June 18, 1936

?

Right Hon. I@

Mr. Speaker, I have not made any observations on this bill since its introduction, for very obvious reasons, but after listening to the speech of the Prime Minister (Mr. Mackenzie King), delivered yesterday, I think it is desirable that I should make some very brief observations upon the attitude which the present government assumed on the public platform during the election of last year when dealing with this question. First, in various parts of Canada which I visited I found that this bank had been held up as a privately owned bank. It was stated that, by contrast, it was to be a publicly owned bank. I agree with the Prime Minister when he says that he did not use the word "nationalized'; he did not use that word, so far as I know, but the effect of the words "publicly owned" upon the public mind was to induce the people to believe that the bank was to be nationalized.

A publicly owned bank means a bank owned by the people. The bank created by the late government was a bank privately owned; the bank that will be in existence after this bill emerges from this parliament will be still a privately and publicly owned bank. It will not be a publicly owned bank. Therefore, the promise that this will be a publicly owned bank has not been honoured. There can be no gainsaying that.

Secondly, it was stated that it would be a publicly controlled bank and that currency would be issued in terms of public need. Of course that meant only one thing, and that one thing has not been accomplished by these amendments, and it is not proposed to accomplish it. Those of us who read the delightful utterances of the Minister of National Defence (Mr. Mackenzie) recall the statements he made with respect to what this bank would be. I cannot help but think that his understanding of it was entirely different from the observations made by the Prime Minister yesterday. It may be that he did not properly appreciate what was meant. If he did not, is it any wonder that the ordinary, average elector looked upon it as somewhat different from the terms of the bill now before the house?

The next point that was made was that we would have, in effect, a publicly controlled bank. I cannot do more on that point than direct the attention of this house to the fact that the executive committee is the governing body of this organization, and the executive committee has not been modified or changed. Under the former act it consisted of the governor, the deputy governor and one director to be named by the board of directors. The deputy minister of finance was to attend, although he had no power of voting; he was to attend as the liaison officer between the government and the bank. When this bill is assented to in a few days it will perpetuate an executive committee consisting of the governor, the deputy governor and one director selected by the board of directors. The deputy minister of finance will still be the officer who relates the policy of the government to that of the bank. Therefore, there has been no change in the executive committee and the control of the organization from day to day is a control exercised by the executive committee. The board of directors will be able to meet but seldom, because the distances are great and they are scattered over the whole country.

The next point is the power of veto. It is perfectly clear that the governor in council has now assumed the power to veto. To veto what? To veto resolutions that may have

Bank oj Canada-Mr. Bennett

been arrived at by the executive committee when there has been a difference. How can that difference arise? Remember, the committee consists of three members, two of whom are selected by the government while the third may be a government nominee. There being only three members, any differences that will arise must be, first, differences between the governor and the deputy governor on the one side and the director on the other. In that event the governor would not disallow it and the resolution would stand. In the other case it would be the deputy governor and the director against the governor, and in that event the governor in council would have to decide between its own governor and its deputy governor and director, who might or might not be a government nominee. Could anything be more ridiculous than the suggestion that an executive committee thus composed can ever run foul of the governor in council unless there is a conflict between those who are operating the bank and the government of the day, a division of opinion between the executive committee and the government itself? In that event the powers conferred by this bill will not have modified in any sense the provisions that now exist, except that the governor in council may exercise a veto with respect to differences where the governor is on one side, as I have said, and the deputy governor and the director are on the other side. The government will have to choose between the two.

It was said further in the course of the explanations given the public last year that this was a private bank, entrusted with the power of issuing money, and to which had been transferred the gold of the country to hold as security for the issue of the currency of Canada. All of this was true, but only partly true. It will be recalled that under the provisions of the statute creating the bank, the bank was made responsible for the issue of the paper currency which it took over. In addition, that responsibility was secured and assisted by the issue of Dominion of Canada bonds which were placed in the treasury of the Bank of Canada and which have been a vital factor, contributing as they do to the revenues from which the dividends are paid. Is there any change in that? No. The gold still belongs to this bank, owned partly by the people and partly by private shareholders. The paper money is still issued by the bank, owned partly by the people and partly by private shareholders. The liability of the bank for the Dominion of Canada notes still exists; it has not been changed. The guarantee given by the deposit of bonds in the dominion with the bank to

secure its obligations still continues. There has been no change, none whatever. There still continues the relation between the bank and the private shareholders that existed when this bill was introduced into this house.

And lastly, upon that phase of it, it will be recalled that the present Minister of National Defence introduced in the banking committee, when the bill was under consideration, an amendment by which he proposed-and it struck me at the time it was a proposal that was in the minds of many hon. members- that the country, if it so desired, might secure the shares of the bank-secure them by taking them over at any time. This proposal was negatived by a vote in the committee-why? The answer is obvious. For this parliament had power, as it had in the case of the Grand Trunk Railway, to enact a statute to provide for the expropriation of these shares, for the taking over of the shares, and for the fixing of the value of the shares by arbitration or otherwise. That power rested with this parliament, and the Minister of National Defence will remember that the amendment he proposed was negatived for the very obvious reason that it was a declaration of a power which rests with this parliament, which has always rested and always will rest with it, the power on the part of parliament to enact legislation, if it so desires, to expropriate or compulsorily take any property which in the national interest it should possess. And when, during the progress of the election campaign, it was suggested that this should be a publicly owned bank, I took the trouble to point out to the people on more than one occasion-on many occasions in fact-that so far as the government was concerned its first view had been that these shares should belong to the Canadian people as a whole, publicly owned.

But having regard to what became apparent with respect to methods abroad, the invading of the privacy of governments and the insistence that patronage should be utilized in the creation officially of positions in the bank,

I told the committee myself that we could not possibly undertake properly to create this bank if we as a nation undertook to hold the shares, that the pressure of all sorts of people for all kinds of positions was such that the bank itself must assume responsibility for its organization. And I pointed out, as I do now, the sort of pressure that was used: (a) geography; (b) rates; (c) religion; (d) polities, and, after all, sometimes, merit-not so often, but sometimes, merit. Now these differences pressed upon us so strongly that we believed that this bank could be properly organized only if it were done under the auspices of directors, the bank being privately

Bank of Canada-Mr. Bennett

owned; and that was the method we pursued. I told the banking committee that; I told the people of the country that; and I said that if after a fair trial it was found desirable that the bank should be owned by the people I would be the last man in the world to interpose any obstacle or to suggest any difficulty; because, if the people desired to follow the policy pursued in some countries instead of adopting the policy followed in other countries, if they preferred the policy followed in great nations rather than to adopt a new policy followed by a smaller number of countries, I was content. New Zealand was organizing its bank about the same time that we were, and adopted in the first instance the very idea that we did, namely, that the organization might be carried on best under private auspices; and then came the change of government and the same cry for public ownership, but not the same result, for they did one thing there that one would expect them to do if they were to make it publicly owned. They took over the shares.

I come now to the next point. The sum of $5,000,000 was the capital of this bank. In Australia it was pointed out that capital as such was unnecessary, inasmuch as a loan from the state was all that was essential to enable the bank to function; and the central bank in Australia carries on more than a central bank business: it carries on the general business of banking, having secured in the first instance, from the state itself, sufficient money for the purpose of enabling it to discharge its function. But it earned large profits, and these profits have now become the nucleus of its capital with respect to its general transactions of savings bank business. It well may be that the experience of nations is not of value in relation to financial matters, for each country has peculiar conditions which may possihly require different treatment from any other country in the world. But we did know, in the light of history, that the publicly owned central banks were few in number and that their success had not been greater than, if as great as, that of the privately owned institution. The circumstances connected with the coming into being of the Bank of England perhaps differentiate that institution from other central banks; but in Europe there are many central banks, and when it was suggested that the Liberal party was in the van of the movement for the creation of a central bank in Canada, I could not but think that the language used by those who sit to my left must have carried conviction, because we do recognize that in the early days immediately after the war-

the Minister of the Interior (Mr. Crerar) will recall this-those who sat to the extreme left then urged the creation of a central bank. Why? I am not referring to his party; I am speaking of the smaller group, notably Mr. William Irvine, if the hon. gentleman wishes me to mention any names.

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LIB

Thomas Alexander Crerar (Minister of Immigration and Colonization; Minister of Mines; Minister of the Interior; Superintendent-General of Indian Affairs)

Liberal

Mr. CRERAR:

I am speaking only from

memory, but I think that if the right hon. gentleman will search the records of Hansard of 1921 and on for several years, he will find that suggestions for a central bank were not made at that time.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

I was not in the house

and therefore I can speak only from what was said outside, but I do recall one man, Mr. Irvine, and another, Mr. Coote, urging that a reserve bank-I think ait times he called it a reserve bank and) at other times a central bank-be established:.

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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

The

question was suggested in 1916 by Mr. W.

F. Maclean.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

I am familiar with that.

I know that in 1916-it was before the Union government came into being-the late Mr. W. F. Maclean did urge the creation of a central bank at the same time that the question was engaging the attention of the United States authorities. But that was in passing rather than the urging of it as a matter of national policy, if I may differentiate between the two. It will also be recalted that at the Genoa conference the question of a central bank for all the nations of the world was discussed as a matter of international policy.

Leaving that, however, I merely desire to mention that the question of the establishment of a central bank engaged the attention of all the great international monetary conferences and of financial men in Canada, because the banks in Canada were opposed to it. There was never any doubt about it that, with one exception, the chartered banks, the managers and presidents, in Canada opposed the creation of a central bank. We might as well face that frankly. They did it openly without hesitancy or doubt; and the reasons were obvious. All one had to do was to look at the Finance Act and the Bank Act to realize why the president of any bank would be opposed to the creation of a central bank. So far as the late government was concerned its attention was very markedly directed to it by special circumstances apart altogether from, shall I say, the academic discussions about it-and I fancy they were academic discussions-by members of governments for

a very long time in this country. When England went off the gold standard and the question of exchange became acute it was of course realized that all our exchange business was carried on. through New York, and a special effort was made to discover any means whereby we might assist in creating some method of doing our exchange business with London. It was pointed out that our efforts were futile, having regard to the small volume of trade, relatively speaking, that we controlled, and which was, of course, the basis of the exchange values. Therefore to a very considerable extent we had to continue to rely upon the New York market. But the government made up its mind that a central bank was desirable. Before the commission was appointed it had already determined, as was pointed out in this house, that it was desirable we should have one. But there might be differences of opinion, and a commission was appointed consisting of many men who were well known in financial and other circles for their knowledge of the situation. We were fortunate in securing as chairman one who had discharged in Great Britain a very great function as chairman of a most important commission there. Those of us who were in the house from 1930 to 1935 will recall that the Minister of National Defence became so familiar with the Macmillan report that he could quote from it with perhaps more readiness than even from the bible, of which he is a good student. The Macmillan report became known to every member of the house, and it supported the project of the central bank.

The bank was organized on the basis I have indicated. As I frankly told the committee in 1933 when we were dealing with the matter, the idea we originally had in our minds was that the shares should be held by the state and that it should be publicly owned, but we saw so many difficulties in the way of organizing it that we thought the only way we could secure an organization that would not be a political one was to pursue the methods that we did. But we pointed out-not one of us, not only myself, but others as well-as regards the question whether it should be a publicly or a privately owned bank, that we knew what the experience of other nations had been, and we said that whatever the people desired to have in that regard we should be glad to see they had. But when the people were told that they were going to get a publicly owned bank they thought they would get a bank that was publicly owned; and the bank they are going to get now is not going to be a publicly owned

Bank oj Canada-Mr. Bennett

bank. Of that there is no doubt. There is only one way that it could be done. The Minister of National Defence realized it when he was on the committee. He understood that we could achieve that end only by that same method, properly adjusted of course to meet the circumstances in taking the shares of the bank, as we employed with regard to the Grand Trunk Railway; or we might do it as we did with the shares of the Canadian National Railway, that is, acquire the shares and fix their value either by arbitration or by some other method-if thought desirable, by reference to the exchequer court.

It is said that these shares have changed values; that many people bought them at a higher value than that for which they were originally obtained, namely $50 a share. That sort of thing is true of any property. Look at the poor unfortunates who bought property at the townsite at Hudson bay; consider what they paid, and what they got after the present Minister of Finance, when Minister of Railways, had expropriated their rights. Observe their evidence in the exchequer court that they had paid thousands of dollars for that for which they were compensated in hundreds. It was a speculative movement. For the shares that were acquired S60 at the most was paid, and $60 represents an increase of twenty per cent over the original value. If the government was going to make the bank a publicly owned! institution it was necessary to do only one thing, and that was to acquire the shares, unless indeed', as was suggested from some source, five million dollars was not sufficient to enable the bank to function and it was necessary to increase its capital. But the Minister of Finance has not so suggested, nor has any one on behalf of the bank. "We raise the capital to $10,100,000, and we put in the capital structure of the bank $5,100,000 more than it had, without any request from anyone but in order that a majority of the shares may be held by the state." That is the explanation that has been given-"a majority of the shares held by the state." That is accomplished, I say, by the method that has been stated, namely, the payment of $5,100,000 to the bank and the issue of a special class of shares vrhich do not carry a vote for the purpose of electing directors, leaving still to the holders of the privately owned shares the right to elect directors, while the crown, owning the $5,100,000 worth of shares, appoints its directors. The number of directors that it is appointing will now be six in all, which of course will give control of the directorate, but it will not give control of the executive committee, which still consists of the two original nominees, the governor and the deputy gov-

Bank oj Canada-Mr. Bennett

ernor, supplemented' by one director who may be either appointed or elected, as the case may be.

So much for the capital stock and the way in which the matter has been dealt with. There is one other matter upon which I think a few words should be said. The Prime Minister referred to it yesterday. You will find it in his speeches-not only those delivered in this house-that currency should be issued by this bank in terms of public need. What do those words mean-"in terms of public need"? There was not a platform in western Canada that I visited where I was not told before the meeting, "You must deal with this question. You must be prepared to say that you are willing that the Bank of Canada should issue currency almost ad lib, to any extent that may be necessary for the public need." Well, heaven knows the public need is still here; it lias not changed. But this bill does not confer any greater power for the issue of currency than the bank had before the hand of the present government touched it-not one change in the world. Then what do these words mean, the power to issue currency in terms of public need? What did they ever mean? They mean to-day not more, not less than they meant in 1930; for this parliament has not been asked to confer nor has it conferred upon the Bank of Canada wider powers to issue currency than the bank possessed under the original charter. Let there be no misunderstanding with respect to that. I wish that to sink firmly into the minds of the people when the Prime Minister says, "We have kept our promises by one hundred per cent." Currency, we were promised, would be issued in terms of public need. We have heard two or three hon. members speak about the public need, but I defy any member of this chamber to point out that there has been a single modification either for good or for ill, either adding to or subtracting from the powers conferred upon this bank w'hen it came into being. Still stands metallic coverage, still stands the same percentage, still stands the same position with respect to legal tenders, still stands the same power of rediscount, still stand the same powers of transaction of business; no widening of powers, no increase in the ambit of its authority, no extension of jurisdiction, no power to issue currency to the extent of a single dollar in terms of public need beyond what it had when we created it in 1933. Where are the powers? I listened yesterday, expecting something of this kind might be pointed out, because I knew it was not to be found in the bank act; peradventure something now was to be done. But nothing of that sort has been done. Credit was a social service-I took

down these words, so it is not necessary to turn back to Hansard-"and the great struggle was between the money power and the people." The money power and the people- that is the struggle the Prime Minister put before the people of Canada, and he was the stalwart champion going out with sword and shield to fight this money evil, remembering the Spartan mother's direction of old, "Return, my son, with your shield or upon it." He went about this country and said to the people: All I want to do is to fight this great money evil, to take part in this great struggle between the people and the money power. Well, they fought it all this session, and I have seen no signs of any change in the instruments with which this great fight was to be fought from what the situation was when he went to the people last year. Is there any change? They say: Yes, we have six more directors in the Bank of Canada; we have doubled its capital; the executive committee remains as it was, but we have given a veto to the governor in council to deny or affirm if the governor and deputy governor do not agree. And they say: Look what we have done-we are fighting the money power for the people. Is it not amusing?

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CON
CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

My hon. friend from

Davenport says, "Worse than that." When the Prime Minister was referring to these matters and saying that credit was a social service I was wondering how much there is in this statute that was not there before; that is the question. The hon. member for Vjancouver-Burrard (Mr. McGeer) pointed out the situation, and it was not very palatable to some members of this chamber. He said: "I took those words of the Prime Minister to mean just what the ordinary man would think they meant, namely, that currency was to issue in terms of public need and that credit was a social service. I thought that is what was meant, and I told the people that. I told them that a new heaven and a new earth was about to come, and I appealed for their support on that ground. I took the Prime Minister's words," he said, "to mean what the ordinary man would think they meant-currency in terms of public need, credit as a social service." Those are the words, Mr. Speaker, by which appeals were made to the people, and when two leading members of this house, men of first-rate mental power and grasp, the hon. member for Rosthern (Mr. Tucker) and the hon. member for Vancouver-Burrard, saw fit to accept those words as meaning what the average man thought they meant, who can blame them?

Bank of Canada-Mr. Bennett

I should just like to know, if an independent canvass were made of this chamber, how many members did not think that those words meant just what the average man thought they meant. I wonder how many members would disagree with the hon. member for Vancouver-Burrard and the hon. member for Rosthern as to what they thought those words meant in October, 1935.

I confess that those with whom I came in contact, and I talked with many people, all said: Well, you are a sound money man. Sorry, we cannot have any more of it; it is a bad thing. What we must have is a new thing, currency issued in terms of public need and credit treated as a social service. And many of them, Mr. Speaker, fully believed they would be able to use those words to their own advantage-not for profit, but that they might be able better to deal with the pressing problems that confronted them. Will not any member sitting opposite me, will not nearly all of them say, that in the rural parts of Canada the words, currency in terms of public need and credit as a social service, were interpreted by those who heard them as meaning that they as individuals would experience those new conditions that come about by the greater circulation of money and the consequent improvement in the purchasing power of the masses of the people? That is what they thought.

I am going to be perfectly frank and say that the language of the Prime Minister is open to another interpretation, and in this connection I cannot but recall Mr. Keynes' last book, to which the hon. member for Vancouver-Burrard referred. Mr. Keynes in his last book points out that he has taken a different view altogether from the view he took when he wrote his previous books, and that this last book is intended for economists and not for the average man, because he has to convince and convert the experts first, after which he hopes to be able to do something with the common people, the masses of the people. That is the way he puts it in his very interesting and amusing introduction, and if there can be anything humorous in economics I commend those few pages of Mr. Keynes' last book to those humorously inclined. I think the Prime Minister must have had exactly the same attitude of mind, and when you find as profound a mind as that of the hon. member for Vancouver-Burrard and as close a student of economics and as industrious a member of his profession as the hon. member for Rosthern drawing the conclusions they did, one cannot but realize that after all the Prime Minister was talking to the elect; he let the masses draw any

conclusion they desired, and the masses drew the conclusion that currency in terms of public need would be issued, which meant that dollar bills would flow more freely, there would be more paper money floating about the country, the printing presses would be more active and the engraver busier than he ever was before; that credit which was essential to the body politic would now be issued as a social service like the old age pensions or some other measure of social reform. That is what the ordinary individual believed, what the layman, as Mr. Keynes calls him, concluded. That is not what the elect, the economists, understood. But it is what the Minister of National Defence understood. He has a very profound mind, and I know of no student of monetary reform who has given more time to the subject or who has been better trained in a great university than he. He has the clannishness of the Scot, and the Macmillan report became to him the shorter catechism of political economy in this country. Believing all this, accepting it as he did, his utterances were in accordance with the general understanding of the man on the street, the masses of the people.

I listened to the Prime Minister yesterday, and I know there was no intention that this should be so understood. He did not intend the untutored man on the plains or the fisherman on the sea or the lumberman in the forests to understand any such thing. Far from it. He was hoping, as Mr. Keynes hoped, to be able to convince and convert the economists first, that currency issued in terms of public need meant just what it has always meant in this country-no change. Public need merely meant, in the language of one of those who preceded me, sufficient money to enable the issue to correspond with the demand. Interest was still to be paid in the same old way-no change. There was to be no change in the payment of the toll that is exacted for the use of capital. No change, but still currency was to be issued in terms of public need. There was no talk then of interest or of these various matters which we now know the government is still carrying on in the same way. No, Mr. Speaker, the unfortunate electors were made to believe by the fervency of great advocacy that there was to be a profound change, a new heaven and a new earth. A better day would dawn. The monetary problems that had so much agitated great minds during the centuries were now to be solved, and public credit was to be issued in terms of public need, which meant that everyone who needed a dollar would get it. That is the sense in

Bank oj Canada-Mr. Bennett

which it was understood. And they believed it, which was unfortunate for us but very fortunate for those who sit opposite. But having believed it as they did, they can now look at this bill, and I defy any man to point out to me anything in this bill that changes the condition that existed heretofore. There it is. You have no change, but you have beautiful words, the words of the economist, of the political economist and the literary giants, all so mixed together as to make a perfect anaesthetic; being mixed together as a perfect anaesthetic they put the poor unfortunate elector to sleep, and they operated on him and he operated for them at the ballot box. Now he is awakening from his stupor; he looks round to see what the operation was; he learns that there was^ no operation worth while but that he had just been put to sleep with the promise of currency issued in terms of public need and credit as a social service.

I point these matters out, sir, because I feel that it is my duty to do so; in view of the effort made yesterday for so long a period of time, in a most interesting and, shall I say, to himself convincing speech of the Prime Minister, in which he made it quite apparent that there was no difficulty in squaring the circle-not the slightest in the world. All you have to do is to read sufficient extracts from newspapers and say: This i3 what we have done; we have done just what the newspapers said we would, and we have currency issued in terms of public need and credit as a social service. Well, having listened to the right hon. gentleman's advocacy of his consistency and of his one hundred per cent performance of the obligations undertaken, I have only to say that-alas and alack!-the meaning which he put upon his remarks should I think in fairness have been put into them when he was making them to the public. If he had explained just what I have said here; if he had said: Ladies and gentlemen, electors of Canada, when we have finished with the Bank of Canada Act we are going to double the bank's capital and appoint six directors, but we shall leave it just as it was with respect to the issue of currency and the discharge of the functions for which it was created; we are going to make it publicly owned by making it half private, except to the extent of $100,000, and half public,-if he had said that, I wonder how many who shared the general benefit from the language used by the Prime Minister during the election campaign would care to go back to their constituents, taking this bill in their hands, and truthfully tell the electors just the differences between the old act and

the new. "Currency in terms of public need, credit a social service." In hoc signo vinces!

I have nothing further to say, Mr. Speaker, except that I congratulate the government. I congratulate the Minister of Finance upon the training which he has received during the last few years, which enables not only the minister himself but those who sit about him to realize that after all, stability, security, certainty, are the hallmarks of a sound financial policy. Although for a moment you may be led by beautiful phrases or by words capable of two meanings to conclude that you may have currency issued in terms of public need or credit as a social service, you cannot possibly do it and maintain the position which this country has made for itself as a country that has honoured its obligations in terms of its contracts, has paid its debts to the extent that it has been possible for it to do so, and has stood out among the nations of the world as a country poor but young, realizing that if we are to develop as a great power, a great people, we can do so only by attracting capital to our shores, unless we are prepared to adopt the view which my friends to the left maintain and advocate so well, namely a socialist state. We are not yet prepared to do that. But unless we are, then the government is to be congratulated upon maintaining the old standards and following the course that experience has mapped out as the only course that can be followed by any nation that does not desire to bring about an impossible situation with respect to its currency on the one hand or repudiation of its obligations on the other. To the extent that the government has followed the course of its predecessors, leaving the Bank of Canada Act unchanged in its essential features, making the privately owned institution part public and part private, but not changing the general provisions as to its policy with respect to currency, and leaving all the powers and functions of the bank untouched by the ruthless hand either of time or of extreme radicalism, I congratulate it and trust it goes forward to discharge the very onerous duties and responsibilities that during the next few months rest upon it, in a manner that will enable us at the end of that trying period to maintain our position and be able to say with pride and satisfaction that we have not used either the printing press or the engraver's art to issue currency to meet our pressing needs, or treated credit as a social service that can be had by anyone that asks for it. It cannot be done and this system maintained. When I hear my hon. friends to the left advocating a change of the system I appreciate their consistency; for they realize that unless the system is changed we must maintain the posi-

Bank of Canada-Mr. Bennett

tion which was taken by the late administration and which the present administration is continuing to follow.

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LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Mr. MACKENZIE KING:

Mr. Speaker, there is just one correction which I should like to make in the statement made by my right hon. friend at the beginning of his speech. I did not like to interrupt at the time. The right hon. gentleman said I had spoken of a publicly owned and publicly controlled bank. I do not think he will find in any utterances of mine either in this house or beyond its walls advocacy of a publicly owned and publicly controlled bank. I took care to say on all occasions that the question of public ownership was debatable but the question of public control was not, and I spoke of a properly-constituted publicly controlled bank.

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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

I quite appreciate the statement made by the Prime Minister. In the speech he made at Saskatoon, which place I reached the day after he had been there, that was the understanding of his speech, but obviously it was not an attempt to report the language verbatim. If the right hon. gentleman says he made no such statement of course I am glad to accept his statement. It does not change the force of the argument.

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EXTERNAL AFFAIRS-PROBLEMS ARISING OUT OF ITALO-ETHIOPIAN CONFLICT


The house in committee of supply, Mr. Sanderson in the chair. Salaries and expenses of the office of the Canadian Advisory Officer, $32,500.


LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Right Hon. W. L. MACKENZIE KING (Prime Minister):

Mr. Chairman, in the

statement I am about to make I shall seek to anticipate the questions which may be asked with reference to the important international matters to be discussed this afternoon. Having regard to the critical situation existing in Europe and other parts of the world, and to the possible interpretation which may be placed upon any observations made in the course of debate this afternoon, and especially because of the world significance of some of the matters we are about to consider, I shall make no apology for following somewhat closely the notes I have carefully prepared. I hope the committee will permit me to make my statement free of interruptions. I shall endeavour to say nothing which will necessitate interruption, and upon completion of the statement I shall be pleased to try to give such further information as hon. members may wish to have.

It has been contended that the government has not made clear its policy on the important problems, immediate and future, which have been raised by the outbreak and progress of the Italo-Ethiopian conflict. It is true that the government has declined to make a statement at some critical stages when a statement would be premature, and would complicate rather than advance a solution. I believe it will be generally conceded that the course of events in Europe has more than justified the government's attitude. It is undoubtedly essential that in parliament and outside of it there should be full and responsible discussion of the vital questions of Canada's relations to other states. There has not been sufficient discussion in the past. That has been due to our slow emergence from the colonial attitude of mind; our relative immunity from any' serious danger of war on our own account; the real difficulties inherent in our preoccupation with the tremendous, absorbing and paramount tasks of achieving economic development and national unity, which with us take the place of the preoccupation with the fear of attack and the dreams of glory which beset older and more crowded countries; and the unparalleled complexity of our position as a member of the league, a member of the British Commonwealth of Nations and one of the nations of the American continent.

The situation is changing. Informed and serious consideration of Canada's external relations is being given by the press and by organized groups of citizens throughout the country. There is a much more realistic appreciation of our position than prevailed thirty years, even ten years ago. I cannot say that there has been a crystallization of opinion in any final or clear-cut form, but there is an increasing realization of the complexity of the problem and of the special Canadian factors involved.

So far as the general policy of the government in the present conflict is concerned, it has been made clear from the beginning. That policy was set forth definitely in the statement issued on October 29, within a week after the present administration assumed office. It is a policy by which we have abided and a policy to which we still adhere.

That statement set forth, first, the attitude which the government proposed to take on the immediate question of the application of sanctions to Italy, and second, the line of approach to the wider question of the aims and methods of the League of Nations. May I deal with each of these two questions in turn?

First, as to the immediate question. It was stated that while reserving consideration of the feasibility and desirability of making the league's central purpose the guarantee of the territorial status quo and the reliance upon force for the maintenance of peace-

-in the present instance, when an earnest effort is being made with wide support to test the feasibility of preventing or at least terminating war by the use of economic sanctions, and when there is no room for doubt as to where the responsibility rests for the outbreak of war, and having regard also to the position taken by Canada at the recent assembly, the Canadian government is prepared to cooperate fully in the endeavour.

It was further added that steps would be taken to secure the effective application of the economic sanctions proposed by the coordination committee, and that the Canadian government did not recognize any commitment binding Canada to apply military sanctions and that no such commitment could be made without the prior approval of the Canadian parliament.

I think that was a definite and clear statement of policy. How far has that policy been carried out?

First, "the effective application of the economic sanctions recommended by the coordination committee," representing all the members of the league which had concurred in finding Italy the aggressor. What were those sanctions? They were:

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1. The prohibition of exports of arms and munitions to Italy.

2. The prohibition of the export to Italy of certain key products useful for the prosecution of war and controlled by members of the league, including transport animals, rubber, bauxite, aluminium, iron ore, manganese, chromium, nickel, tungsten, vanadium and tin.

3. The prohibition of all imports from Italy, except gold and silver coin and bullion, goods en route; later, books and newspapers; and later still, goods paid for though not shipped before October 19.

4. The prohibition of loans or credits to Italy.

These were the sanctions, and all the sanctions, which the league commitee recommended should be put int-o effect. All were put into effect by Canada at or before the time agreed upon, November 18. All are still in effect. All have been enforced strictly and effectively.

As some question has been raised as to whether the sanctions are actually being enforced, it may be well to state the facts briefly. Any doubt on that score is based, I think, on misunderstanding either as to what the recommendations as to sanctions actually were, or as to the actual facts of their application.

The first recommendation for the prohibition Of the export of arms and munitions raised relatively few difficulties for Canada, as we produce these wares only in a very minor degree. There has been no indication of evasion.

The second recommendation, for prohibition of the export of certain key minerals, touched Canada more closely. We are the outstanding producer of nickel, one of the most important minerals included in the list, though it does not hold the decisive place which is sometimes attributed to it. Special care was therefore taken to ensure against not only direct but indirect shipment of Canadian nickel to prevent, in the words of the league committee, "any abnormal increase in the export of prohibited commodities by indirect routes."

The Department of National Revenue vigilantly checked direct export. As to indirect export, the fact is that practically all Canadian nickel bought by continental Europe is bought from Great Britain; London is the dominant centre in the metal trade for Europe. In 1935, for example, Canada sent 149,800 hundredweight of fine nickel to the United Kingdom and only 380 hundredweight direct to the continent of Europe. As a party to sanctions, the United

Kingdom has of course been equally concerned with Canada in ensuring that no nickel should reach Italy after the export ban went into effect. The other important possible channel is the United States. The position in that regard is simplified by the fact that for some years the International Nickel Company has followed the practice of selling to consumers in the United States for their own use only; no nickel has been sold in the United States for export to other countries. The exports to and from the United States have been carefully followed; some nickel has been and is being exported from the United States to Italy, but the amount is not sufficiently large to constitute an appreciable evasion.

Some misunderstanding has also arisen in this case because of the mistaken notion that all exports were prohibited. This of course was not the case. There was no reason why wheat or codfish should not be exported, so far as the exporter was concerned. Our general export trade was of course affected by the retaliatory steps taken by Italy which endeavoured to find substitutes at home or to divert purchases to non-sanctionist countries. Aside from direct steps taken by the Italian authorities, the decreased purchasing power resulting from the inability to sell Italian goods abroad of course reduced Italy's power to buy abroad.

The third recommendation, prohibition of imports from Italy, was relatively simple to enforce, which was one of the reasons for its adoption. The recommendation in this respect has been fully and faithfully carried out. Some misunderstanding has arisen from two sources. First, certain exceptions were included in the recommendation, none of grea importance, the chief being goods en route at the time the sanctions were applied, and goods paid for but not shipped before October 19, but as rigid care was taken to compel complete proof before goods of either category were admitted, the total was slight. Second, the ordinary statistics of importation give rise to misunderstanding. Our customs returns of imports do not comprise goods entering the country, but comprise goods passing through the customs, and consequently the returns show as "imports" goods which entered the country before sanctions were imposed, but not drawn from customs warehouse until some months later.

The fourth recommendation, the prohibition of loans and credits, like the first, created no special problem for Canada. The cooperation of banks and investment companies was early secured by the Minister of Finance. The recommendation, it may be noted, did not

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prohibit making payments due for goods or services, or the making of gifts.

In several cases inquiry was made as to the detailed procedure adopted by the United Kingdom and other countries. It cannot be denied that Canada has enforced the sanctions agreed upon as fully and effectively as any other country, and more so than a number of countries which agreed to sanctions "in principle."

As regards the proposals to add coal, iron and steel, and oil to the list of prohibited exports, it is not necessary to make any extended comment. The criticisms of the Canadian government's attitude on these proposals which were voiced in some quartern last December did not survive a clearer appreciation of what the Canadian government's attitude was and of the position taken by other countries. These commodities have not hitherto been included in the prohibited list for two reasons. In the early stages of the conflict, the prohibited exports were confined to articles which were substantially controlled by members of the league and trade in which therefore could not easly be diverted to non-sanctionist countries. When at a later stage their inclusion came up for review, a second consideration came into play, namely, whether their application would or would not lead to war. There is no inherent reason why these commodities should not be embargoed, why nickel or iron ore should be prohibited and steel or oil continue to be shipped. The difficulty arises from the inevitable dilemma which the application of sanctions presents: If moderate, they may fail to deter or halt the aggressor; if extreme, they may drive an aggressor to prefer the gamble of sudden battle to the prospect of slow strangulation. There is no blinking the fact that economic sanctions may lead to war. They mean the application of force. They are not mere commercial measures. They are in intention and reality a means of imposing the will of one nation or group upon another nation or group. In modem times they have always, in different forms, been an important part of the technique of war, from the Berlin decrees to the Trading with the Enemy Acts and the blockades of neutral countries in the great war. Whether they will progress into military measures is not necessarily within the control of the powers that impose them; that may depend on the calculation of advantage and disadvantage made by those against whom the test of will is directed.

In the present conflict, one of these commodities assumed critical importance. In modern military operations, with aviation and mechanized transport playing so decisive a role, a continuous supply of oil may be vital.

How vital is a question in dispute; the authoritative inquiry made by the league expert committee resulted in the finding that if applied by all countries it would become fully effective in three or three and a half months, but that, if applied only by league members, the effect would be merely to render the purchase of petroleum more difficult and expensive. Whether the enforcement of an oil sanction would, in fact, have led to war is also in dispute; the Italian threats may or may not have been genuine. In any case they were sufficient to cause some great countries to conclude that enforcement of oil sanctions might invoke new wars or at least make impossible a peaceful settlement of the existing war.

During November, the European press were full of assertions that Canada was initiating and urging the imposition of an oil sanction. It became imperative to correct this serious misapprehension. The Canadian government had not urged the step in question. Further, it did not consider that Canada should initiate such a step: Canada had no special power, no special interest in the present conflict which would warrant such a pretentious gesture. It was not upon Canada, but upon countries nearer the conflict that the chief brunt of possible consequences would fall. This was made clear in the statement issued on December 2. This statement, of course, referred to the origin and not to the merits of the proposal. It was explicitly stated that the Canadian government would be prepared to consider, with other members of the league, any proposal for the revision of economic sanctions.

I may add that on two later occasions, in December and in March, when it was expected that the question of oil, coal and steel sanctions would come before the committee of eighteen, the Canadian government instructed its representative to concur in the proposal if generally supported.

As regards military sanctions, the position taken by the government was stated on October 29:

The Canadian government at the same time desires to make it clear that it does not recognize any commitment binding Canada to adopt military sanctions, and that no such commitment could be made without the prior approval of the Canadian parliament.

The provision of article 16 of the covenant on the point is as follows:

It shall be the duty of the council in such

case-

That is, in case of a member of the league resorting to war in disregard of its covenant undertakings.

-to recommend to the several governments concerned what effective military, naval or air

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force the members of the league shall severally contribute to the armed forces to be used to protect the covenants of the league.

As a matter of fact, the council has not in the present instance recommended any military action by any member of the league. One member took, not military action, but military and naval precautions, but Great Britain's action in moving the home fleet into the Mediterranean was decided upon before sanctions were applied, and without any request from the council or members of the league, but as a result of Italy sending large bodies of troops to Libya, and other similar gestures.

In fact in the discussions between France and Great Britain which took place at the outset, there was no proposal to apply military sanctions, and this attitude was communicated to the Italian government. As the situation does not seem to be fully realized, I may take time to quote the concise statement made by Mr. Laval on December 28, as reported in the London Times; Mr. Laval's frank declaration is of interest further as indicating how decisions at Geneva are determined by the great powers there represented, as is doubtless in great measure inevitable. Mr. Laval declared:

As early as September 10 I had, at Geneva, conversations with Sir Samuel Hoare and Mr. Eden. Conversations about what? We were certain that our first effort at conciliation had failed and that hostilities would soon begin. We were concerned to know how the mechanism of collective security would be put into action. Without waiting for an official sitting of the council, in that spirit of close collaboration which must always animate French and British ministers, we discussed and examined the grave situation which would be created for the world by the Italo-Abyssinian war.

We at once agreed to avoid military sanctions, to adopt no measure of naval blockade, never to consider the closing of the Suez canal, in a word, to reject everything which might lead to war. We then considered what financial or economic sanctions we could adopt. I do not remember that there was any difficulty between us. We held our discussions, as may be imagined, on a basis of equality. We agreed in deciding that financial sanctions and an embargo on arms should first be submitted to a committee which did not yet exist, but which was created with the name of Committee of Coordination, and that other sanctions such as the refusal to buy and sell should be examined.

What does article 16 of the covenant say? "The council will indicate to the governments concerned what effectives may be necessary to ensure respect for the undertakings of the league." Well, at no time has the council made such a communication. Never has that text been mentioned, and I even repeat that by common and unanimous agreement we set aside all military sanctions and those which could lead to them.

It should be understood that in this statement Mr. Laval was referring to the initial discussions.

I come now to the present position: A new situation has arisen with the occupation of the Ethiopian capital by Italian forces and the collapse of organized resistance. That event requires us to consider the question, Why has the league failed, thus far? In the first place the preservation of peace and of Ethiopian independence had been seriously jeopardized and compromised before the league took any action. The Ethiopian question in one form or another had been the subject of diplomatic controversy and negotiation between the three neighbouring great powers, France, Britain and Italy, for forty years. Spheres of influence were claimed by each power; and efforts made to harmonize their claims with one another and with the maintenance of Ethiopian political sovereignty. Italy, the latest comer, was particularly concerned. Late in 1934, a border conflict at Wal-Wal brought this special angle of the growing tension between Italy and Ethiopia before the council of the league. After bandying back and forth, Mr. Eden's persistence wan largely responsible for its settlement, in an arbitral decision declaring neither party guilty. But the fundamental difficulty remained unsolved. It was not discussed by the three powers, Italy, France and Britain, when they met at Stresa in April, 1935. A few months previously France had agreed to recognize Italy's predominant right to economic expansion in Ethiopia, as Britain had done in 1926, but Mr. Laval contended that in neither case was there the slightest countenance for forced aggression. In spite of earnest efforts on the part of the British and French representatives in the summer of 1935, Italy persisted in its insistence upon a settlement by force of arms. The main issue did not come before the council until August, and even then its consideration was passed back and forth between the three powers and the league.

The three power conversations failed. In September the league assembly found the Ethiopian question deposited on its doorstep. By that time there were 250,000 Italian troops in East Africa, the Italian authorities had publicly committed themselves to military action, and the league's essential task of preventing war had become almost impossible. The suggestions for settlement offered by the committee of five were rejected by Italy, and on October 2 war broke out.

In the second place, the policy adopted after war had broken out has thus far proved inadequate to bring the war to an end or to save

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Ethiopia. That policy, in brief, was to abstain from military sanctions and to apply a number of economic sanctions, in the hope that the cumulative effect of mild economic pressure by the league, hard fighting by Ethiopia, and heavy rains in Ethiopia would eventually compel the aggressor to desist. The rains were delayed; the resistance of Ethiopian troops and Ethiopian geography proved less adequate than the military experts had forecast. The courage and determination of the emperor and the individual bravery of his men were hampered by tribal dissension, by lack of modern equipment, particularly in the air, and by the decision of the army leaders to risk large scale battles rather than fall back on waiting tactics and guerilla warfare. The undoubted organizing and engineering skill shown by the Italian forces, their ruthless bombing from the air, and finally their recourse to the horrors of poison gas in violation of their pledged word, enabled them to break up organized Ethiopian resistance much more rapidly than had been anticipated.

In the meantime economic sanctions have undoubtedly been hampering Italy's war effort, restricting supplies and weakening her financial position. Possibly if Ethiopian resistance had been prolonged, the existing sanctions would have been adequate to turn the scale, whether toward peace in Africa or toward war in Europe, who can say? but they were not adequate under the actual circumstances. General agreement for more stringent and strangling economic sanctions has not been secured; military sanctions have not been proposed. It is now apparent this policy was not calculated to halt a strong and determined aggressor. As Mr. J. A. Spender puts it:

If we strip the case of Italy and the leagu* of the terminology in which it is commonly involved, is it not a very simple one? One resolute man who does not hesitate to make war has been matched against two opponents, one of whom said that he would not make war alone and the other of whom let it be known that he would not make war at all. What other conclusion could there have been to this method of proceeding than that which we have witnessed ?

It is only fair to say that the reason was not fear of Italy, but fear of war, and war on a European scale, apprehension that the strain of economic insecurity, the reckless urgings of ambition or revenge, the tense and neurotic relations between state after state and its neighbours, the mounting armaments, would lead to a sudden flare of war in Europe if the spark fell from Africa. It may be that there was nothing in the Euro-

pean situation in December or in May which might not have been anticipated by statesmen close to the European scene when the existing sanctions policy was determined last September and October, but closer approach undoubtedly make the prospect more vivid and more deterring, particularly when the German government forced the Rhineland conflict upon the stage. In brief, collective bluffing cannot bring collective security, and under present conditions most countries have shown they are not prepared to make firm commitments beyond the range of their immediate interest.

What next? The question arises whether 'sanctions should be increased, continued at their present level, or discontinued. It is a question upon which there is wide divergence of opinion.

Those who urge they should be continued and increased, as for example by closing league ports and the Suez canal to Italian ships until such time as Italy agrees to make peace on terms consistent with her covenant pledges, contend in the first place, that the issue at stake is a great one, the preservation of the league and the system of collective security; and that if Italy is allowed to flout the league and annex Ethiopia, every aggressive great power will be encouraged to do likewise, every small state will be exposed to danger and unrest, and every people driven to fall back on armament and military alliances; and in the second place, that the risk is small, that Italy has been weakened by the financial strain, that the Ethiopian forces may reform and carry on guerilla warfare for years, and, in short, that there is still time to call the Italian bluff, and that it is safer to call it to-day than be faced with a more serious struggle with the aggressor of to-morrow.

Those who urge that sanctions should speedily be brought to an end, reply that the league is not at stake but a mistaken conception of league policy, and in any case article XVI was designed to save the victim rather than to punish the aggressor; that it would be the height of folly to risk an imminent war to-day in order to avert a hypothetical one to-morrow; that with the collapse of the Ethiopian government and Ethiopian armies, there is now no foundation on which to rebuild, no fulcrum on which to rest the lever; that the Italian economic condition is far from hopeless and her people united and flushed by success, and that with the Far East in motion, Palestine aflame, Austria torn by internal conflict and external propaganda, Germany watchfully waiting,

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France distracted by internal difficulties, only doctrinaires would urge risking war to save a formula.

In a recent debate at Westminster the opposing views were clearly set forth. Mr. Dalton, for the Labour party-

... impressed upon the government the view of the members of the opposition that there was no justification whatever for the removal of the sanctions imposed on Italy by the League of Nations practically unanimously. The conscience of democracy in this and other nations would not accept that view. There was a strong case even now for increasing the sanctions by including oil and other commodities in the list. The economic and financial situation of Italy was not enviable. It "was all very well for people in the capital to cheer a distant victory, but there was the matter of months to come, and we should look ahead and vindicate the already shaken policy of the collective system.

The other view was most forcibly expressed by Sir Austen Chamberlain, a former Foreign Secretary:

In the early days of this struggle I said that for myself I had counted the cost and that I was prepared to go to all lengths with other powers, even to the use of military force.... But the circumstances have wholly and profoundly changed since then. What was the purpose of sanctions? Not in this case to attempt to prevent aggression, but to prevent aggression succeeding. They failed. They were to bring the war to an end and to stop bloodshed. They failed to bring the war to an end. It has been brought to an end by military means, by the conquest and complete subjugation of Abyssinia and the flight of the emperor. To ask at this moment, or to propose at this moment, to continue sanctions is a policy of equal danger and futility. I want to ask those who press this policy on the government, have they reckoned the cost and are they prepared for the price they will have to pay?

No indication was given at that time of the position of the government. To-day the British government has stated its position. As I came into the house this afternoon the Canadian Press were kind enough to hand me dispatches which have come setting forth particulars of the debate which has taken place in the British House of Commons today. It would be of interest I think for me at this moment to quote one or two paragraphs which appear in the press dispatches and which, will doubtless find their way into the evening papers.

London, June 18.-Anthony Eden, Foreign Secretary, told the House of Commons to-day Great Britain would take the lead at Geneva for removing the League of Nations' sanctions against Italy. Mr. Eden said: "His Majesty's government, after mature consideration on advice which I, as foreign secretary, thought it my duty to give, has come to the conclusion there is no longer any utility in continuing these measures as a means of pressure on Italy.

Mr. Eden recited the occasions upon which Great Britain had previously taken the lead in

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attempting to settle the Italo-Ethiopian war, and said that, since the league seemed to be perplexed, the British government considered it to be its duty to take the lead again.

"No doubt it would be quite as easy for us not to do so and to follow somebody else," said Mr. Eden, "but I don't believe that is the right attitude for this country to take."

He declared: "We have to admit that the purpose for which sanctions were imposed has not been realized."

He added, he considered the situation in Ethiopia one "which nothing but military action from outside the country could possibly reverse."

Then Mr. Eden demanded: "Is there any country, is there any section of opinion in this country, which is prepared to take such military action? '

"If the league means to enforce an Ethiopian peace which the league can rightly approve, then the league must take action of the kind which must inevitably lead to war in the Mediterranean-and no man can say such a war can be confined to the Mediterranean."

"I have no reason to think the league favours such a departure or such action, and no reason to suppose this country, on which the greatest burden of such a wrar must fall, desires it either."

"The government," said Mr. Eden, "is actively studying the question of league reorganization but," he added, "it was felt wiser to leave the matter until the September league assembly."

That statement of the British position came in, as I have indicated, this afternoon. The new government of France has not yet had an opportunity of making its position known to the public.

I have summarized the conflicting points of view. The assembly which is to meet at Geneva the end of this month will be called upon to consider the extension or the removal of sanctions. It is desirable, in view of the fact that this session of parliament will shortly come to an end, that the position which the Canadian government propose to take should be stated now.

May I say, Mr. Chairman, in presenting this statement that the position which our government proposes to take is one which was determined in the cabinet some little time ago. It was a decision arrived at before we had any information as to what the British action would be in this matter. Our position was taken in the light of all circumstances as we were able to ascertain them, and with particular regard to Canada's position.

It is urged in some quarters that sanctions should be applied until the principle of collective security is vindicated and Italy agrees to make peace on a basis consistent with her covenant pledges. That could only mean applying sanctions until the aggressor is forced to withdraw and the independence of Ethiopia is restored. How could that end be achieved? It is clear that sanctions of the present order would not be adequate to

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attain it, now that Ethiopian, resistance has practically collapsed. No half-way policy is possible at this stage. Six months or a year of continued ineffective economic pressure would be worse than useless. The end could be achieved only if the members of the league would definitely undertake to resort to whatever measure of compulsion, including war, would be found necessary to secure a speedy and certain compliance. Is there any likelihood that under the circumstances that exist to-day, alike in Europe and in Ethiopia, any appreciable number of the effective members of the league would give such commitments? It is clear there is not. Is there any certainty, if they did, that their objective would not soon be lost sight of in the very serious disturbances which might arise from other quarters? Entertaining this view, we do not consider that we would be warranted either in committing Canada to such a course, or in urging those members of the league upon whom the main burden and risk would fall, to undertake it, if they were not themselves convinced of its necessity. We believe there is no practical alternative for Canada at the approaching assembly of the league but to support the raising of sanctions, and our delegates will be instructed accordingly.

I come now to the concluding part of what I have to say, and which has relation particularly to the future of the league. Probably many of the members of this house have read an interesting speech delivered by Mr. Baldwin on the future of the league a week or so after the debate to which I have referred. The burden of his address was the value of the underlying ideals of the league, the experimental character of article 16 and the policy of sanctions, the necessity of re-examining that experiment in the light of experience and considering whether any changes were required in the covenant, whether automatic sanctions are practicable, and whether it will be possible to give the league the universality of membership its founders assumed.

That brings me to the question of our own attitude to the league in the future. It is not a subject upon which anyone can dogmatize. There are many points of view which may be taken to-day, and new factors, new experience, may require us in the years to come to revise the opinions of today. But it is a question which events have forced us to consider.

Here, again, may I say that the view of the government, in general terms, was ex-

.

pressed in oUr statement of October 29, and that experience since that time has not shown any reason for substantial alteration of that view.

In brief, it was then indicated that the government regarded the league as an essential instrument for peace; that there had been differences of opinion among league members from the beginning as to the means wherelby peace could he secured; and that successive Canadian governments, without any appreciable public dissent, had opposed the view of Geneva as "an international war office," with the emphasis upon ,punishment rather than prevention. The statement concluded :

It is also to be understood that the government's course in approving economic sanctions in this instance is not to be regarded as necessarily establishing a precedent for future action. In the future, as in the past, the government will be prepared to participate in the consideration of the most effective means of advancing the aims of the league through the adjustment of specific controversies, the lessening of the rivalries based upon exaggerated economic nationalism, the renewal of the effort to stem the rising tide of competitive armament, and such other policies as are appropriate for a country in the geographic and economic position of the dominion, and as will ensure unity and common consent in Canada as well as the advancement of peace abroad.

May I develop that view somewhat further? In the first place, we do not believe that isolation from interest in world affairs is possible for Canada. The world to-day is an interdependent world. No happening of any magnitude abroad is without its repercussions on our fortunes and our future. Canada, it is true, unlike many less fortunate countries, is not exposed to direct and imminent danger of attack and conquest by any country. We are fortunate both in our neighbours and in our lack of neighbours. It may be that this fortunate position is not due to any special virtue on our part, that it is an accident of geography and of history, but one has only to be in any European country a day to realize how relatively fortunate a position it is, and what folly it would be to throw it away. It is equally true, I Should add, that if some countries have too much history, we have too much geography; we have the problems of rapid development of half a continent, the burden of budding railways and roads to connect the far-flung provinces, the task of maintaining government over vast areas, and unity among sections thousands of miles apart, problems from which many older,

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developed, concentrated countries are relatively exempt. We have a real interest in the peace and prosperity of the world. Our climate and resources, our whole railway and economic structure, have made international trade essential for us, at least for many years to come. A great war abroad and, in lesser measure, the preparations for war, the rattling of the sword and the darkening of the sky with planes,' may disturb our trade, endanger democracy., strain our relations with other lands.

We are concerned in external affairs, in the events beyond our border, and cannot cut ourselves off from contact with them. External affairs, for Canada, mean in overwhelming degree, our relations with the other members of the British commonwealth, particularly the United Kingdom, and with the United States. With other countries our commercial relations are increasing, and with France we have also an historic tie. This is surely obvious, but it is necessary to emphasize the obvious when men speak as if it were only in and through the League of Nations that we can take our part in international affairs. The league has a distinct place of its own, a long range importance, but our direct relations with Britain and the United States and other countries are of daily and vital import. We have made some progress in providing the machinery, the instruments, for carrying on these direct contacts. It is half a century since Sir John Macdonald established the high commissionership in London. It is just over a quarter century since Sir Wilfrid Laurier established the Department of External Affairs. The recent establishment of legations abroad and the receiving of legations here is now an accepted Canadian policy. Day to day experience makes it clear how imposible it would be to deal with our increasing and more urgent relations with other countries without these agencies of direct and immediate contact, these channels of responsible and friendly intercourse. When circumstances permit I trust it will be possible to carry further this proved experiment in the establishment of legations, and to widen the exchange of representatives with members of the British commonwealth.

But apart from these agencies of contact with individual countries, these means of dealing with specific issues of direct concern, there is a need for a more general organization, an international clearing house, an agency for collective discussion and collective settlement of the problems the nations have in common. We have such an organization to-day in the League of Nations. As someone

has said, the league is the one great thing that came out of the war. If it did not exist, or if it went out of existence, it would be necessary to recreate it. The world is linked together materially and we have to devise political means to keep pace with the closer contacts and the more rapid changes of the new age. I may repeat that "the Canadian government regards the league as an indispensable agency for organizing and strengthening the forces of good will in the world, and for effecting the essential adjustment of conflicting national aims.''

What are the objects of the League of Nations? They are best set forth in the preamble of the covenant itself:

In order to promote international cooperation and to achieve international peace and security,

by the acceptance of obligations not to resort to war,

by the prescription of open, just and honourable relations between nations,

by the firm establishment of the understandings of international law as the actual rule of conduct among governments,

and by the maintenance of justice and a scrupulous respect for all treaty obligations in the dealings of organized peoples with one another.

There is, however, room for difference of opinion and need for discussion as to the means by which these ideals of the league may most effectively be advanced under actual conditions in the world, and as to what means are practicable and appropriate for Canada to adopt. Adherence to the league and to the promotion of security by collective action does not necessarily mean a commitment to the use of force, economic or military. There have been two opposing views as to the course the league should adopt. One view, which may be called the continental view, the contention of a number of European countries facing states from which they have acquired territory, has been consistently from 1919 to 1935, that the members of the league should commit themselves to definite and automatic use of force against an aggressor, or at least a European aggressor. The provisions of article 16, the proposals for an international or inter-allied military force, the proposals for an Anglo-American-French treaty to guard the Rhine, the draft treaty of mutual assistance of 1923, the Geneva protocol of 1924, the long discussions during the disarmament conferences, with the cry "security before disarmament," the proposal in 1935 that sanctions should be applied against a country which without having recourse to war had violated a treaty endangering the peace of Europe, these are only some of the expressions of that view.

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The other view laid emphasis upon prevention rather than punishment, urged the peaceful remedy of grievances rather than making war upon a country resorting to war, questioned the readiness of European countries to give as well as to receive aid. It was on the whole the view of the countries of the British commonwealth and the Scandinavian states. It found expression in the assembly resolutions of 1921, watering down article 16, in the movement for the revision of article 10, in the opposition to the protocol of Geneva, in the contention that mutual disarmament was the best means of giving security, in the movement for conciliation and arbitration. It is well expressed in the reply of the British government in rejecting the Geneva protocol proposals in 1925:

The fresh emphasis laid upon sanctions, the new occasions discovered for their employment, the elaboration of military procedure, insensibly suggest the idea that the vital business of the league is not so much to promote friendly cooperation and reasoned harmony in the management of international affairs, as to

Ereserve peace by organizing war, and-it may e-war on the largest scale....

And it certainly seems to His Majesty's government that anything which fosters the idea that the main business of the league is with war rather than with peace is likely to weaken it in its fundamental task of diminishing the causes of war, without making it in every respect a satisfactory instrument for organizing great military operations should the necessity for them be forced upon the world.

This has unquestionably been the attitude of Canada. I quote from our Statement of October 29:

As regards the means to the advancement of those (league) ends, successive Canadian governments have opposed the view that the league's central purpose should be to guarantee the territorial status quo and to rely upon force for the maintenance of peace.

The Anglo-American-French treaty of 1920 was so framed as to exclude the dominions. Canadian public men of both parties opposed or sought to remove the status quo guarantees of article 10. The Canadian government in 1925 rejected the protocol of Geneva because of "its rigid provisions for the application of economic and military sanctions in practically every future war." Canada and the other dominions did not adhere to the Locarno treaty reinforcing the guarantee of the Rhine border, just as Great Britain at that time refused to guarantee the Vistula. In responding to the invitation of the United States to become a signatory to the Briand-Kellogg paot, the Canadian government, in view of its discussion as to its bearing upon the covenant of the league, made the following statement in 1928.

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LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Mr. MACKENZIE KING:

I quote from

the statement made in 1928 in connection with the Kellogg pact:

The preeminent value of the league lies in its positive and preventive action. In bringing together periodically the representatives of fifty states, it builds up barriers against war by developing a spirit of conciliation, an acceptance of publicity in international affairs, a habit of cooperation in common ends, and a permanently available machinery for the adjustment of differences. It is true that the covenant also contemplates the application of sanctions in the event of a member state going to war, if in so doing it has broken the pledges of the covenant to seek a peaceful solution of disputes. Canada has always opposed any interpretation of the covenant which would involve the application of these sanctions automatically or by the decision of other states. It was on the initiative of Canada that the fourth assembly, with a single negative vote, accepted the interpretative resolution to which the Secretary of State of the United States recently referred, indicating that it is for the constitutional authorities of each state to determine in what degree it is bound to assure the execution of the obligations of this article by employment of its military forces.

The question of sanctions has received further consideration by later assemblies. It is plain that the full realization of the ideal of joint economic or military pressure upon an outlaw power, upon which some of the founders of the league set great store, will require either an approach to the universality of the league contemplated when the covenant was being drawn, or an adjustment of the old rules of neutrality to meet the new conditions of cooperative defence.

In the light of the recent experience of the league and of the discussions in the United States during the past year on neutrality, this last sentence was a fairly good prophecy.

On the other hand, Canada participated in every league movement for extending the range and facilities for peaceful conciliation, such as the general act for the pacific settlement of international disputes, and the optional clause for extending the jurisdiction of the permanent court, taking the initiative among the members of the British commonwealth in proposing ratification of the latter measure. Successive Canadian governments supported the cause of disarmament throughout. Perhaps all members of the league should have taken a stronger stand at the fatal hour in 1933 when Germany's proposals for equality of armament were rejected, but it was on the countries which were heavily armed that the difficult responsibility rested, and if the wrong turning was taken, we must admit that hindsight is more common than foresight. We did something to aid the minorities protected by the peace treaties to secure a fair hearing. I do not say we have done enough at Geneva, that we were always as concerned as we might have been, or as strong in our advocacy of good causes as we and others might have

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been. There are obvious limitations to the amount of pressure a small and distant country, not primarily responsible for what may be the outcome of the league decisions, can apply. But at least, whatever government has been in power, we have, I think, aimed in the right direction.

There is undoubtedly much that is attractive and persuasive in the conception of a world united to prevent by force a breach of the peace by any aggressor. It has been stoutly contended that if all nations would undertake to make war upon an aggressor, and carried out that undertaking, war would never occur. That may well be, but unfortunately it is only a hypothetical argument; it bears no relation to the actualities of to-day It may be that eventually some such rule of law will be established in the international as has been established in the national field, or at least in those countries where law and the free expression of the people's will still prevail. But clearly that time has not yet come, and to pretend that it has is only to make for disillusionment and misdirected effort.

Two conditions are essential to the working of any such plan of universal compulsion. In the first place, there must be an overwhelming preponderance of power, economic and military, in the league as against any possible aggressor or combination of aggressors. Even economic pressure, if it is to be strangling enough to be effective against a strong nation, must be backed by a definite readiness, in the last resort, to have recourse to armed force. That is surely clear. That condition does not now exist. For one thing, the league is not the universal association anticipated by its founders when they dreamed of it imposing peace throughout the world. The United States, Germany, Japan, Brazil, are outside the fold. A league facing the abstention of some and the hostility of others of such powers clearly cannot operate as it might in other circumstances. In the second place, there must be the certainty that the members of this body will be ready to exercise that force when the occasion arises, regardless of where it arises or whether they have any direct interest in the quarrel. That condition again, does not exist. There are a few countries which have evidenced some measure of idealism in their approach to the question, but in most cases action has depended on a calculation of immediate interest. That was shown beyond doubt in the Manchurian and Chaco incidents. The league did not apply military or even economic sanctions in the Manchurian affair; its action was confined to a recommendation not to recognize the state of Manchukuo. In the Chaco war, between

Bolivia and Paraguay, it did even less. That was not a minor conflict. It was a long and bloody war, dragging out for nearly three years, costing the lives of a hundred thousand men, bleeding and bankrupting both countries, and leading lately to the establishment of military dictatorships. It involved immensely more human suffering than the Ethiopian conflict. Yet the league never even attempted to determine the aggressor; after two years of warfare a league commission made recommendations for a settlement, which were rejected, and later still a futile embargo on arms was proposed. It is true the intervention of the league was complicated by local South American jealousies and rivalries, but this was an excuse rather than a reason for nonintervention; if the letter of article 16 applies anywhere, it certainly applied in the Chaco. In short, these disputes were far from Europe's shores; no direct national interests of other members of the league appeared to be concerned, or none commensurate with the effort and the risk of coercive action. There has been no firm ground any time in the past ten years for anticipating that the league would act otherwise in such cases.

Under such conditions it is clearly impossible for a country like Canada to make binding commitments to use economic force or military force. The league cannot operate as a one-way road. European states cannot throw overboard all obligation to action in Asia or America and expect other members of the league to accept obligations in European disputes. Occasions may arise where military action may become advisable or essential, but so far as Canada is concerned, that would be for the parliament of Canada to decide in the light of all the circumstances at the time. Automatic commitments to action in any and every part of the world have not been and, at the present stage of national development, will not be observed by the members of the league. Automatic commitments in restricted areas wThere direct interests are involved might be so observed, but such commitments, whatever name they go by, are often hard to distinguish from the old fashioned military alliance.

It is a matter of regret that the league is not now in a position to play the spectacular role of dictating peace to all the world.. But admittedly it is not in that position or that mood. To act as if it were is merely to incur failure and recrimination, and to involve the risk of bringing on the very disaster it is the purpose of the league to avert.

But that does not mean that there is not a great part for the league to play. If it

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cannot become the international war office, neither need it become a mere debating society. It can emphasize the constructive side of its task. It is of great value to have at Geneva a world-wide organization where the machinery for conference and conciliation is always available, not having to be improvised in the midst of a crisis; where representatives of fifty countries meet periodically and come to have some appreciation of the difficulties and the mentality of other lands, and slowly develop the habit of working together on small tasks leading to greater; where, in spite of all the criticisms we often hear as to vaguely worded resolutions and hotel bedroom conversations, the statesmen of great countries are forced to come into the open and defend in public, before a world forum, the policies of their governments. It can press on to its task of disarmament, or at least to the halting of armaments. It can develop and apply the instruments of conciliation and of arbitration in settling specific disputes before they lead to open challenges and entrenched positions. It can provide a forum for the discussion of economic grievances. Much nonsense is talked to-day about the Haves and the Have Nots; the countries which are in trouble as regards raw materials are the countries that have them to sell, rather than those that have to buy. Canada, for example, has great resources, but she also has great burdens; we have incurred huge debts in seeking to stake out and develop and unify this widely scattered heritage; and incidentally, whereas many of the countries which complain of their unjust treatment have evaded the burden of internal debt by inflation and of external debt by repudiation, Canada has paid and continued to pay every obligation within and without the country.

We should inquire earnestly and seriously what can be done by joint action to remove at the root the political unrest, the economic insecurity, which is largely responsible for national rivalry and threats of war. We must of course keep a sense of proportion, realize the complexities of the problems of post-war Europe and pre-war Asia, the measure of knowledge, the measure of influence which Canada can bring to bear upon the solution of the racial strifes, the border disputes, the class antagonisms, the economic conflicts of distant continents. But inquire we should into any question, raw materials, population movements, labour conditions, that is felt as a grievance. There is one economic grievance, or rather difficulty, which nearly all share, the

difficulty of finding markets, the contention that unless we sell we cannot buy. That is sound, anil points to one sound policy all should seek ito follow as a means to world appeasement-revival of two-way international trade, an increase in the total movement of goods, not the futile and fatal attempt to equate balances between every two countries, at constantly falling levels of total trade. Civilization will indeed be in jeopardy if governments tinker with symptoms and ignore causes, if we allow and encourage the disruptive forces to grow and confine our efforts to repression or punishment when the damage is done. Repression or construction, force or cooperation, the clash of tariffs and the appeal to force or the solution of the problems that underlie international rivalries -that is the choice before us.

It is a counsel of despair to assume that trade war or military conflict is inevitable, and to assume that all that can be done is to meet force by force. Particularly is it futile to expect that we can sow the seeds of economic nationalism and reap a harvest of peace and prosperity. It is a policy of organized scarcity, of deliberate sacrifice of the standards of living in pursuit of a security which it makes impossible by the antagonisms it creates. It is a policy which injects the state into every transaction between citizens of different countries and makes ordinary business an international struggle. Within the measure of our power, we must pursue the attempt to bring international trade gradually hack to a sane basis, to lessen the throttling controls and barriers. If we can do so in any degree, we shall make one of the most direct and constructive contributions we can make to the peace and welfare of our own and other lands.

We must not despair of the league. The league has failed, but the league is not a failure. Christianity has failed time and again, but Christianity is not a failure. Rome was not built in a day, and imperial ambitions cannot be exorcised in fifteen years. After all, it is a very little while since we in the British empire ourselves completely reformed. In spite of all discouragements, in spite of the failure of premature efforts, the ideal of world peace is not only sound, it is the essential condition of the survival of civilization and human life itself. So far as Canada is concerned, there is no danger to our national unity and our economic recovery so serious as participation in a prolonged war. We must continue to work earnestly toward the ideal of world peace. To that end we

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must utilize constructively the League of Nations-that indispensable agency which the conscience of mankind fashioned on the morrow of the greatest international disaster of all time, and bequeathed to our own and future generations.

At six o'clock the committee took recess.

After Recess

The committee resumed at eight o'clock.

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CCF

James Shaver Woodsworth

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

Mr. J. S. WOODSWORTH (Winnipeg North Centre):

I must express my appreciation of the very carefully prepared statement of the Prime Minister (Mr. Mackenzie King). On the whole I find myself very largely in agreement with the concrete actions taken by the government and also with the ideals set forth by the Prime Minister. But I would point out that many of the decisions arrived at might be called after-the-event decisions. The policy of "wait and see" has so far proved successful, but we must not take it for granted that such a policy will always succeed. I am afraid that, alone, it may not keep us out of war. The government's decision with regard to the withdrawal of sanctions may have been arrived at some time ago, but it is perhaps characteristic that it was not announced until after the great nations had declared themselves.

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LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Mr. MACKENZIE KING:

The hon. gentleman says that the announcement made by the government was not made until after the great nations had declared themselves. That is not true. If my hon. friend will kindly state what great nations have declared themselves, and when and where they did so, the record will be complete.

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CCF

James Shaver Woodsworth

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

Mr. WOODSWORTH:

We know now the position of Great Britain; Mr. Litvinoff made a declaration a week or two ago, and according to the press the decision of the French government is now fairly well known.

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?

An hon. MEMBER:

What is it?

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CCF

James Shaver Woodsworth

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

Mr. WOODSWORTH:

I am saying, according to the press. As to the future, I must submit that the government's policy is vague. The Prime Minister avoided, or at least did not mention, many problems that are inherent in the existing world situation. He did not attempt to indicate the implications of the general position he enunciated. Possibly-I say this in all sincerity-that is too much to expect from the responsible head of a government or from the leader of a party which

comprises such diverse elements, but I think that someone should do this.

For a long time we in this house have taken very little interest in foreign affairs. The discussion of a new post office or of a wharf apparently really means more in this house than the discussion of some of these worldshaking events; yet the issue of peace and war is really involved in our foreign policy. The last war, according to a recent computation, cost Canada $4,341,488,904. Through the opportunity I now have in this chamber I would impress upon our Canadian public the disaster that war would mean to Canada and the disaster that it has meant to the world. According to some calculations quoted in Canadian Business of June, 1934, the amounts invested or rather squandered in the last war could have been utilized to create almost a new world. As estimated by Nicholas Murray Butler, who is far from being a radical agitator, the last war cost 30,000,000 lives and $400,000,000,000. He said:

With that amount we could have built a $2,500 house with $1,000 worth of furniture and placed it on five acres of land worth $100 an acre, for every family in the United States, Canada, Australia, England, Wales, Ireland, Scotland, France, Belgium, Germany and Russia.... There would have been enough left to give each city of 20,000 inhabitants and over in all the countries named a $5,000,000 library and a $10,000,000 university. Out of the balance we could have set aside a sum at five per cent interest which would pay for all time a $1,000 yearly salary each for 125,000 teachers and 125,000 nurses. After having done all this we could still have bought up all of France and Belgium, everything that France and Belgium possessed in 1914: every home, factory, church, railroad, street car.

If these figures are anything like approximately correct, they bring home to us the frightful disaster the last war was; and as we contemplate these facts one might well fear lest another war might wipe out civilization. Our people do not realize the danger. I am not altogether blaming the government.

But one reason the people do not realize the seriousness of the situation is that we have not had the discussions which we might have had in this house. The government, even at this present session, delayed for nearly five months before stating its policy. The Prime Minister said that there was danger of our being colonial-minded, and that is a real danger. The tendency is for us slavishly to follow Great Britain. That constitutes a sort of inferiority complex which manifests itself in the idea that someone else must take the lead. I cannot see why someone else should always lead. The Prime Minister said recently that a very difficult situation confronts European statesmen at the present

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time. Why cannot we understand that it confronts the world and Canada and not merely European statesmen? The leader of the opposition (Mr. Bennett), in the same connection, said that efforts must be made to uphold the hands of those who are endeavouring to maintain the peace of the world. Well, are we not members of the league, and why should we not have a responsibility in regard to stating what we believe? On the other hand, this inferiority complex manifests itself in the exaggerated idea that if we take any action it may upset the apple-cart. Only the other day the Prime Minister said:

I ask my hon. friend to consider what the effect of a discussion in this parliament two months ago, one month ago, two weeks ago-*

And the Prime Minister fairly shuddered! Then the leader of the opposition joined with him in the observations he made in this house. He said:

Any observation that might be made in this house and which would embarrass an already embarrassed situation, would be, in my judgment at any rate not only unsound but calculated to retard rather than to assist the accomplishment and purposes of the end we have in view.

I really do not think Canada is as important as that, but I most firmly believe that Canada should be prepared to take her stand and express an opinion with regard to these matters. If the parliament at Westminster, so much nearer the scene of action, can discuss these matters as it has done from time to time, I cannot see why there should be any difficulty in the way of our discussing them in this country.

I suggest that we may as well concede to one another that we all want peace. We all love our country, and if some of us hold views and advocate policies that are not held and advocated by the majority in this house, I hope our arguments will not be met with cries of "coward," or "communist" or "anti-British" or "pro-German" or pro anything else. I admit that the situation is very, very complicated. Any of us who have tried to arrange our own thoughts cannot but have felt that. I think the Prime Minister is quite correct in his statement, and I sympathize with him when he says that we cannot be dogmatic with regard to many of these problems. It may even be very difficult to maintain a consistent position. Our policy must necessarily be contingent upon rapidly changing conditions.

I do not think I can make any greater contribution to-night than to present as briefly as possible some fundamental considerations that I hope no one will call merely academic.

I believe firmly that war is madness; that it settles nothing; that it creates serious trouble. I believe that we must approach the study of war with a scientific spirit and a scientific technique. War does not come by act of God; it does not come out of thin air. It is the result-and I think we are all coming to that view-of clearly defined and ascertainable causes. We recognize to-day a certain war psychology which is apt to get possession of any or all of us. Then there are undoubtedly certain economic factors, prominent among which are the gain that comes from private armaments, and economic nationalism. Just recently Mr. Harold Butler, Director of the International Labour office, speaking at the Twentieth Session at Geneva, 1936, had this to say:

War is not caused only or mainly by lust for territory or booty or prestige. It is also caused by low standards of living, by the feeling of economic insecurity, by the desire for moral or social emanicipation. The founders of the organization were right when they discerned an indissoluble connection between peace and social justice....

There is now a vague awareness that territorial claims and armament programs are not the fundamental issues and that it is impossible to allay the international tension which they have created without striking deeper. They are not the causes of our present discontents but the symptoms. The roots are to be found in actual or threatened impoverishment, declining standards of life, insecurity for the future of themselves and their children which darkens the outlook of the present generation in so many countries. The remedy is not to be found then in political pacts or frontier rectifications or disarmament conferences alone. These methods have been tried and have failed because they did not touch the real source of the trouble. So nowadays we are beginning to talk of the abolition of trade restrictions, the distribution of raw materials, the stabilization of currencies, an international monetary agreement, the resumption of international lending, as things which are not merely required to promote economic recovery but which are indispensable to the future stability of the whole political structure.

Let me say further that I am perfectly convinced that if we want to have peace we must be prepared to pay the price of peace. That is not going to be a light price, but in contrast with the enormous costs of war we ought to consider ourselves fortunate indeed that we are in a position to pay it. Further, let me state the convictions of this group-

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LIB

Ross Wilfred Gray

Liberal

Mr. GRAY:

If the hon. gentleman will permit a question, what does he mean by "the price of peace"?

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CCF

James Shaver Woodsworth

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

Mr. WOODSWORTH:

I do not want to go into that at the moment. It would take me too long to outline a program. All I desire here is to indicate that we cannot

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get peace merely by wishing for it. We shall have to give up-as I shall urge a little later-older conceptions of our "sovereignty," the older ideal that we can go our own way without reference to the outside world, and so on. I say we have to pay the price of peace, and it is not a light price.

I believe, and our group believes, that war cannot be eliminated under the existing economic system. I shall not be thought to drag in a mere party slogan when I say I am convinced that capitalism means social injustice at home and it also means imperialism and militarism. In our modern complex

industrial and social structure, I agree with the Prime Minister that no individual can live to himself and no nation can live unto itself. Self-sufficiency, independence, sovereignty, isolationism belong to the past. The world is becoming more and more integrated. The trouble is that our institutions and our ideals have not kept pace with the development which is taking place in the world around.

I find myself somewhat in a dilemma. Let me confess that as an individual I refuse to participate in or to assist in war, and yet I am a citizen of a country that still relies upon force, and as a public representative I must vote on alternative military policies. Under these conditions in the actual world of affairs one must try to hold to his own convictions and keep ultimate objectives in view, and yet advocate measures which are recognized as merely ameliorative. One must accept half a loaf, or even support procedures which, though repugnant to one's principles, represent a real advance in public welfare and public morals. For example, I am opposed to capital punishment, and yet, rather than see a woman's head nearly torn from her shoulders, as was done recently in Montreal, I would vote for the electric chair, for gas, or even, I think, for the axe! In a decently organized society we would not need a police force. In the present semi-barbarous civilization I prefer a police force to bandits and vigilantes. So, in international affairs, until war is actually and wholeheartedly repudiated as an instrument of international policy, an international police force under proper control, if indeed that is possible, might be preferable to world anarchy.

Lest somebody should set me down as an idealist let me talk for a little while as a hardi-boiled realist. In my judgment it is the advocates of armaments who are the sentimentalists. They are living in the past. Armaments in the past have failed to give us security. Some other way must be found.

It is the imperialists who are the sentimentalists. It is those who pin their faith to the league as now constituted who are the sentimentalists.

Let us consider realistically the defence of Canada. If we start with the assumption that Canada's first obligation is to her own citizens, our problem is: How can we save our next generation from annihilation? I submit, as I did on the defence estimates, that with our present military equipment or any which this country can support, Canada unassisted cannot defend herself against all comers. Fortunately she does not need to do so. The United States will not attack us, and under her Monroe doctrine the United States would protect us, not because of her interest in our welfare, but because of her interest in her own affairs. At the moment, then, I have a good deal of sympathy with the isolationist position, though I quite agree that it cannot ultimately save us. We are a part not only of North America but of the world.

A more difficult question is: What of our British empire connections? Personally I think highly of Great Britain. I am not sure but that spiritually I am more at home in England than in Canada. But I do not believe in modern imperialism, German imperialism, Japanese imperialism, French imperialism, or British imperialism.

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June 18, 1936