August 11, 1956

LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

I shall be glad to clean that up when I answer the questions.

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LIB

Edward Turney Applewhaite (Deputy Chair of Committees of the Whole)

Liberal

The Deputy Chairman:

Shall the item carry?

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SC

John Horne Blackmore

Social Credit

Mr. Blackmore:

No, Mr. Chairman, there are a number of other matters which-

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LIB

Stuart Sinclair Garson (Minister of Justice and Attorney General of Canada)

Liberal

Mr. Garson:

I wonder if my hon. friend would permit me to reply to the hon. member for Dauphin. He asked me to give the context, and I would be glad to give the context of this quotation. It reads:

Tonight I should like to reply to C.C.F. broadcasts in this and in another series. In these we of the Manitoba government are criticized rather severely because we are not providing at the taxpayers' expense more drainage, more roads, increased educational grants and pensions and social and health services, and a larger civil service to administer expanded governmental activities generally. To do these things would of course hugely increase the cost of provincial government in Manitoba. Yet not once in the broadcasts did any C.C.F. speaker even attempt to state the cost of what he was advocating, let alone give the slightest consideration as to how that cost could foe met.

Well, of course, everyone knows that it is a bit childish to advocate extremely costly measures with a complete unconcern as to how they are to be paid for. Broadcasts of this sort are made only for the uninformed.

Our opponents do not accuse us of recklessness or extravagance. On the contrary we are accused of being too thrifty. It is a disgrace, they suggest, that with war's buoyant revenues we have surpluses and use them to reduce the provincial debt.

Then I went on to examine the sources from which this revenue that would be involved in these vast expenditures which the C.C.F. were advocating would come. I pointed out that it will not come from natural resources revenues because they had -been absorbed into the budgets many years ago. I pointed out, amongst other things, the part my hon. friend from Dauphin was referring to and I said:

The third source from which the tax moneys to pay for increased governmental services do not come is large corporations. Corporation or joint stock companies are merely devices, pieces of machinery if you like, by which a number of people join together to do business which they could not do individually.

And, Mr. Chairman, might I say how intensely gratified I am that a member of the C.C.F. party, in the person of the hon. member for Dauphin, is accepting these doctrines and quoting them back to the members of the house with approval.

These corporations are organized-

-to make profits if they can, and amongst other things to pay taxes. All of the taxes which the corporations pay must, in the nature of things, eventually be passed back to people: either to the shareholders of the corporation in reduced dividends, or to labour in lower real wages, or to the consumer in higher prices for the corporation's product. In the end all corporation taxes come to rest upon people, who are the only taxpayers.

My hon. friend keeps repeating my language in a different context. Well, this is a new and different policy pattern for our socialistic friends of the C.C.F. I congratulate them on at last having seen the light; and it is a matter of pride to me that they have seen the light from a speech that was originally made by myself.

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CCF

Frederick Samuel Zaplitny

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

Mr. Zaplitny:

Just one moment; since the minister has certainly widened the area of discussion a great deal by going back to the beginning of his broadcast, which has nothing to do with the subject under consideration today, and challenged the C.C.F. to point out where some extra funds could have been derived in the province of Manitoba to pay for the services we have advocated, in other to save time I shall give one source which he will recognize very quickly, and that was pointed out by a man who was his own leader at one time in the province of Manitoba, Hon. John Bracken, who pointed out that the government of Manitoba, of which the Minister of Justice was premier at that time, was paying the breweries of Manitoba $1 million a year more than they needed for beer over a long period of time. If they had put that into the public treasury they could have provided some of the services we advocated.

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LIB

Stuart Sinclair Garson (Minister of Justice and Attorney General of Canada)

Liberal

Mr. Garson:

Again my hon. friend is quite wrong in the statement he makes because, if he will examine the report made by Hon. Mr. Bracken closer than he has done, he will discover that it did not apply to the period of which I was speaking in this speech.

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CCF

Frederick Samuel Zaplitny

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

Mr. Zaplitny:

You are merely trying to wiggle out of a position.

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SC

John Horne Blackmore

Social Credit

Mr. Blackmore:

Mr. Chairman, when my time was exhausted a few moments ago I had been dealing with the matter of currency in the Guernsey islands, and pointed out that in the case of Guernsey island there was a very successful use of government credit, debt-free money spent into circulation. In that case the money was spent into circulation for building public works.

Before going on with the Bradburys, which I indicated I would be talking about, may I point out to all those who are interested that the Social Credit government would use the power to create debt-free money based upon the goods and services producing and consuming power of the governmental unit in which the money was being created and in which it was to be used, and with this debt-free money the first thing they would do would be to pay what they call the compensated discount on the goods coming into consumption over the retail counter.

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This compensated discount would bring down the price of the goods, which would mean that the effect of over-all Social Credit would be just exactly the opposite of inflation. It would bring down prices instead of allowing them to rise. Besides that, as soon as the compensated discount would be applied on any one or a very large variety of goods, on the goods of which there was an abundance, then it would enable people to get purchasing power into their hands directly by government distribution which would enable them to buy goods, so that the total markets in the country would greatly increase.

There will be some who will say this. Are we not in danger of running into inflation now? How can we afford to put more money into circulation now that the Bank of Canada is taking steps to curtail the amount of money going into circulation to prevent inflation? I reply with this observation. Can anyone here imagine that say $10 a month put into the hands of each of the people of New Brunswick for instance, who are receiving incomes lower than the taxation level would cause inflation, especially if that money went into circulation in the form of a discount which brought the price of goods down say 10 per cent? Is there any conceivable way in which that could cause inflation?

Would anyone argue that in Canada, if we had plenty of money with which to do it and did have to take the money out of the taxpayers' pockets, we would not raise the old age pensions to $65 without causing inflation across Canada? Would anyone pretend that it would be impossible to increase pensions to the blind and to allow other people who are living on fixed incomes, especially if that money took the form of discounts on the goods they bought? Would anyone contend for a minute that such a process would cause inflation? If so, then undoubtedly indeed we are faced with a hopeless situation.

My contention is that if money were put into the hands of, say, the common people of New Brunswick to the extent, we will say, of $10 a month in the form of discounts, it would enable them to buy a good many things such as milk, cream, butter, eggs, poultry products and a great many things that could be manufactured locally. It would increase the production in New Brunswick, the will to produce, and it would increase the consumption and raise the standard of living in New Brunswick.

The same thing would apply all over the nation. So when I say that Social Credit advocates distribution of a considerable

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consumption at the level we desire. He points out that basically the purchasing power of any country is its goods. Our lathers knew long ago and we know now that barter has been sound all through the generations. They were able to trade their beef for potatoes or any kind of commodities with each other, which simply means that goods are purchasing power. All that is now necessary is to put these goods into a monetary form so they can be used.

I should like to read three quotations. The first one comes from "The Principles of Currency", page 52, as follows:

In enunciating for the banks the simple principle which must guide them in this task of controlling an upward or prosperity phase, it is not difficult to lay down a rough and ready datum line from which to start. That line is simply such a level of prosperity as will keep the whole of our economic system functioning healthily, and will provide suitable sustenance to every man, woman and child in the land, and suitable employment to every employable person: a level which will yield a fair return to capital and make a fair provision for the development of social and other services which have become so important a factor in our national life.

We in Canada do not begin to approach that standard today. Here we are in a period of greatest prosperity, a nation producing something like $28 billion worth of goods this year, yet we have our old age pensioners on a disgraceful standard of living under which it is utterly impossible for a man and wife receiving the present old age pensions to go out and rent a house in Ottawa for instance and still live. It just cannot be done, and I defy anyone to say that it can.

That is far short of the standards set here in this quotation. Why is it short? Because all money that goes out into circulation today in Canada has to be borrowed into circulation, and the only reason for which people will borrow, except those who are borrowing consumer credit and have to pay it back, is to produce. The result is that when there is adequate production they will not borrow and the banks hesitate to lend. The result is that we have no way of controlling the amount of money going out into circulation. There is no way in the world of making sure there is enough money circulating in the right places in Canada to enable every Canadian to obtain the needs of life and have the necessary standard of prosperity.

Further, we know that with automation it is becoming yet more difficult to give every person a chance to live. The threat which haunts every man from coast to coast in Canada right now is the threat of unemployment. That is what faces every man except those who happen to have fortunes. I submit that that is so far below the

[Mr. Blackmore.l

standard which we have the right to demand that we should be ashamed of ourselves even to contemplate the continuation of that condition.

Surely every man who is willing to work and is capable of working should be assured that he will have a job at which he can support his family. Every man who is unable to work but who is willing to work should be given the means whereby he can support life in some kind of dignity and comfort. Why? Because the country which can produce $28 billion worth of goods is the land in which he lives.

So much for comment on that particular quotation. I now quote another one from "Currency, Credit and the Exchanges", pages 55 and 56. Notice again what this man says about what should be the absolute demands of the Canadian people, and I quote:

In other words, we regard the stage of complete reabsorption of economically employable labour as marking the return of full health to the body economic, and we define this stage as the datum level of general all-round prosperity, such as shall be productive of most happiness to men.

I interrupt the quotation. Have we in Canada arrived at that point? Not by any manner of means. We make full employment impossible for our people now. We have huge employment, but go down into New Brunswick and see whether you can get a job, or if you do get a job whether it will supply anything like a decent standard of living for your family. I call on the hon. member for Restigouche-Madawaska to testify to that. He has just come from down there. I was down there and was in the homes of many of those people. Unless those people happened to have pensions they were just in mortal dread of being unable to get jobs, and when they do get jobs in most cases the pay is so small they simply cannot support their families up to anything like a decent standard of living. And that in a Canada with a production of $28 billion a year! What a lasting disgrace that is to the government and to the Department of Finance particularly. I go on with the quotation:

We maintain that such is the datum line which we require, the 100 per cent level from which to start, and to which we should return. It will be the purpose and the duty of banking statesmanship to keep production and consumption swinging freely about that datum line in such a way that every economically employable man shall be at work, and wholesale prices may not fall and retail prices may not rise beyond the limits of healthy seasonal percentage variation, and within the natural limits of commodity production changes.

I suggest to the minister that he send copies of those quotations to Mr. Coyne and say to him, "Mr. Coyne, keep your eye on that and do your best. You are a lot short

of it yet. If you cannot do it as governor of the Bank of Canada, tell us what to do."

I suggest to the minister that the thing he will have to do is re-enact the finance act of 1914 and 1923, and use that act as a means of creating debt-free money which he can spend into circulation wherever in the Canadian economy he believes it needs to be spent, in the form of giving compensated price discounts to consumers of commodities going over the retail counters, or in the form of dividends where he wants to distribute it in that form, where people need income and are unable to obtain it.

He needs to re-enact the finance act of 1923. His illustrious predecessor, Right Hon. W. S. Fielding, said almost wl.at I am saying when he reintroduced the act in 1923, which act had been introduced and used by a Conservative administration under Sir Thomas White, that masterful minister of finance of world war I days. Mr. Coyne should be given a chance, and I maintain that we are not giving him a chance because he is running a banking system the business of which is to produce goods, and he is lending money for production. He simply cannot put money into circulation in everybody's hands by lending money to produce. There has to be money issued into circulation with which to consume.

So much comment for that. Here is another quotation which is of value from "Currency, Credit and the Exchanges" by William A. Shaw, page 67. I think I read this one before, but I shall read it again. It is as follows:

By its means we have evolved the true theory of money, and in the light of this theory our currency and banking legislation need no longer be the process of blindfold groping and experimenting which it has been in the past.

-and which it is right now. Here is Mr. Coyne trying, desperately trying, to find out what to do to attack the great problems which face him and which he sees in the future; he is doing everything he possibly can to remedy the situation, but because he has not the proper tools he simply cannot do the job. I go on to read one more brief paragraph from this quotation:

This theory of money rests upon one basic principle, viz., that goods purchase goods. In this axiom the word "goods" is used for brevity's sake as comprehending all economic goods or services which, as possessing economic value, possess thereby exchange value.

I read this from "The Principles of Currency, Credit and Exchange", by William A. Shaw, published in 1934:

There is no inherent or scientific necessity for an ever-recurring cycle of over-trading followed by disaster and depression. The cause of that recurrent phenomenon lies hidden in the financial structure of the modern world and it is removable.

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If our civilization is to survive it is imperative that such cause be removed without delay.

I suggest that the minister knows only too well that that cause has not been removed, and that the minister has not in his mind even the way of removing it. If he has, he must be having difficulty with the people in his department.

I should like to ask the minister casually, in passing, how many of the officers of the Department of Finance are graduates of the London school of economics, and how many of the men now employed in the Bank of Canada are graduates of that school of economics. If the minister wants a sound financial system he had better take those men out and give them lucrative positions somewhere else, because they will misguide him as sure as the sun rises. The London school of economics was not developed to enable people to learn how to run a country well; its object is to enable a country to run on the rocks, as we are in danger of doing right now. That may sound very queer, but I can back every syllable of every word I have said.

I quote the following from "The Principles of Currency, Credit and Exchange":

For the hidden mainspring of all the cyclical movements and evils of the past has lain in finance and not in industry.

Those quotations can be of the very greatest value, in my judgment. I might say that I have no desire to pretend to unusual knowledge in this respect, but I have read a great many books written by men of various attitudes all the way from the socialists to the extremists in the orthodox field and those along the borderline in the unorthodox field. The sum total of the information I have been able to gather from the works I have been able to read is that the principles embodied in the statements and quotations I have made and read here today are absolutely sound. If we are to provide a sound economic system in Canada, we must build on the principles that are therein involved.

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SC

Ernest George Hansell

Social Credit

Mr. Hansell:

Mr. Chairman, I can assure you, as I rise to speak, that this is in no way creating any type of filibuster. We have judged our time in fairness to this house in the process of this present session; but we are interested in financial matters and, as the Department of Finance has been called at this late hour, we want to accommodate the house but we want to do an effective job by reason of the fact that the people have sent us here to do that job. I shall not take very much time, only a few minutes, to say what I want to say.

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An hon. Member:

You have only three minutes.

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SC

Ernest George Hansell

Social Credit

Mr. Hansell:

What I rose to say was this. I want to add my voice to the voice of the hon. member for Eglinton with respect to what I believe to be a very vital principle which evidently has been enunciated in the last day or two. I was here when the minister replied to questions the other day, and he appeared to place the responsibility for the financial policy of this country on the doorstep of the governor of the Bank of Canada.

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LIB

Walter Edward Harris (Minister of Finance and Receiver General; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Harris:

No, no, no, no.

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SC

Ernest George Hansell

Social Credit

Mr. Hansell:

It had all that connotation to it, as far as I am concerned. If the minister answers, "No, no, no, no", then I am quite willing to be satisfied with his answer; but let it be known that even though there is legislation under which the Bank of Canada carries on its duties, the government here cannot hide behind that legislation and relieve itself of the responsibility of determining the financial policy of this country which results in either a high standard of living for all the people or a lower standard of living with no purchasing power with which to live.

I have said that, and the government must be responsible for that. That is what they are here for. Furthermore, they go out in election campaigns urging the people to place the responsibility on them; then they are answerable to the people for the financial policy of this country. Let us make no mistake about that.

During the speech that was given by the hon. member for Cape Breton South the hon. member mentioned the cycle of boom and bust, and the minister interjected that his policy was designed to prevent too much boom and bust. I do not know whether or not there is too much boom now. I do not know whether this action of the governor of the Bank of Canada is to prevent too much boom, but frankly I am very much concerned about the bust part of the cycle. Very many people are very much concerned about inflation. I am too, but I think I am more concerned about the problem of deflation, which will happen as sure as you are born if the boom is to be followed by the bust. What I should like to learn from the minister is what his policy is going to be to prevent the bust. That is what I should like to know.

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An hon. Member:

Six o'clock.

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SC
LIB

William Alfred Robinson (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The Chairman:

Has the hon. member leave to continue his remarks?

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SC
?

Some hon. Members:

Agreed.

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SC

Ernest George Hansell

Social Credit

Mr. Hansell:

All I want to say is this. When there is a rise in prices, all the people of Canada suffer. Whether that rise in prices is caused by direct action, as has been described by the hon. member for Lethbridge, or whether it is a rise in prices that has been caused by too much money chasing too few goods, the government must be responsible for that because that is within the confines of financial policy.

I am interested particularly in the poor people of this country who have to stand the brunt of the rising costs of living. That is what I am concerned about. I urge the minister now to adopt a policy whereby the spending power of this country will aid the poor people of this country to have a decent standard of living.

I have a very interesting thing here that I shall hand to the minister. I do not know whether it has been brought to the attention of the house before, but here is an envelope in which an old age pension cheque was enclosed. I suppose it is just one of thousands. It has a postmark on it, and the postal service put some little advertising in their postmarks. The envelope is printed: "District Treasury Office, Department of National Health and Welfare, Family Allowances, Federal Old Age Pensions". This was sent to the old age pensioner and on it is a postmark which says: "Good hot breakfasts a winter must".

There is a great deal of irony in that, because this old age pensioner is a lady 75 years of age. There is that cheque for $40 a month. She said, "I am still healthy. If I buy a good hot breakfast and pay my rent and my other necessities, I am wondering what I will have for my other two meals for the day". There is some irony to that.

I met an old age pensioner on the street in my own home town not long ago. His vest was frayed; his shoes were not neat. He said, "Mr. Hansell, do you suppose they are going to do anything further for us old age pensioners? I cannot very well get along on my $40 a month". Why cannot he get along? Because the cost of living is too high. There is some reason for that.

I say what I have said in previous sessions. Even with respect to industrial pensions, when money was paid into industrial pension funds the cost of living was much lower that it is today. If they expected to receive $40, $50 or $60 a month 10 or 15 years ago, that looked fairly good then. But now they receive the $40, $50 or $60 a month, or whatever is the amount at which their pension was calculated, and of course the cost of

living has gone up so much that in reality when they are paid this amount it is just the same as saying to them, "Yes; you put aside enough to pay for a pension of $75 a month when you reached pensionable age. We are sorry but we can pay you only half that amount". That is really what it means. To me that is a steal-not an intentional one, of course-by reason of a faulty financial policy.

I know we are anxious to get through, and I am not going to take up any more time now on this matter.

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Item agreed to.


August 11, 1956