I still cannot understand
why we should consider it after reaching full production if we refuse to consider it before we reach full production. Surely the time to consider monetary expansion is before full production is reached. I think the Minister of Finance would agree with that statement.
The leader in this house of the Cooperative Commonwealth Federation made a statement with which I do not agree, when he said that when we nationalized the Bank of Canada it served to bring about a better relationship between production and money. In view of the fact that from 1935 to 1939 we had in the neighbourhood of half a million people unemployed, I cannot see how anyone can claim that the Bank of Canada maintained a correct relationship between the amount of money and the amount of employment or production in the country. The minister himself admitted in September, 1939, that it was desirable to have monetary expansion in order to bring about fuller employment and an increase in the production of the country.
The figures quoted by the Minister of Finance must have helped to impress everyone with the magnitude of our war effort. I think it should prove, to all those who have given this matter any consideration, the undesirability, or perhaps I might say the impossibility, of obtaining such enormous sums entirely from the pockets of the Canadian people. Action of that kind would mean the lowering of the standard of living of the people to such a tremendous extent that our war effort would be greatly impaired. If production were static, such action might be necessary. But, as a matter of fact, production is steadily expanding, and is still a very long way from reaching the maximum. I say that in spite of statements which have been made by some ministers to the effect that we are rapidly approaching that point.
We still have thousands of unemployed. I believe that every hon. member is being frequently approached by men, skilled men, looking for work. If that is not true of the east,
War Appropriation-Mr. Quelch
Here is another question and answer which shows even more clearly his attitude. As a matter of fact, in the second answer he takes the stand that a large debt is a sign of progress, a small debt a sign of stagnation.
Now I want to get this question across once more. Can wre hope ever to tax the people of Canada sufficiently to retire the debts, or must we continue to go progressively into debt, although the debt charges may not increase because of lower rates of interest?
A. That debt is an asset of the Canadian people. Now let me say. I am speaking of public, private and aill kinds of debt; what would be the object of repaying it?
Q. Well that is what
A. Speaking of the thing as a whole. Now there may be and there has been an object in repaying debts so far as one individual entity is concerned; but as it is repaid to the holders of the debt one must assume that they are using that money for fresh enterprises, involving fresh debts and fresh assets; so that all I can say would be this, that in a country where the sum total of public and private debt was decreasing, you have a country which is going backward and which is becoming more poverty stricken. Generally speaking, in a country where you find that there is no public and private debt you have a country resembling darkest Africa; there is nothing else.
That, I think, shows clearly why this government are going head over heels into debt, when they have a man advising them who believes that increase of debt is a sign of progress. While it may be true that the national debt is a national asset, we should remember that it is only an asset of comparatively few of the people but it is a liability of one hundred per cent of the people. Therefore the government have to place a levy on all the people of Canada in order to pay tribute to a comparatively few. Is that a desirable condition? But that is the direct result of the government's financial policy as recommended and approved by the governor of the Bank of Canada.
I was interested to observe that the general manager of the Bank of Montreal, Mr. G. W. Spinney, takes just the opposite view. In my opinion, the stand taken by Mr. Spinney is far more sound than that of the governor of the Bank of Canada. Mr. Spinney, on January 24, 1938, said:
Canada's debt burden gradually is lowering the general standard of living, G. W. Spinney of Montreal, general manager of the Bank of Montreal, said in an address prepared for delivery to the associated boards of trade of Quebec eastern townships to-night.
He went on to say:
The primary threat to the welfare of this country lies in our indifferent attitude towards mounting debts. Federal and provincial government indebtedness is ever on the increase and some municipal bodies are shaping their courses in the same direction. Let us consider how our capacity to pay is keeping pace with the growth in our promises to pay.
Comparing the year 1937 with 1927 we find the annual national income of the country is less by something like $1,230,000,000. On the other hand the total of dominion, provincial and municipal direct and guaranteed debt had increased in the same period by some $2,620,000,000. In other words, while the wherewithal to enable us to pay our contractual obligations has shrunk in the last decade, we have in the same period substantially increased the total of our borrowings.
Something seems to be out of kilter here because we are obviously making promises which our present growth in wealth and income does not appear to justify.
So we in this group believe that we are quite justified in condemning the present policy as a debt-creating policy, a policy that is building up a tremendous debt which can never be paid but which will extract interest charges from the people as long as we continue under the present system.
Let us take a later period, 1935 to 1939, the regime of this government. During that period we had an average of a million on relief, half a million unemployed employables, industry operating at only a small percentage of full capacity, our capital assets being steadily depreciated and our defences neglected while foreign countries were rearming. This was all because the Minister of Finance of that time insisted that money was not available to develop the resources of this country. Hon. members who were here during that period will remember how time and again we of this group urged the government to adopt a policy that would make it possible to develop the resources of the nation, but all we got out of the Minister of Finance was hysterics. He conjured up the bogy of inflation; he saw the snakes of inflation creeping about the country, choking the very life out of the people. When it was even suggested that we should make old age pensions available at the age of sixty-five, the minister said it was impossible to find the money, but now we are finding millions and billions for the destruction of life.
I am satisfied that, when this war is over, people will not be content to be told by the government that money is not available to guarantee a decent standard of living in Canada, while we have half a million people unemployed and1 industries producing only to a small percentage of their capacity. I am satisfied that, when our soldiers come back, they will not be content to be told, as the soldiers of the last war were told, that no work is available for them and they will have to go on relief. Soldiers will not be content to see the widows of soldiers forced on relief because the government refuse to pay pensions, because these women are in the unfortunate position of being unable to prove that their husbands died as a result of
War Appropriation-Mr. Quelch
war service, or had a 50 per cent disability. As every hon. member knows, that is a situation which every returned man has been1 fighting for the last twenty years. Finally we had the disability reduced from 80 per cent to 50 per cent, but there are still many widows of men who died as a result of war service who have been forced to accept relief because this government would not accept its responsibility. I do not believe that, after this war, our soldiers will permit such a situation to continue. When they see the government finding millions of dollars for war purposes, they will not be content to be told that in a country like Canada, with all its resources, people must remain on relief and1 without employment simply because the Minister of Finance considers it necessary to maintain a deflationary policy.
As I have pointed out already, during the period from 1935 to 1939 we urged upon the government the need for monetary expansion We urged that a certain proportion of the unemployed be used to build up the defences of the country, to construct roads, irrigation projects and other essential services, while the balance of the unemployed should be used to expand the production of consumer goods, thereby satisfying the demand of those engaged in other services. That is to say, we stressed the need for maintaining a definite relationship at all times between the production of capital goods and the production of consumer goods, so that the money paid out in the production of capital goods would equal the deficiency of purchasing power that existed as between the total prices of consumer goods available for distribution and the effective demand against them. Provided that is done, there can be no talk of inflation, because by such action you have stabilization, not inflation. And, as I have already said, those who were in the house at that time will remember what happened; invariably the Minister of Finance displayed hysterics, or the debate was adjourned on some excuse or another.
So, Mr. Speaker, I would say that from 1935 to 1939 the Department of Finance continued to sabotage the development of our industries and the training of our man-power, while our potential enemies, unhampered by such financial restrictions, expanded their industrial output to the maximum. Therefore, upon the declaration of war, we found ourselves in this deplorable situation, with weak defences, practically no modem armies, a large volume of unskilled labour, and with our industries running in low gear. In view of the points I have recited, Mr. Speaker, is there any reason why the people of Canada to-day should have any confidence in the financial
policy of this government? I could not help feeling amused at the following statement made by the present Minister of Finance, apparently in reply to Mr. Hepburn, on January 24 of this year:
I can understand that during the depression, when there were unemployed labour and resources in Canada, it may have been difficult for a layman to grasp the rather technical principles that determine the amount of expansion of currency and credit that may safely and wisely be provided for-
I am glad the minister admits that such a policy is at least open to question; I assume he would object to the use of the word "criticism." I am satisfied that the minister will have a far harder job to justify a policy of that kind after the war than perhaps he has had in the past because, as I have stated already, there is a rapid awakening taking place, and the tremendous expenditure of money in connection with this war has opened the eyes of the people as they have never been opened before. I am hoping that the deflationary policies of the past are a thing of the past which never again will be sanctioned by the people of Canada, and that in future the Prime Minister will be compelled to live up to the policy which he laid down in 1935, and upon which he won a great election.
I think we are all agreed that Canada must make a maximum war effort at this time. We know that Canada has tremendous resources, both developed and undeveloped. We also appreciate the fact that we are a long way from the point where these resources may be developed to their capacity in order to bring about a maximum war effort. In our opinion, the main obstacle impeding our progress is the financial bottle-neck. The Prime Minister, the former Minister of Finance and the present Minister of Finance have stated in effect that anything physically possible to further our war effort will be made financially possible. I submit that to-day this policy is not being carried out. I think it is quite obvious that ever since the declaration of war the government has been thinking in terms of money instead of in terms of production. As evidence of the truth of that statement I would quote some examples.
First of all, I might refer again to agriculture, one of the key industries, which to-day is still being compelled to produce many commodities at less than cost of production. We all know that no industry can carry on efficiently under such conditions. The farmers have every right to demand that the government carry out its promise with regard to equality of service and sacrifice. I am not suggesting for one moment that we should
War Appropriation-Mr. Quelch
hold up England for higher prices. I am suggesting that the difference between cost of production and the prevailing price should be made up by means of a subsidy paid by the government, the cost of which subsidy should be borne by the whole Canadian people. I do not see why one body of people should be asked to make a greater sacrifice, so far as production is concerned, than any other body; and, as the Minister of Agriculture has admitted, agriculture is being sacrificed in this war. We do not know what will be the consequences of this policy, but we do know that the debts of the farmers are being expanded month by month, year by year, and that all the advantages brought about by debt adjustment for the farmers are being wiped out and that this work will have to be done all over again. We are only laying up more trouble for ourselves by ignoring this problem. It will have to be dealt with after the war, so why not deal with it now? The minister need not be afraid that a fair price for agricultural products would cause an increased demand for goods. The farmers have such tremendous debts to pay that any increased returns they receive will be applied on their debts, and of course when money is paid back to the banks it goes out of circulation.
I have another instance to show that the government is still thinking in terms of money rather than in terms of production. I have in my hand a letter which I received from Mr. Justice T. C. Davis, associate deputy minister of the Department of National War Services. Page three reads as follows:
Scrap iron and steel: This is an item which is particularly important and every effort should be made to salvage all of this type of scrap metail. Only experienced persons can adequately sort out scrap metal, break down and arrange the same for shipment, and experienced persons should be called into consultation in doing this work.
A thorough investigation into the problem of scrap iron and steel has disclosed the fact that in all parts of Canada, except in Saskatchewan, Alberta and British Columbia, there is a ready market for these materials. Freight rates and prices are such in Canada, exclusive of the said three provinces, that voluntary organizations very often make a good margin of profit by gathering up these materials. It is highly desirable that the supply of this type of material be substantially increased.
And it goes on to say:
In connection with the three provinces of Saskatchewan, Alberta and British Columbia, there is no place in these provinces where scrap metal can be consumed in quantity, and all such salvage must be shipped to markets outsidf these three provinces. At the moment, freight rates and prices make shipment generally impracticable.
First of all, he says that this is an item of particular importance, and that every effort should be made to salvage it, but that salvage of this commodity cannot be carried out in the three western provinces because it costs too much. Does that sound as though we are removing financial limitations when we have in three provinces large quantities of scrap iron which the government cannot use because it costs too much to move it?
Subtopic: PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY