July 2, 1940


The house resumed consideration of the motion of Hon. J. L. Ralston (Minister of Finance) that Mr. Speaker do now leave the chair for the house to go into committee of ways and means, and the amendment thereto of Mr. Coldwell.


SC

Victor Quelch

Social Credit

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

The Budget-Mr. Quelch

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;

The Budget-Mr. Quelch

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.

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

Paul Joseph James Martin

Liberal

Mr. MARTIN:

And at what expense to the people!

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I am going to deal with that.

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LIB

Paul Joseph James Martin

Liberal

Mr. MARTIN:

I do not mean financial expense.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I was in England two

years ago, during the crisis of that time, and I met a friend of mine who had just come

The Budget-Mr. Quelch

back from a six weeks' tour of Germany. That was not a Cook's tour; he and his friends took a car and travelled through the country. He said generally speaking they found contentment in Germany. That was in 1938; since then there has been a big change. The standard of living has been reduced very considerably, and I am going to explain why. When I am dealing with the financial policy of Germany, however, I hope no hon. member will think it necessary to rise in his place and ask me if I am advocating fascism or nazism. Our policy is the very essence of nazism. Nazism believes in centralization of power; we believe in the decentralization of power. Nazism believes in the greatest possible regimentation; we believe in the greatest possible freedom. But I would ask this: Just because Germany uses tanks, would it make us nazis if we used tanks also? Just because Germany uses dive bombers, are we nazis if we use them also? When the Prime Minister asks this parliament to grant him dictatorial powers, does that make him a Hitler? Because we have conscription and Germany has conscription, does that make us nazis. Therefore, if Germany has had a sane monetary system in the past few years, I am not advocating nazism, I am sure, if I advocate that we should have adopted a similar financial policy.

I am going to quote from a speech made by Doctor Schacht formerly president of the Reichsbank. This speech was made on November 29, 1938, to the Deutsche

Akademie. It was entitled "The Financial Miracle," and from it I quote the following:

The public finances of Germany were in a hopeless state in 1932. Every increase in tax rates only caused a decline in revenues.

And I would especially refer that statement to the Minister of Finance. Doctor Schacht continues:

Those symptoms of economic collapse were of necessity reflected in an unexampled social distress. A shocking proof of this are the statistics of unemployment, which in the winter 1932-33 exceeded the six million mark and which together with the invisible unemployed amounted to about seven million.

That is the condition which existed in Germany in 1932. In the article Doctor Schacht points out that Hitler called him and told him he wanted to put into operation a financial system which would make it possible for Germany to expand her production to the maximum. Then he goes on:

All government assistance was from the very beginning used to bring about a rise in production, first in a so-called work creation programme through credit assistance for reconditioning, repairs and similar things, and

afterwards through the great armament programme which was steadily expanded. The extent of this programme and of the autohighway construction which was undertaken soon made it clear that these two tasks alone would be sufficient to overcome the existing unemployment, so that the other work creation measures soon became superfluous.

Naturally this work creation and armament-programme could only be set under way by the state and could only be carried out by financing on a large scale. No capital at all was available for this financing. In fact money creation had to be helped along. . . .

The fact that the newly created money would' be covered by newly created goods was not the only point; the type of goods also had to be considered. Simply expressed, the problem was as follows: The credit money, made available for the armament programme, produced a demand for consumption goods, in so far as it was paid out in the form of wages and salaries. However the armament manufacturers deliver military goods which are indeed produced but not consumed. This leads to two conclusions: First, care must be taken that in addition to armament production, a volume of consumption goods is produced which is sufficient for the needs of the population, including all those working for rearmament and, second, the less consumed, the more workers can be allotted to armaments. [DOT]

The point I bring particularly to the attention of hon. members is that they did not reach maximum production until 1938. Up to 1938 they were expanding their production of war material and consumption goods. Therefore at that time they were able to put forward the maximum war effort, and at the same time maintain a comparatively high standard of living. Then he goes on to say:

Spring 1938 brought a change in our finance policy, because at that time German economy had reached a stage of full employment. As soon as an economy has made use of all available labour and materials, any further credit expansion is not only senseless, but actually harmful. For then newly created money can no longer effect a further increase in goods production but can only bring about competition for the available labour and raw materials; and such a competition must necessarily lead to an increase in prices and wages.

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LIB

Paul Joseph James Martin

Liberal

Mr. MARTIN:

They ultimately disagreed, too.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

At least we can judge by

results in Germany.

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LIB

Paul Joseph James Martin

Liberal

Mr. MARTIN:

But Doctor Schacht ultimately disagreed.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

No, I do not think he did. He was placed in a position of even greater importance than the one he held at that time. As a matter of fact, he was promoted because of work well done.

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LIB

Paul Joseph James Martin

Liberal

Mr. MARTIN:

The hon. member must

mean subordinated. It is not correct to say that he was promoted; Doctor Schacht was actually demoted. He was taken out of control.

The Budget-Mr. Quelch

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

He was placed in control

of foreign exchange affecting Germany, Italy and Japan. Surely that is an important position.

If our production were geared up to its maximum capacity, then it would be necessary to increase taxation. But such is not the case tb-day. Our production can be greatly expanded, and to-day we are faced with the difficulty of disposing of a great many of our primary products. To expand taxation ;at this time is bound to mean a restriction in demand against production of primary products. We have lost a number of our markets, and by this form of wholesale taxation, as suggested in the budget brought down by the Minister of Finance, we are just adding to the difficulty of making a distribution of our primary products among our people.

Again I say that if there are certain commodities in Canada which are considered to be scarce, which have to be purchased with foreign exchange, then surely the logical thing to do is to ration those commodities so as to make sure of a fair distribution, rather than cut down the income of all people, and thereby reduce the demand against those commodities which can be produced in abundance. Therefore I say it is not a patriotic budget, but rather one which will actually retard production at a time when we should be expanding production to its maximum.

With these thoughts in mind I move the following amendment to the amendment:

That the amendment be amended by adding thereto the following words: _

"Furthermore this house is of the opinion that there should have been no increased tax burden placed upon the consumer until Canada attain maximum production of desired commodities or full employment by issuing through the Bank of Canada, currency and credit in terms of actual public need."

I hope the Prime Minister will not take the same attitude to this amendment as to the one moved a few days ago. This amendment I would point out is different. It refers to taxation and production. May I quote at this time what the Prime Minister said only a few days ago respecting the Bank of Canada:

Those who are voting for this amendment are voting to give the government power to relieve itself of all responsibility of financing Canada's war effort simply by passing an order which will enable it to transfer that whole responsibility to the Bank of Canada, an institution which has its home in this city.

And again:

We shall be ridding ourselves of all responsibility for what is required in the way of finance to carry on Canada's war effort, and we shall be turning it over to a single institution which is located on Wellington street not far from these houses of parliament.

How many would agree with that definition of the Bank of Canada? Do we recall the statement made by the Prime Minister in 1935 respecting the need for a Bank of Canada, in order to control currency and credit in terms of public need? To those who remember that statement, what must they think of the definition I have just read? When I heard the Prime Minister's statement the other day I was amazed. As a matter of fact I believe I might say I was thoroughly sickened to think that a prime minister of this country when speaking to the members of the House of Commons could be guilty of such puerile nugacity.

Perhaps hon. members recall what was said last year by the former Minister of Finance about the Bank of Canada. Last year he stated that parliament, through the instruments it had created, now effectively controlled currency and credit, day by day, week by week, month by month; furthermore he stated these instruments were the Bank of Canada and its directors, and that this parliament through the Bank of Canada controlled currency and credit. Yet the Prime Minister states that the Bank of Canada is an institution on Wellington street, and that if we place responsibility of finance in the hands of that institution, we would be evading all responsibility. Yet, I repeat, according to the former Minister of Finance, we control currency and credit through that institution. Undoubtedly we have a definite responsibility for the activities of that institution. Perhaps I might be allowed to quote a few words from a speech made by the Prime Minister on August 2, 1935. He said:

Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty _ of parliament and of democracy is idle and futile. To regain for the nation what^ has been lost and to secure a properly constituted national central bank, will continue to be a first objective of Liberal effort.

He said it was a conspicuous and sacred responsibility to control currency and credit through the Bank of Canada, and yet to-day he says it is an institution on Wellington street and if that institution finances the war, we would be evading all sense of responsibility. I do not think the Prime Minister is doing credit to himself or to this government when he indulges in equivocations of that kind.

The budget shows that large sums will be needed in addition to the amounts to be secured by taxation. They may be secured in three ways: by borrowing the savings of the people; by borrowing from the chartered banks, which means monetary expansion; or by borrowing from the Bank of Canada, which

The Budget-Mr. Gillis

also means monetary expansion. If we are to borrow the savings of the people, it will simply mean that this government takes the stand that we are responsible for providing a safe investment for the people. Although we have what might be called a smoke screen by which we try to convince the people that they are financing the war through their purchases of savings certificates, we all realize that the greatest proportion of bond issues will be purchased by financial corporations rather than by the savings of individuals. When we finance by borrowing the profits of corporations, it merely means that we are placing a levy for all time against the people of Canada in order that a tribute may be paid to a small class of society.

On the other hand, we have the power which we should exercise of issuing what money we need through the Bank of Canada. That is what the people believed was the purpose of the formation of this bank. The Minister of Finance may suggest that if we finance in that way it will mean increasing the amount of cash in the tills of the chartered banks, thereby making it possible for them to increase their loans and thus bring about inflation. That charge was made by the former Minister of Finance. I would stress the fact that it would be an easy matter to amend the Bank Act in order to compel the chartered banks to increase their cash reserve requirements, thereby preventing that expansion.

If the minister should contend that the banks could not operate on that basis, that there would not be sufficient profit for them, then I say what I have said before on many occasions: We should nationalize our whole banking system. Personally I am in favour of that. When men who are directors of banks and also directors of industry, have the power to expand their loans up to ten times the amount of their cash, it means that we have given them the power to effect the price level to their own advantage. I do not think that is a satisfactory state of affairs. Credit is a national matter, and it should be controlled absolutely by the people, for the use of the people.

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

Clarence Gillis

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

Mr. CLARENCE GILLIS (Cape Breton South) :

Mr. Speaker, I regret that I cannot conform to the wishes of the leader of the opposition (Mr. Hanson). I feel that I must take up some of the time of the house in an endeavour to place before it my opinion of the budget as well as the opinion of the people whom I represent in this parliament. This budget does not impose many new direct taxes, but the poor of this country must still continue to pay the indirect taxes which

were in effect, such as the sales tax, as well as the new import duty of ten per cent which is imposed upon the necessities as well as the luxuries of life. I have not much to add to the position taken by this group on the budget. This has been made clear already by the hon. member for Rosetown-Biggar (Mr. Coldwell) and others.

It is significant to note that although the income tax exemptions are being placed quite low, the wage-earners and farmers of this dominion still come within those exemptions. This indicates quite clearly how low the income of our people actually is. The income of an average wage-earner in Canada is probably little above the exemption for a single man, namely, $750 a year. According to figures I have seen, the average farm income is even less than that, being about $500. These new exemptions will indicate that many of our people are in receipt of incomes much lower than is required for a minimum decent standard of living. My guess is that these exemptions will cover the majority of our people.

As far as the miners of Nova Scotia are concerned, they have already suffered a serious reduction in their standard of living. Their wages have remained stationary since the outbreak of the war, while, according to information which I have received as recently as yesterday, their standard of living has been reduced by about thirty per cent. I am in receipt of a resolution outlining the views of 5,500 organized miners in that section, and they claim that their cost of living has increased approximately thirty per cent while wages have remained stationary. They have lost that amount of purchasing power which, in the final analysis, is really wages.

The budget also proposes a two per cent income tax against wages. During the depressed days from 1929 to about 1934 the coal company in that particular section, which employs practically all of the gainfully employed men, was in the habit, where a man lived in a company house and purchased his coal from the company, of waiving the rent. During a time when the government of this country and many charitable organizations were providing money for the alleviation of distress caused by unemployment and parttime unemployment, coal and rent bills were piling up against these miners. Work has picked up somewhat since 1934, but these large debts had accumulated and they are now being deducted from the envelopes of the men. I assume from the budget speech that the income tax will be based upon the total earnings of these men and no deductions will be allowed for these back payments. This tax will be assessed against the total wage

The Budget-Mr. Gillis

without allowance being made for the payment of a relief bill, as it were, to the coal company.

It is significant to note that while the income tax is quite steep, a man with an income of from $10,000 to $50,000 still has a handsome income left after all taxes have been paid. However, it is with the corporations of the country that I desire to deal particularly this evening. A few days ago there was an editorial in one of the Ottawa papers to the effect that the big industrialists and financiers had forced France into capitulation. In this great hour of trial, democracy must be made to work so that the morale, faith and determination of our people will remain steadfast in the days that lie ahead. For the common people democracy can be made to work effectively only to the extent that they are given an opportunity to solve their problems cooperatively, only to the extent that monopolies and huge corporations are investigated and controlled by government for the public welfare. If this is done, our own people will be given renewed hope and vigour, and the people now under Hitler's heel will be given a living example of democracy at work.

I have already said once in this house that in my opinion and in the opinion of the people of Nova Scotia, that province is largely in the hands of and dependent on the Dominion Steel and Coal Corporation. But hon. members do not have to take my word for it. In a brief dated March 10, 1934, H. J. Kelly, Vice-President and General Manager of Dosco, stated:

According to the records of the workmen's compensation board, this company and its subsidiaries pay approximately 40 per cent of the total industrial payroll of the province of Nova Scotia in normal times. It is estimated that at least 100,000 people are directly affected by the operations of this company and indirectly the whole population of Nova Scotia is affected.

In company with all the other workers employed in the Dosco mines, I watched the development of the corporation. It received its charter in 1928. In 1930 it took over the properties of the British Empire Steel Corporation and since then it has acquired various other companies and properties. To-day we find that Dosco owns and controls some twenty-six companies. As a result of purchases and financial reorganizations, this monopoly now controls:

Coal mines in Cape Breton county (north and south of Sydney harbour), in Pictou county and in Cumberland county, Nova Scotia.

Iron ore mines, containing about one-sixth of the world's iron ore, at Bell island, Newfoundland.

Steel plants at Sydney and Trenton, Nova Scotia.

Steel car works at Trenton, Nova Scotia.

Shipyards, marine railways, et cetera, at Halifax, Nova Scotia.

Steel fabricating plants and fence manufacturing and steel wire plants at Walkerville, Ontario.

Wire and nail manufacturing plant in Toronto, Ontario.

Rolling mills and steel wire plant in Montreal, Quebec.

Coal docks at various St. Lawrence ports.

Coal shipping steamers.

Railways in Cape Breton and Cumberland counties, Nova Scotia, and a switching and junction railway at Walkerville, Ontario.

Wire, nail and galvanizing plants in Saint John, New Brunswick.

The only large steam electric power plant in Canada, at Glace Bay, Nova Scotia.

Timber limits in New Brunswick and Quebec.

The total assets of Dosco and its subsidiaries at the end of 1939 appear to have been in the neighbourhood of $80,000,000.

All through the years from 1928 to the present, when mines were closed up and families thrown on relief, when the workers were persuaded to accept cuts in wages and had to be satisfied with part-time work, Dosco and its predecessors kept buying up various companies. Thus in 1928 Dominion Steel Corporation bi ught the Peck Rolling Mills.

In 1930-32 Dosco bought the Canadian Bridge Company, and its subsidiaries, and Canadian Steel Corporation from the United States Steel Corporation.

In 1937 it bought Graham Nail and Wire Products.

In the same year Dominion Coal bought the Cumberland Railway and Coal company from Dosco for $1,000,000. I am a worker and cannot be expected to understand the mysteries of modern legal and financial manipulations, but the workers would like to know why it was necessary for the coal subsidiary to buy a railway and co$l company from the parent company.

In 1939 Dosco bought the Sarnia Fence company.

Why were all these purchases made? Who owned these companies formerly? What was their record of earnings and what were the prices paid? It should be remembered that on the board of directors of Dosco are men like Sir Herbert Holt, Mr. G. H. Montgomery, Senator Webster, Mr. J. H. Gundy and Mr. J. A. Kilpatrick, who have their fingers in many industrial and financial pies in this and other countries. I am not saying that Dosco

The Budget-Mr., Gillis

has at any time done anything improper. I do not know. But I do say that we should have more information on these and other transactions. There should be a thorough investigation of the records and history of this monopoly which, according to its own vice-president, affects directly and indirectly the life of all the people of Nova Scotia.

Hon. members may not know that a royal commission investigated part of the situation in 1926. It found many millions of dollars of watered stock in the companies which later became part of Dosco, although it is only fair to say that the Dosco reorganization seems to have squeezed out most or all of the water in the old companies. The same commission also found that the coal company used to sell its coal to sister companies at fire-sale prices, thus reducing the earnings of the coal company and depressing the wages of the miners. According to the report of the Duncan commission in 1932, this improper practice had also been abandoned by that time. The point, however, is that the knowledge that such things were done at one time gives rise to suspicion that other things may have been done since. It is no use indignantly denying it. It is the government's duty to learn the facts and to act on them.

I should like on this question to quote from the Financial Post of March 30, 1935, a statement made by Colonel G. S. Harrington, at that time premier of Nova Scotia. The Financial Post says:

He said that the new issue of $25 par value preferred stoek was "pure, unadulterated water," while the market value of the stock had been manipulated so that large fortunes had been made by "some gentlemen in this province."

"Some gentlemen have made fortunes out of this. It is extraordinarily unfortunate at this time, when labour wants its share in the earnings, that there should be stock manipulation."

I think Colonel Harrington should be an authority on that question because he has taken a great deal of interest in the coal industry in Nova Scotia ever since I have been employed by this company, and I have considerable respect for his judgment in matters of this kind.

In 1938 a royal commission under Mr. Justice Carroll investigated the Acadia Coal company, a subsidiary of Dosco. I wish to quote a few findings and statements of the report of this commission which appeared in the spring of last year, 1939:

Your commissioners readily admit their inability correctly and accurately to dissect or untangle intricate matters of accounting; but this at least may be said, that from the year 1925 until the end of 1932 the Acadia was in a comfortable position financially, and showed a surplus during those years of from $460,219.42

to $1,076,060. That is shown by schedule "B" which apparently means that the company had a balance at credit during those years which amounted to $583,630.25 at the end of 1932. During that period there was paid as dividends on first and second preferred shares of Acadia the tidy sum of $334,770.41. One of those dividends, amounting to $148,382.25, was paid on December 31, 1928, notwithstanding that the profit shown for that year amounted to only $100,976.28.

Schedule "C" indicates some rather startling facts. In 1925, when the loss of Acadia is shown to be $128,469.66, the Scotia company took from Acadia cash to the amount of $1,921.21. In 1932, when the loss of Acadia is shown to be $180,174.38, the Scotia company obtained from Acadia the sum of $724,895.87 cash; and on the 19th of January, 1933, the day that the receiving order was granted against Scotia, that company received from Acadia the sum of $20,000 cash, and on that day the memorandum shows that the Nova Scotia Steel and Coal Company owed Acadia Coal Company a total of $1,703,410.81 . . .

There was nothing illegal from the point of view of authority in the various matters of borrowing the dividend payments already mentioned. In fact it cannot be said there was anything illegal in those transactions from any point of view. Legality of action, however, is one thing, and preserving and safeguarding the industry and all that that implies is quite another thing.

It is therefore the considered view of your commissioners that some legislative action should he taken in regard to the powers of holding companies.

None has been taken.

To some people this story may be just another story of accepted financial manipulation. I know that this story affected human lives. The result was that the entire town of Thorburn became a ghost town and a thousand souls became destitute.

Only to-day, from that particular section, I received a letter from a lady. I should like to read part of it, because it has a bearing on the matter of the manipulations referred to in the report of the Carroll commission:

I am writing to you as' a last gesture of a number of destitute and starving people.

It would be too long a story to try to tell you half, and it is unbelievable in this dear land of ours-what we have suffered since the government took away our employment. Now

there is not even desultory road work-and no direct relief-since three weeks, only for sixteen party people. Over 100 got nothing.

Dozens of committees have gone to Halifax and also to Ottawa. No one will come and no one will listen. We have no one to help us, when all we ask for is work and some way to once more earn our living.

That comes from a little mining sectionwhich was closed as a consequence of the manipulation which is mentioned in the

report. It is seven miles from New Glasgow; it has no railroad and is practically in the wilderness; the houses are tumbling down;

The Budget-Mr. Gillis

there is no lighting system; and people who have given the best years of their life to the development of the industry are in great distress. In my opinion the enterprise was scrapped by high finance.

I say that the federal parliament is directly concerned in this matter. From 1897 to 1939 this parliament granted to the various companies which were later combined in Dosco a total of about $20,000,000 in bounties, subsidies, subventions and the like. In addition to this direct aid, a large portion of the eight and a half million dollars or so paid to the railways in the last ten years to assist in th'e movement of Canadian coal to central Canada has gone to help Nova Scotia coal. This is an indirect assistance to Dosco, since it widened its markets at public expense.

These figures still leave out of account the enormous benefits granted the industry through the tariff, tax exemptions and the like. Thus the ten per cent import duty proposed by the present budget will, in effect, act as a subsidy to the coal industry.

I am not arguing that this assistance should not have been given or should bestopped. I said the other day that theminers of Nova Scotia appreciate this assistance very much. But I do say that it is the duty of this parliament and the government to make sure that the assistance

goes to improve the condition of the workers and people of Nova Scotia and that it is not misused for the enrichment of the owners of the industry or wasted through inefficiency. Down to March 31 of this year Dosco had received some 84,407,000 in war orders. Is it not our duty to investigate thoroughly the record of this corporation and its present standing? If the people of Canada are to go on providing public money to assist this enterprise, is it not time they took it over and ran it for the benefit of the workers in it and of the community generally?

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LIB

Georges Parent (Speaker of the Senate)

Liberal

Mr. SPEAKER:

Order. I made a ruling the other day with regard to the reading of speeches. The hon. member is apparently confining himself very closely to his manuscript.

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CCF

Clarence Gillis

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

Mr. GILLIS:

Mr. Speaker, I was simply endeavouring to do what I noticed has been done by almost every hon. member who has taken part in the budget debate. The minister himself, when he presented his budget; the leader of the opposition, and practically everyone who has spoken to-day has, and I think correctly, used notes.

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LIB

Georges Parent (Speaker of the Senate)

Liberal

Mr. SPEAKER:

The other day, when I was making a statement on this subject, the Prime Minister (Mr. Mackenzie King) asked whether it referred to ministerial statements. I said no, that the practice and the custom of the house had been to allow ministerial statements to be read. The leader of the opposition is in somewhat the same position; he to-day was giving a statement which appeared to be on behalf of the group of which he is the leader. No other hon. member who has spoken to-day has used his papers to the same extent as the hon. member who has just taken his seat. I would ask that he desist from doing so.

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CCF

Clarence Gillis

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

Mr. GILLIS:

Thank you, Mr. Speaker. I am endeavouring to make a statement on behalf of the people I represent, on a very complicated question, and the information I am giving is not my own. I have endeavoured to present it through various documents, such as the Financial Review for 1939, the Financial Post, and different sources of information from which I have selected this material. At this particular time I am following closely the information contained in these documents because I do not want to make any statements which are not in accordance with the facts. But I have not any intention of reading my speech so far as it consists of the comments which I intend to make upon these notes.

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LIB

Georges Parent (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I do not think there

would be any objection to the hon. member reading from documents which he wishes to quote, but so far as I have seen, much of that part of his speech which he has been reading has been in the nature of comments on the documents and figures which he has quoted. I would ask the hon. member, when he is quoting, so to state, and then to continue his speech in his own words.

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CCF

Clarence Gillis

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

Mr. GILLIS:

Thank you, Mr. Speaker.

Finally, I want to put on the record what the miners of Nova Scotia have to say about the situation in a brief which their union has prepared and which was presented by the miners to the conciliation board that is sitting at the present time in Pictou county and endeavouring to iron out the situation there. This is what they say:

In determining the amount of wages payable we believe that in the past the human factor has been required to take second place and that profits, dividends, and investment earnings have been given first place, and have been the principal aim and concern of the management. Perhaps that is natural under our economic system, yet we believe that there is need for a change. What is demanded of the workman is his labour, and when he has given that he

The Budget-Mr. Gillis

has cooperated with the owners by giving all that is demanded of him. The workman does not share in the management of the industry, he does not control its policy or direct its destiny, he does not decide what dividends shall be paid, what borrowings shall be made, what expansion or development shall be undertaken; has had no voice in deciding corporate set-up, appointment of managers, or directors, or affiliations with other industries. He gives his labour, others manage the industry. Sometimes an industry fails due to factors over which the management has no effective control and often it fails as a result of bad management. In either case the workman is not responsible for the failure. He has given his labour, he has done what was demanded of him, and having done so, he should be the last to suffer, and he should not be obliged to suffer if his suffering can be avoided by action within the control of the management.

It is said that investors are entitled to a return on their money invested. We cannot agree that that is always so. Often the money invested is surplus money which the owners do not require for the reasonable needs or even luxuries of themselves or their families, they have it to spare and have invested it in order to make more money. Often, too, the money is inherited, money not earned by the investor. We believe that a reasonable living wage for the workman who gives his labour and who needs such a wage in order to get even the minimum requirements of subsistence should take precedence over earnings on such invested capital, and that profits and returns on invested capital should not be regarded as more important than payment of proper wages.

That is the principle which we support. I believe that this is the principle which the people of Canada support. But I know from my own life and from the lives of thousands of other workers in Nova Scotia that the opposite principle has been applied in practice. As a result, the people of my province have no confidence in the corporation which controls them. ,

We must win this war. To win we must have the whole-hearted cooperation of the workers of this country. They are ready and anxious to give that cooperation. But wealth must be made to pay its share. Monopolies should be investigated and controlled. Otherwise they will make fortunes at the expense of the people.

My endeavour in presenting the case as I have at the present time is to bring to the attention of the government and particularly the Minister of Finance a situation that now exists in Nova Scotia. The Dominion Steel and Coal Corporation is a large corporation that controls the destinies of twenty-six other companies with ramifications throughout eastern Canada. Since I have come here, telegrams, letters and resolutions have been sent to me and, I believe, to other hon. members of parliament, demanding that

something should be done in Nova Scotia with respect to an investigation into the management and general financial structure of this corporation. The action now taken by the government for the purpose of probing for a solution is in my opinion misleading and not going to arrive at any permanent solution.

At the present time there are four conciliation boards set up in Nova Scotia, bound by certain terms of reference, beyond which they cannot go. I think the terms -of reference relate to the ability of the respective subsidiary companies of the Dominion Steel and Coal Corporation to pay the wages demanded, on the basis of their earnings for the past year or two. While these conciliation boards may serve some purpose and have done so in the past, in my opinion they are not going to serve any purpose, or will serve very little, at the present time. After thirty odd years of experience working for that corporation and its subsidiaries and dealing with them through the medium of unions and so on, I believe that the people of Nova Scotia generally, not only the miners, have completely lost confidence in the word of the people who head that organization, and are sceptical as to what will come from these conciliation boards. What is now required is an exhaustive survey carried on under the jurisdiction of the federal government into the financial structure of that corporation and labour conditions under its management. The boards that have been set up are in my opinion not able to do that because of their terms of reference.

For the past eighteen months the miners all over Nova Scotia have been endeavouring to come to some understanding with the corporation on the question of wages. We have been signing contracts now for a period of thirty years. In this war effort every endeavour should be made by the company with respect to both signing agreements and carrying them out and pushing that industry to its highest capacity, because coal and steel are necessary war commodities. The steel operations are in just the same position as the coal mining. For the last two years the steel company at Sydney and the workers have been at loggerheads; no agreement, no understanding, spasmodic strikes, lack of confidence and general demoralization. The brief presented by the Carroll commission should have a thorough investigation from the federal government, in view of the fact that the federal government is paying relief to people left destitute by virtue of the manipulations as shown by the commission. For the past six or seven years the people of Nova Scotia have been endeavouring to present their case

The Budget-Mr. Brunelle

before some responsible body that will try to find a solution for a problem which affects practically all the people of Nova Scotia, because steel and coal are basic industries of that province and ramify into every phase of its economic life.

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

Hervé-Edgar Brunelle

Liberal

Mr. H. E. BRUNELLE (Champlain):

The present debate gives members of this house an opportunity to make general observations, and I wish briefly to avail myself of that opportunity. The budget now before this house is such that if anyone did not previously realize what it means for this country to be at war, he must realize it now. Several new and heavy taxes are imposed; other taxes are increased, and yet it appears we must face a large deficit. And apparently the worst is yet to come. But we must carry on and make the best of the situation. Things that could be said or suggested in normal times cannot be expressed now for fear of hurting someone's tender feelings. But only one thing matters, that is to win the war into which we went voluntarily and of our own accord. However, the present war, terrible though it may be, does not mean, even if we were to lose it- which God forbid-the end of the world. But, I hasten to say, it might mean the loss of some privileges which we cherish very much. Yet, in spite of everything, at the end of hostilities the people in general, and our youth in particular, will expect to live normally and in reasonable comfort. I was pleased to note in the speech from the throne that the government is concerned with post-war conditions. That is why in that speech we have the following declaration:

While the present session of parliament will necessarily be mainly concerned with Canada's war effort, and the measures essential to the achievement of ultimate victory, my ministers are of opinion that, despite what to-day is being witnessed of concentrated warfare, it is desirable, as far as may be possible, to plan for the days that will follow the cessation of hostilities.

In consequence we are to have unemployment insurance, in spite of many difficulties and obstacles which had to be met, and I am sure that the whole country, and the industrial workers in particular, will be very glad of it. Also some legislation has already been passed to assist youth training in conformity with the plan originated by the late regretted Minister of National Defence, the Hon. Norman Rogers, while he was Minister of Labour. But I think it is apropos to remark here that our Canadian young people must prepare themselves to earn their living, must equip themselves with special knowledge and particularly with those qualifications which more than ever are needed to enable them to [Mr. Gillisd

compete with others. Ordinary training and education are no longer sufficient in this age of specialization. The young must study; they must learn; they must specialize in some branch of trade, work or science. In so preparing themselves, they will pave the way to their own success, and no one can do this for them as well as they can. Let our youth have confidence in themselves and cease to think of or count on outside protection or influence. The doors of our technical schools are open to them; day and night courses are available. I need not say that the appalling burden of the war will fall on the shoulders of youth or on the next generation.

I can speak only of the province from which I come, but I am afraid that immediate prospects for the employment of our young people in Quebec are not very bright, since up to the present industry has not come close to absorbing those available for employment. It was hoped that the sacrifices required by the war would be to some extent compensated for by additional industrial activity, but so far very few opportunities have been offered our unemployed. Of course the government is not to blame for this lack of industrial activity, which is a matter of private enterprise and individual initiative; but it is a pity that no practical, appealing and up-to-date plan of colonization has been set up in my province to prevent our farmers' sons from flocking to the cities, where they simply increase the number of men out of work. In Canada, a country that we call agricultural, it is not normal to have only about 40 per cent of the people residing in rural districts while 60 per cent live in the cities. I suggest that a conference of the dominion and the provinces be held without delay in order to devise a real back-to-the-land movement and a plan to keep on the land those already there, and to place more farmers' sons on new land under more favourable conditions.

I am deeply concerned with the youth problem, and I ask that every effort be made by the appropriate authorities to encourage the reopening of plants which in many instances have been closed since 1930. Some industries are working seven days a week but still have parts of their plants closed. I would rather pay these companies for employing people on relief than continue the payment of direct relief to these people. In order to encourage the sons of our farmers to take up new land, I suggest that eastern farmers should receive constant attention, particularly at this time when their production is so essential. Unfortunately the war has closed many of our former markets with the result that the prices of some agricultural products have fallen. This situation is liable to get worse

The Budget-Mr. Brunelle

but, as I said in the beginning, we realize now what it means to be at war. No doubt this dislocation of our foreign markets was inevitable, but in my opinion something should be done for our eastern farmers. For instance, there is plenty of feed grain in western Canada being sold at very low prices; yet when that grain is transported to the east our farmers must pay very high prices for it, because of the high cost of transportation. Railway rates on grain sold to eastern farmers by western farmers should be considerably reduced. Since the war began the farmers in the east have been invited to produce more beef and bacon, the prices of which have not been as good as we expected. I repeat that the loss of our foreign markets due to the war has been the cause of the drop in prices of agricultural products.

Our efficient and capable Minister of Agriculture (Mr. Gardiner) already has done a great deal for the farmers of the east, who are grateful for his efforts to improve their lot. I am sure the Minister of Transport (Mr. Howe) would gladly cooperate with the Minister of Agriculture in reducing railway rates on feed grain from the west. Let the rates cover the cost only. The present rates are almost prohibitive, and in many instances the eastern farmer cannot afford to pay the price demanded for feed grain coming from the west. In view of their past contributions to assist others, I believe the eastern farmers are entitled to the benefit of some little sacrifice on the part of our railways or other groups and classes of our citizens who have profited from those contributions. At present the cost of transporting grain from the west is so high that the retail price of that grain in the east is not at all commensurate with the sales price in the west. Eastern farmers and their organizations should enjoy a lower freight rate at least on feed shipped to them direct.

Before I resume my seat I must touch upon another subject. Last September the sales tax was imposed, as a war measure, on the domestic consumption of electricity. It is not my intention to criticize the tax itself, but rather I would offer a suggestion as to the manner of levying that tax. I submit to the Minister of Finance that the tax is not fair to some taxpayers, inasmuch as certain sections of the country feel that they are being discriminated against. This was a new tax. I am sure the former minister never meant to impose a hardship on anyone or to create an injustice, but in my opinion an injustice has been created. The amount of the tax should be in proportion to the quantity of electricity used. As the law now stands, those who pay the largest tax are not always those

who consume the greatest quantity of electricity. I happen to be president of an electric plant in Gaspe, and a little study has made it clear to me that the present tax on electricity is in fact a tax on the electricity bill whereas, to be fair to all, the tax should be on the quantity of electricity consumed.

The point I wish to make is that while electricity is standard in its nature, there is considerable variation as between the prices of electricity in different parts of the country. It happens that in some instances where the rates of electricity are highest, the people can least afford to pay the 8 per cent sales tax. And irrespective of their means and ability to pay the tax, those people who are fortunate enough to profit by hydro-electric plants, or by municipal electric systems, receive advantages which are not enjoyed by the consumers who live in areas served by steam electric plants, by insulated small waterfalls, or more especially by the big power plants which overcharge the consumers.

To illustrate my point I beg leave to quote from the publication Electrical News and Engineering published in Toronto on March 15, 1940. The quotation is as follows:

Based on the most recent report of the Dominion Bureau of Statistics, the per cent of total dominion domestic consumptions for each province is as follows:

Per cent

Prince Edward Island 0T

Nova Scotia l-6

New Brunswick l-2

Quebec 13-2

Ontario 58-5

Manitoba 15-1

Saskatchewan 1'8

Alberta 1'8

British Columbia and Yukon 6'7

Computing the revenue derived from the existing tax from the statistics showing the average monthly bill and the number of consumers as shown in the same report of the Dominion Bureau of Statistics, the proportion of taxes paid by each province is as follows:

Per cent

Prince Edward Island 4-0

Nova Scotia 3-9

New Brunswick 2'9

Quebec 20-7

Ontario 45-2

Manitoba 7'9

Saskatchewan 4-7

Alberta 4'7

British Columbia and Yukon 9'6

From the above figures it will be noted that Ontario contributes 45 per cent of the total taxes for a consumption of 58 per cent of the total dominion consumption and Manitoba's share of the taxes is only 7-9 per cent for 15T per cent of the total consumption.

It will be noticed that Quebec pay 20-7 per cent of the total tax on electricity, and consumes only 13-2 per cent of the total kilowatt hours of the dominion. I ask the Minister of

The Budget-Mr. Brunelle

Finance to devise a plan whereby the tax will either be placed on a kilowatt hour basis or will follow the block principle, namely, a decrease in the tax in proportion to the increase in kilowatt hours consumed. I feel sure at any rate that the Minister of Finance will find a more equitable way of levying the tax on electricity.

Topic:   THE BUDGET
Subtopic:   DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
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July 2, 1940