July 2, 1940 (19th Parliament, 1st Session)


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
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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

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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;

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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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