was then Doctor Grisdale, one of the many who disappeared during the exodus of deputies in the last five years, established a large combined factory at Finch in Stormont county. They bought three or four old factories and combined them into one. They produced butter and cheese and other processed commodities of milk so cheaply and with such satisfaction to the patrons that they could not take care of all the milk which was offered.

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

Frederick George Sanderson (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The DEPUTY SPEAKER:

I am sorry to interrupt, but the hon. member has exceeded his time.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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May 12, 1936