March 10, 1944 (19th Parliament, 5th Session)

PC

John George Diefenbaker

Progressive Conservative

Mr. DIEFENBAKER:

There have been occasions in the past when the minister has made a similar comment upon statements I have made but which turned out to be correct. The statistics I am about to quote do not come from the Department of Munitions and Supply; they were issued by the Dominion Bureau of Statistics.
Having indicated in general the situation in this regard, I wish now to deal in detail with the matter. So far as the minister's department is concerned, the attitude since the beginning of the war has been to neglect smaller industries, even though they could have contributed to the war effort, and to give orders in the main to the greater industries. If this bill represents a changed attitude in that regard, all I have to say is that with the approach of an election the government now wishes to place itself in the position of being able to say to the small industries:

Industrial Development Bank
We will now give you the chance which thus far has not been given to you during this period of war.
I realize that the difficulties of the transition period between war and peace will be greater than those of the transition period between peace and war. I commend to the membership of the house one of the finest reports that has been issued on the subject of peace and war and the adjustment policy in the United States. I refer to the report by Bernard M. Baruch and John M. Hancock, which deals, among other matters with postwar adjustments and with the question of financing small corporations. I quote:
It is an easier task to convert from peace to war than from war to peace. With the coming of war a sort of totalitarianism is asserted. The government tells each business what it is to contribute to the war programme -just what it has to make and where it is to get the stuff out of which to make it. Patriotism exercises a strong compulsion. With peace, the opposite becomes true. Each has the right to make what he pleases. Governmental direction and aid disappear. The markets become free and each individual is dependent upon his vision, his courage, his resourcefulness and his energy. Everyone has the privilege of building up, but no one has the right to pull down.
To return to the point I was making a little while ago; I had pointed out that the trend to which I referred, that of disregarding small industry, is clearly evidenced by the figures which I have from the Bureau of Statistics. They show that in 1940 the production of companies, 15,478 in number, producing under 825,000, was $138,000,000, in round figures; between $25,000 and $50,000 the production of 2,954 companies was $104.000,000. Taking the great corporations, which the minister said did not receive a preference, I find that there were 677 corporations in Canada producing between $5,000,000 and $10,000,000, and producing over $5,000,000 there were 123 corporations. In 1943 the trend towards the great corporations had been accentuated. In 1941, while the companies producing under $25,000 per annum sold a total of $121,000,000 worth, those between $25,000 and $50,000 sold $116,000,000 worth, the companies producing between $1,000,000 and $5,000,000 sold $1,755,000,000 worth, and those over $5,000,000, 198 in number, sold $2,459,000,000 worth.
This has been the trend throughout Canada, and the bill now before the house will not stop it. The small entrepreneur in Canada has been at the mercy of the various boards set up by government. The proposed legislation will not be of particular benefit to the small business man, or enable the returned
soldier to establish himself in business, unless the type of business in which he may engage is widened.
As the bill now provides, the only businesses that can be assisted are manufacturing concerns, or enterprises engaged in processing, power development, and the like. The statement to which I have referred, giving the viewpoint of the United States and the recommendation with regard to small business, is of particular application to Canada. It states that small business is:
The broad backbone of enterprise, that as production controls are relaxed particular care should be taken to protect the competitive positions of small business as far as practicable within the needs of the war. Cancellations of war contracts can be guided to permit the earliest releasing of small concerns which can convert back to peace-time production; also certain nuisance production controls involving only a limited amount of resources which press heavily on small concerns can be relaxed sooner than broader production controls.
The Baruch report, which is of profound interest to Canada, has recommended that so far as small industiy is concerned, restricted and curtailed as it has been during the war in the switch from war-time to peace-time reduction, cash should be available to renovate plants and to tide over existing companies to permit other businesses to do things by which civilian goods can be produced. Under this bill loans can be made only to corporations engaged in manufacturing, and to power companies. It does not cover many other small concerns to which soldiers returning to the country will wish to devote themselves. Agriculture is not included. Agriculture, we are told, will be included in a subsequent bill,,, but as it stands to-day, the hope that this bill will to any great extent contribute to the establishment of businesses by returning soldiers is unjustified.
The recommendations in the United States are that so far as war production is concerned the lending authorities should be restricted t.o the Smaller War Plants Corporation. For permanent risks which the banks cannot assume, the federal banking system should be given authority to make industrial loans.
One other matter that I think should be considered by the government at this time is the whole question of taxation. No one objects to taxation in time of war. No one resists the veiy high taxes which we have for corporations, for individuals and for all; but when peace comes, in order to build up industrial development, those who intend to engage in industry should have some indication now from the government as to the policy it intends to adopt in the transition period.
Industrial Development Bank

In the United States the Baruch report states that taxes have not been too high for war time; if anything they have been too low. That is admitted, but it is pointed out two of the first problems that must be faced in the period of transition to peace is the encouragement of new industry and the determent of monopoly, both of which can be effectuated by the removal of excessively high taxes. It recommends that the government of the United States should indicate now the nature of its taxation plans; for unless taxation is to be reduced in a measure when the war is over, the returning soldier desiring to enter small enterprise will find himself unable to pay off any loans he may have negotiated; in the words of the report, "he will be chained like a galley slave to a loan he can never repay." Our whole tax system should be part and parcel of the picture of rehabilitation after the war. We have heard nothing at all about the plans of the government. There are wrongs in the present taxation system, and one of them is this: it allows officials in the tax department a discretionary power which is contrary to the principles of parliamentary government. We had an example yesterday of how a board acts toward the representatives of the people. Yesterday the hon. member for Lambton-Kent (Mr. MacKenzie) asked a question, as reported at page 1297 of Hansard, with regard to the present remuneration of certain individuals in the employ of the Canadian Broadcasting Corporation. The answer given by the minister was:
This information has not been made public in the past, as it was not deemed in the public interest to do so.
This shows the attitude of some boards and some controllers. It shows a' disregard of the rights of parliament. Would an answer to this question with regard to salaries hurt the war effort? Could there be anything in it that would be beneficial to the enemy? Time and time again we are told in this house that we cannot get information because the government or the board set up by the government takes refuge behind the statement: "It is not in the public interest."
The time has come when there should be a declaration of policy on the part of the government with regard to small businesses. We do not know what the post-war picture will be. We do not know what the plans of the government are. They give them to us haphazardly, in piecemeal and indefinite fashion. They place before the house a bill with regard to loans, but do they give us the picture? Do they say what they are going to do to assist small industry to reconvert after the war? According to the Baruch report in the United
States the first consideration of the government should be the early release of small industrial plants from war production in order to encourage small industry. That recommendation applies particularly to industries that can be readily converted, and where there are cancellations of industrial production, smaller enterprises should be permitted to return to production first. There is not an hon. member in this house who has any conception of what the plan is of the minister. If he has a plan, so far it has not been placed before the people.
During the past four years the prairie provinces, and to a lesser degree the maritime provinces, have been discriminated against or deliberately ignored in the development of war industry. There has been a tremendous exodus of people from the western provinces, many of whom will desire to return. This proposed legislation, if it is to be effective, must be made effective now. It must be more than a scheme to da-ngle before the eyes of those who desire to go into industry. It must have teeth in it. When I see the situation in the three western provinces, the failure of the government to develop industry there during war time as it should have been developed, I fear for the future in the post-war period with respect to the use to which moneys will be placed by this corporation. My own province of Saskatchewan produces twelve million bushels of flax. The sunflower seed crop is nine million pounds. The oilcake derived therefrom is required for our stock by our dairy men. AVhile our province produces fifty per cent of the flax crop in the prairie provinces, and requires this cake for protein supplement, the production has gone ahead in other provinces and the live stock producers in Saskatchewan have to pay top prices.
The hon. member for Moose Jaw (Mr. Ross) has been particularly advanced in his ideas in this regard and has pressed his ideas on the government. There are hon. members on both sides of the house who have done the same thing, but for some reason the western provinces have not received consideration in the matter of war development and war plants. Two plants have been set up in the last two years in the east to process oilseed, one in Hamilton and the other in Toronto. I should like to ask the minister under whose control this matter comes while the war is on. What is the government going to do to assure that a fair portion of the moneys available for small enterprise under this measure will be available in the maritime provinces and in the prairie provinces?
If Canadian economy is to be built up on the basis of Canadian unity, an effort must be made now to bring about decentralization of

Industrial Development Bank
industry. True, some of our western provinces have not the same facilities, but each province should, according to availability of raw products, be given an opportunity to build up a diversification in industry. That is of the essence of the rebuilding planned in the United States. The national resources planning board in the United States have been viewing the situation that confronts the people there, and their report sets out the whole position in a very few words. I quote:
One of the aims of post-war conversion should be to achieve a better regional distribution of manufacturing activity. The desifabfi'ty greater industrial decentralization has long been apparent. There is considerable room for such decentralization despite the opposing advantages of regional specialization. Manufacturing activity could bring to agricultural regions a higher income, and a more balanced and diversified economy. In many instances, decentralization would reduce cross-hauling of raw materials and manufactured goods, and thereby considerably reduce distribution costs. In addition to such economic and social gains, there would be important advantages for our future national defence.
Before this bill goes to the committee the government should give us a picture of what it intends to do with reference to the decentralization of industry in this country. We are trying to assure ourselves now that there shall not be unemployment after the war. Pious expressions of hope without action will be ineffectual. The transition to peace will be difficult-more difficult, as I have already said, than was the transition from peace to war. I hope this legislation works. It can be made to work, but not, as I see it, on the basis of the generalities set forth in the bill as presented.
This type of legislation is a novelty in Canada, though it is not new in the United States. Just because it is new some people may oppose it. I have always believed that political parties, no less than individuals, must not worship the past; their membership must not suffer from neophobia, the fear of new things. Everything must be tested, not on the basis of its tradition or its novelty but on the basis of whether or not it will be workable. To that end I suggest, in order to assure that little enterprises across Canada shall receive consideration, that certain steps should be taken in connection with this measure.
In the first place we must assure that the small amount which is to be available, $75,000,000 to $100,000,000, is not distributed in large amounts to a few great corporations, thereby rendering small enterprises unable to obtain their fair share. If this legislation is designed in the main to support the small enterprise, then I suggest that some sort of
limitation or restriction should be imposed upon the amount that may be lent by this organization, as was suggested the other evening in the able speech of the hon. member for Queens-Lunenburg (Mr. Kinley). In the second place, to guard against any suggestion of political interference in connection with the various branches which are to be set up, loans should not be made without the approval of the central board of directors.
There should be some further restrictions. We are actually giving a number of individuals carte blanche to expend money, and this bill does not contain any provision limiting the powers of the board so far as loans are concerned. Private banks are limited; trust companies are limited. They lend the money of their shareholders. Is there any reason why similar limitations and controls should not be imposed upon the lending powers of a government institution? Otherwise, as I say, parliament will be giving this organization a blank cheque for the disbursement of the people's money.
I come now to the next and larger phase, that having to do with the war effort and rehabilitation scheme as a whole. As I see it, this bill brings into focus and sharp relief the whole question of the shift after the war to peace-time production. It is designed to make the road of reconversion easier. But what is the plan of the government? No one has ever heard it. We get it piecemeal; we get one act now and another act again. The time has come when this country should have placed before it the master plan which the government no doubt has and which will deal with such important matters as the unwinding of the war machine, the disposal of government owned or financed war plants, the cancellation of war contracts, and the allotment now to various industries of the production of civilian goods.
With reference to these matters this house and the country know little. In the United States a plan already is being evolved and placed before congress. Contract termination is the first step. The time has come, I believe, when the membership of this house and the country should be informed as to what production is to be cancelled this year, what industries are to be closed out, and what is to be done with such industries. In the United States, according to reliable information, the producers of ammunition, small arms, tanks and tank parts, as well as other munitions of war, have achieved such production as to necessitate the cancellation of any further orders. In that country a uniform cancellation clause has been established. If that has
Industrial Development Bank

been done in Canada, no one knows about it. The war assets corporation has been set up, another of the corporations independent of parliament. I have no objection to the setting up of corporations when they are to carry out the plans and decisions of the representatives of the people, but I believe we in this house have a right to full discussion of this subject, to have placed before us the government point of view with respect to rehabilitation in industry after the war, to the end that hon. members may be permitted to discharge their responsibility of placing before the government and the country the views of a large portion of our people.
I have been asked, where is the plan? This bill is not the plan; it is just one segment of the entire picture. We as members of this house, business people, those engaged in small enterprises, the men overseas who intend to return and establish small industries-all have a right to know the plan of the government. It may not be complete in detail, but it can be a comprehensive plan the details of which may be filled in subsequently. I repeat, what is being done in Canada? Is there a uniform cancellation system? Has a body been set up similar to the body in the United States, where some two hundred government contract officers are studying the whole question and will later go throughout the country advising industry as to how production may be reduced in one line and increased in others? I ask, does the government intend now to stop the freezing of small industries so far as the men returning from overseas are concerned? Those men are coming back now in small numbers. May they establish themselves in industry? May they open country stores? May they go into the types of business they followed before the war? Oh, no. That privilege should be guaranteed to them. They should be given permission by parliament; the wartime prices and trade board should immediately relax the freezing order in relation to the establishment of industries as applied to the ex-service men.
When there is a lessening in any branch of war production, I should like to know if the government has decided what civilian commodities will be produced and what businesses are to be taken out from the freezing order, in order that employment may be maintained. Has the government a plan as to what civilian production will come first? What of the surplus of army goods, the stocks of food on hand to-day, and so on? All these are parts of the whole picture, without which none of us can intelligently discuss the post-war problem as affecting industry, or the question of advancing money to assist industry. When the
transition period comes and we return to the production of civilian goods, new machinery will be required, repairs will be needed, plant alterations will be necessary, and so on. Is it not about time the Minister of Munitions and Supply and those associated with him, and the Minister of Finance, advised the country whether in the reestablishment of these business enterprises such expenditures will be deducted in arriving at net income for taxation purposes?
There are other phases of this matter that could be dealt with, but they can be covered when we are taking up the different sections of the bill. I ask the minister or his parliamentary assistant to place before this house and the country something of the picture, something of the plan. Sometimes I wonder whether there is a plan. To-day there is this piece of legislation; to-morrow there is another. No one can put together this bits-and-pieces post-war programme. I should like to see it reconstructed by those in authority, to the end that business may know its position and, above all, that the men and women returning from overseas service may not be denied, as they are to-day, the opportunity to go into small enterprises but will be given the opportunity to do so, and that the money to be made available under this bill shall be devoted mainly to the assistance of small enterprises.

Topic:   INDUSTRIAL DEVELOPMENT BANK
Subtopic:   PROVISION OF ADDITIONAL CREDIT FACILITIES FOR FIXED AND WORKING CAPITAL
Full View