Mr. VICTOR QUELCH (Acadia):
This afternoon, just before the leader of the opposition (Mr. Hanson) took his seat he made a plea to hon. members in this corner to restrict their discussion of this budget. I would suggest that the leader of the opposition would have been in a better position to make that appeal if he had lived up to it himself and if the hon. member for Danforth (Mr. Harris) had already done so. I make that statement because the leader of the opposition and the hon. member for Danforth have monopolized in their discussion of this motion over five hours of the time of the house. Therefore it is hardly being logical or consistent to ask us at this time to limit our contributions to the debate.
In discussing the budget it is necessary to keep in mind that it is a war budget, and that in time of war the major objective becomes that of winning the war and defeating the enemy. All the resources of the nation must be organized to that end. This means that great sacrifices will have to be endured. It therefore behooves the government to see to it that those sacrifices are imposed upon the people in the most equitable way possible. It is absolutely essential that during the war we maintain a high morale among the people in order to build up the will to win. Such a spirit is usually built up over a number of years. It is not usually prevalent among a people that have been ground down by poverty, misery and want, unless it can be shown that that condition exists as a result of the nation being deprived of a fair share of the resources of the earth. In such case of course the people will be willing to fight to change that condition.
But that is not the position of Canada. We have almost unlimited resources. In spite of that we have had a great deal of poverty, misery and unemployment in this country during the past ten years. Can a people who have been in this unhappy plight be enthusiastic about fighting for a continuation of such a condition? Unfortunately that is the only course which has been or is presenting itself to many people since the declaration of war. Despite this handicap, a high morale and a fine esprit de corps would prevail among
the Canadian people if there were strong leadership; but unfortunately that has been sorely lacking in Canada during the past six years. If under strong leadership immediate evidence were forthcoming that we were putting forth our maximum effort and at the same time insisting upon the greatest equality of service and sacrifice, I believe that confidence could quickly be restored in this nation. Would anyone in this house be so foolhardy as to suggest that either of these things has been accomplished during the past ten months, or since the declaration of war? Ten months after the declaration of war we still have men in Canada pleading for the opportunity to make some contribution in this war. Industry is fighting to obtain orders. Now by this budget we are given to believe that all this is to be changed. For instance at page 1014 of Hansard we find this statement made by the Minister of Finance (Mr. Ralston):
Financial provision can be made and will be made for whatever it is physically possible for us to produce or to procure in the way of war services, supplies and materials. The limits of our effort are not fiscal; if there are any such limits they are physical, mental and moral-by that I mean the physical limits of our resources and the mental and moral capacity of Canadians to bear burdens and make sacrifices.
I would congratulate the Minister of Finance upon that statement. But it is comical to find that statement appearing in the budget speech. For the past five years we have advocated that principle in this house, and have always been ridiculed for stating, as we have on various occasions, that anything that is physically possible and desirable can be made financially possible. Last year in the banking and commerce committee the governor of the Bank of Canada stated that that was true, and now we find it stated in the budget speech. We have referred to the fact time and again in this house; we have pointed out that it has been physically possible during the past six years to increase greatly the production of this country, to establish a higher standard of living so that people would not have to go on relief. No one would dispute that. The governor of the Bank of Canada agrees that what is physically possible and desirable is financially possible. Therefore the only conclusion we can come to is this, that since it was physically possible to make a higher standard of living available to the people of Canada, and since it was financially possible, tihe only possible reason the government had for not doing it was that they did not consider it desirable.
The Prime Minister (Mr. Mackenzie King) has always been fond of expounding fine principles in this house. Unfortunately he has
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failed miserably in putting them into effect. I am not surprised that the hon. member for North Battleford (Mrs. Nielsen) stated this afternoon that she did not believe various statements that were made by this government. How could anybody believe that the various policies that they enunciate today will be put into effect, in view of the stand this government has taken time and again in the past? Have the people of Canada forgotten the statement made by the Prime Minister in 1935 that currency and credit would be made available in terms of public need to meet the domestic and social requirements of the Canadian people? Would any hon. member dare to say that that promise has been carried out? Have we forgotten the policy propounded by the Prime Minister at the outbreak of the war, and again on May 20, when he made this statement as recorded on page 46 of Hansard:
The unprecedented threat to the allied powers and ourselves must be met at once by immediate action. Production must be accelerated to its limit. Training must be intensified.
Does anyone suggest that that has been carried out during the past ten months? Can it be said that production has been accelerated to the maximum, while we still have thousands of men in Canada pleading for a chance to take part in the country's war effort? During the past five or six years, while Germany has been busily engaged in amassing war materials and thereby reaching a strong war footing, we have been busily engaged in amassing credit and gaining a so-called strong financial position. While Germany said in effect, "To hell with money" and spent itself into a strong warlike machine, we have been busily worshipping at the shrine of money and saving ourselves into a state of insecurity. I say that because wars are not fought with money, they are fought with men and materials. Germany had the materials by September of last year, and we apparently had the credit. But credit is merely faith in our ability to deliver goods and services as, when and where required, and unless goods can be delivered when required, that faith is destroyed. I wonder how long the people of this nation will continue to have faith in a system which for the past five years has wrecked the lives and health of thousands upon thousands of the people of this country, and in the past few months has seen nation after nation destroyed under the iron heel of fascism.
In peace time we have urged that production should be maintained at its maximum, or at least at a level sufficiently high to provide to the people of Canada a decent 95826-811
standard of living. We have repeatedly presented the physical picture, showing that industry was only producing at less than fifty per cent of its capacity. We have pointed out that this dominion has great natural resources barely touched, large reserves of energy and a large surplus of unused labour in the form of the unemployed, and in addition a large favourable balance of payments, a position of which we might well be proud but for the fact that on the other side we had a million or so people on the verge of starvation and destitution. And repeatedly we have asked in this house this question: Why should we not put the unemployed to work in the industries that are working only part time, and thereby produce the goods of which the people are so greatly in need? We always failed to get a reply to that question. Many hon. members have risen in their places and tried to place the blame upon industry. They have stated that industry should have had more confidence; that industry should have expanded and employed the surplus labour. I would point out that you cannot blame industry. If industry was not able to sell its restricted production, how could it possibly have sold its production if it had expanded?
We have stressed the reason for this condition, and it is necessary that we should understand it at this time in discussing the budget. We have contended that this condition is due to the fact that industry is not self-liquidating; that industry, owing to certain practices that are inherent within the system, does not create an effective demand for its own production except in times of abnormal capital goods production, and during the past ten years capital goods production has been sorely lacking. We have stressed the fact that if the Canadian people are going to be put in a position where they can buy the production of the country-and I think the house would agree that the only point in having production is in order that you may have the consumption of it-then we must maintain a certain definite relationship between the production - of capital goods and the production of consumption goods. That relationship is this: You must have at all times a sufficient volume of capital goods production so that the salaries, wages and dividends paid out in that production will be at least equal to the deficiency of purchasing power which exists as between the total prices of consumer goods and the monetary demand against them. If that equilibrium is not maintained, it will mean there will not be an effective demand against the production of the country. Production will become restricted;
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unemployment will increase and you will find yourselves in the vicious circle of deflation. We therefore contend that it is necessary for the government to take such steps as may be necessary to maintain that equilibrium by instituting national projects such as road building, reforestation, slum clearance, the elimination of level crossings and so forth.
On the other hand, in time of war we have an entirely different situation. The production of armaments means an increased production of capital goods. In turn, that means an increased demand against consumption goods. So long as we can increase production to satisfy the demand for war purposes and at the same time satisfy the demand for consumption goods, there can be no justification for increased taxation. It is only after the maximum capacity has been reached that it will be necessary to increase taxation. Otherwise excessive taxation is bound to result in an actual retarding of production. If there should be in Canada certain commodities of which there is a scarcity, for instance such commodities as are paid for by foreign exchange, and it should be desirable and necessary to reduce the demand against those commodities, I maintain that the only sound way to do that is by rationing rather than by attempting to reduce the purchasing power of the people by a heavy increase in taxation, because, when you reduce the purchasing power of the people by wholesale taxation, as exemplified in this budget, you are going to retard and so restrict the demand against the commodities of which we have a surplus. In the near future we shall probably have a great deal of trouble in selling our primary products, because we have lost a number of our markets in Europe. What is going to be the result of this budget? It will further increase that problem and further restrict the demand against commodities of which we have actually surpluses in this country at the present time. This is called a war budget. Certainly it is not a patriotic budget, because it is going to retard our productive capacity; it is going to restrict the demand against goods of which we have a surplus, and therefore make it so much harder to expand our production.
During the past five years I have pointed out that our production has been restricted ever since the Liberal party came into power in 1935. I have pointed out how the Minister of Finance, instead of following the policy laid down by the Prime Minister in 1935-that is, that currency and credit would be made available in terms of public need to meet the domestic and social requirements of the Canadian people-has been attempting to reduce the expenditure by the government to fMr. Qiifllch.J
the amount procurable from the pockets of the Canadian people. The result has been the restriction of production in the face of actual, physical want. Whilst Germany was busily expanding her production to the maximum, the minister's deflationary policy kept thousands of people in Canada idle, although we could have very well utilized the services of those people to build up our defences and increase the production of commodities so that the demand created by the money paid out for the strengthening of our defences would have been satisfied by the goods produced by industry.
So, Mr. Speaker, I would say that those people in this country, in England and in France, who have been guilty of this financial policy of restriction in the face of the great armament production that was going on in Germany, have been more guilty of treachery to these nations than many people who have been actually paid servants of Hitler. There is no question of it. I think we all realize to-day that Germany has gained her successes not by superiority of man-power but through treachery in various forms among the allies. Not the least of those acts of treachery were those policies imposed upon the allied nations under which it has been impossible to expand our production to the extent to which it should have been expanded. We had idle men; we refused them the right to work, while Germany was making every man work to the maximum in building up the greatest war machine the world has ever known. What was the situation here? We had half a million men unemployed. Am I not justified in calling that the greatest act of sabotage Canada has experienced? Those men who have been responsible for our financial policy during the past six years are the grand saboteurs of this country. The other day the hon. member for Parry Sound (Mr. Slaght) said we should hang people guilty of treachery. I said then, and I say now, that we should make sure we hang the right people.
On the other hand it is interesting to note how Germany, a country that was destitute and without capital in 1932, has been able to build up one of the greatest war machines this world has ever seen.
Subtopic: DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE