May 9, 1944 (19th Parliament, 5th Session)


Gerald Grattan McGeer


Mr. G. G. McGEER (Vancouver-Burrard):

them as freely and with the same spirit as against Hitler, we shall really be making progress.
I know that the remarks I shall make will not find a happy echo in either St. James street or Bay street. But I do feel rather happy to be able to travel in the company of the men I have quoted this afternoon.
We live, Mr. Speaker, in grim but inspiring times. Our day of decision in this parliament must follow and be complementary to the D-day of invasion. For upon our decisions in parliament will depend, not the success of the invasion that is coming, but the success of the fruits of the victory which we hope is not far off. The great crisis of the war for us is close at hand. The day nears when the weight of the fighting power of the United States and the British empire, accumulated in years of determined preparation, will be thrown in all its force against the enemy.
We have good reason to be confident that the declining strength of nazism may be soon overwhelmed. Germany, we trust, will not be able to survive another winter of war. Japan has already lost control on the seas and in the air. Before this summer passes no ship flying the flag of Japan will be able to move with safety on any part of all the seven seas. Many now competent to express an authoritative opinion are predicting that the Japanese war machine may collapse in a welter of hara kiri, even before the disillusioned and defeated nazis throw down their broken arms.
We await anxiously the day of the grand attack, and when it comes we regret that the shadow of sorrow will pass over the doorstep of many more Canadian homes. But the day of unconditional surrender will not be denied. Let us hope that we at home, in safety, have already been given the light to appreciate the nobility of the character which the fighting men and fighting youth of our generation proved was theirs in the darkest days of freedom's danger. Let all of us, particularly those of us who are in our war parliament, remember that our men on the seas and in the fighting lines, and the boys in the air who are crusading as youth never crusaded before, are fighting for the institutions that have flourished under the flag they love. They have gone forth with daring and courage, and with dauntless hearts and matchless fortitude not to conquer but to save. Fighting to protect the security of their homes and loved ones, and to preserve free enterprise as the greatest of all their liberties, in victory they will gladly offer all the liberties which they enjoy and cherish to enslaved mankind, wherever oppression and aggression rule. They are adding new lustre to the glorious traditions of our race;
[Mr. McGeer.)
they are writing new pages in the records of our long and valiant service in the cause of freedom. No reckless ambitious pride or buccaneering selfishness tarnishes the escutcheon of the armies of liberty that they are bearing with unconquerable valour. When men struggle in the clash of arms in that spirit, their war is holy. The blood spilled in that cause is sacred. The lives laid down in sacrifice on that altar of service are forever consecrated to immortal glory. Ours is not only the justifiable pride of those closely associated with the heroes who are enacting the greatest episode in our glorious history. Ours is not only the tender memory of the loved and lost. Ours is the solemn duty so to fulfil the purpose and opportunities of our lives that the victory they fought and died to secure will not have been won in vain. It is for us to dedicate our lives to the preservation and advancement of all they gave their lives to save. Out of their sacrifice so freely offered and gladly given, and out of the welter of human carnage which has drenched so many lands with the blood of innocent millions, may there come to us new understanding. Yes; may we be given the understanding that will bring us under the guidance of the golden rule and release us forever from the alluring selfishness of the rule of gold.
Until we in parliament win that great battle against the selfishness of privileged monopoly, all the tragedies of revolution and war will be repeated over and over again. Wars are won on the battlefields, but they are bom of the misguided action of men in parliaments. Until parliament dominates and subdues the blind greediness of privileged monopoly, the lot of our own and future generations will be but a repetition of the dismal past, its envies and its hatreds continuing, its false gods prevailing, its poverty, squalor and misery enduring, its revolutions and its wars beclouding the future and turning every horizon that beckons mankind onward and upward into the bitter anguish of illusion and disappointment.
It is ten terrible years since parliament approached the revision of the banking laws- ten years of depression and of war. And while I know it is easy to say that things are so bad they cannot be worse, I have always believed it was better to remember that things can never be so good but what they might be better.
I remember appearing before the banking and commerce committee back in 1934, advocating some very heretical doctrines against orthodox finance. I came under the guidance of the like of Lincoln, and I laid down his programme with regard to the approach to national currency, when he said back in 1839:

Bank Act-Mr. McGeer
We say that no duty is more imperative on the national government than the duty it owes the people of furnishing them a sound and uniform currency.
To achieve that, as our objective, we went before the banking and commerce committee; and the Liberal party coined the great expression, "Liberalism stands for the issue of currency and credit in terms of public need, not private gain." My hon. friends do not think that we have gone far enough, but let me say that the picture to-day is very different from what it was then. Liberalism has achieved much.
In 1934 we advocated a publicly-owned national bank that would become the centre of Canada's greatest public utility, her monetary system. That has been accomplished. We advocated the removal of the gold reserve limitation in the issue of full legal tender and national paper currency. That has been accomplished. Some of my hon. friends will laugh when I say that we have ownership of the Bank of Canada. Not only have we ownership of that bank; to-day there is in issue from that bank 81,400,000,000 of national currency serving this nation in war. We advocated the control and regulation of the international movement of currency, credit and investment. That has been accomplished. Our foreign exchange control board has proved to be an institution of tremendous power and invaluable service to the nation in this crisis.
We advocated then, not the rigid regimentation and controls necessary in war time, but that wages and prices and production and distribution and rents should be kept within the bounds of reason. We have proved that with the cooperation of the people these things can be controlled, and those controls are now in operation. AVe advocated also the use of taxation to aid in the regulation and circulation of the medium of exchange and to avoid inflation. It has been proved that that is a practical administrative power of government. All these reforms have taken place under a Liberal administration, and I venture to say that there are few nations to-day in the world that have a sounder foundation of finance upon which to approach the period after the war than Canada has under Liberal government.
Let me go just a little further and point to some of the other lessons that we have learned as a result of our experience in this war. AVe were always told that once we were a young country, and had not accumulated the money wealth that older civilizations possessed with which to build railways, canals, harbours, cities, villages and industries, we must conform to the rate of progress and the standards of government expenditure and
taxation that would satisfy the money lenders in Berlin, Paris and London. It was there and there alone that money for capital investment was available. AVe were told that we must keep our credit good in the lending financial centres of the world. Well, we borrowed; we went into debt for everything we did, and we came out of the last war the most heavily indebted people in the world in proportion to our wealth and population. We carried an international debt which was proportionately greater than that of Germany.
AVhat happened in this war? Of course our financial experts told us that we could finance only a hundred million-dollar war at the start. When we took on the British empire training scheme we were told we would have to cut down a portion of our other war work. Because of that bad advice by the financial experts of this country the preliminary war effort was crippled beyond measure. Following the retreat from Dunkirk, the collapse of France and the terrifying exposure of England's weakness, we came to the conclusion that Canada must defend herself, and our government wisely declared that no monetary consideration would stand in the way, that no limit would be placed upon the resources and energies of the people of Canada in this war effort.
What happened? We lifted our war budget from a hundred million to nearly a billion, then to two billion, then to three billion, and this year and last year it ranged in the vicinity of five thousand million dollars. AVhat about these older centres that were supposed to possess the money wealth that we did not have? We lent England seven hundred million dollars and then found a billion dollar's worth of goods and services which were created by Canadian finance and energy. We did not borrow in Berlin because they had closed their door, and the Bank of France crowd in Paris had collapsed. We could not borrow in London because London did not have anything to lend us. Is anybody going to say that out of that experience Canada has not found her financial independence? Are we to go crawling to some international banker for money to put our people to work after this war for a better Canada? I think that would be just as ridiculous as to suggest that we might finance this war by issuing the five and a half per cent tax-free bonds that came from that banker Minister of Finance, Sir Thomas AA'hite, during the first war. That practice was during the years when the orthodox financiers ruled and it was said to be the soundest money that Canada ever issued; certainly the most expensive.
Bank Act-Mr. McGeer

That kind of nonsense will never be repeated. Let us hope that no government will ever say that we have to borrow abroad to finance Canada's development when this war is over.
I am disturbed however because I am not so sure that what I think is excellent advice by our chief fiscal adviser, the governor of the Bank of Canada, has found the right kind of hearing in the ears of our Department of Finance. Let me quote what Mr. Towers has said to this government, which will be found in his annual report covering the work of the bank last year. He said:
I do not wish to suggest that public debt could be increased at the present rate for an indefinite period without placing intolerable strain on our economy. I do feel, however, that the war debt, and the increases which will inevitably take place for a time after the war ends, can be handled without serious embarrassment.
The governor is taking in a fairly wide range of territory, because no one can predict with certainty when this war will end or what its repercussions will be when it does end, or what their cost will be. If we are able to handle an increase in our debt of anywhere from seven to ten billion dollars, why was it that we could not handle a debt of four billion dollars without bankruptcy and unemployment in 1935 and 1939? He goes on to say:
A vastly increased volume of consumption and capital development will be necessary if this output is going to be fully absorbed and high employment maintained.
But here is the warning:
The adjustments required wrill clearly be of unprecedented magnitude, and bold planning on the part of labour, farm and business organizations, as well as governments, is urgently needed.
Just why he left out the banks I do not know; for it does seem to me that their responsibility is just as great as that of the others mentioned.
Let me put the problem as I see it. We now face a world with tremendously improved capacity to produce consumers' goods. We now face a nation with a burden of debt unprecedented in history. Our cities are overtaxed and moving with difficulty under a debt load of one billion dollars; our provincial governments are carrying another debt load of two billion dollars; our federal government carries already a debt of eleven billion dollars, making a total of fourteen thousand million dollars of debt, which is the first fixed charge upon the payment of the taxpayers' money into the consolidated revenue. I have no hesitation in saying that if we are going to sustain full employment or high employment after the war and avoid the disastrous consequences

of a post-war depression, government spending must continue on almost as large a scale in the period of adjustment as during the war years.
What are the programmes so far put forward? There is the $25,000,000 industrial development bank. I disagree with that, because I do not believe that a bank of that kind should be formed to go into competition with our commercial banks or private financing organizations. I do believe that we can repeat the experience of the United States in the establishment of a government agency- not a government bank-like the Reconstruction Finance Corporation which can give to this dominion the same tremendous assistance that the Reconstruction Finance Corporation has given to the United States. When I look over the unprecedented changes in our proposed revision of the Bank Act to-day, the only fundamental change, Mr. Speaker, that I can find is the raising of the rate of interest to small borrowers from 7 to 91 per cent. Here again you have the old doctrine of making the poor pay for the service of the rich. If that provision comes out of the banking and commerce committee, it will come out only after I have given to it all the opposition that I can give. These provisions of finance fail to conceive, fail to apprehend and fail to present to parliament financial adjustments described in the language of the governor of the Bank of Canada as of unprecedented magnitude.
Let me indicate some of the things which we might do to meet the coming situation. There is a causeway to build across the straits of Canso, connecting the great industrial area of Cape Breton with Nova Scotia, There is a canal to build between the bay of Fundy and the gulf of the St. Lawrence. There is a tunnel to build between New Brunswick and Prince Edward Island. There is a great St. Lawrence river to develop. There is Beauharnois already in action, and not supplying the needs. The St. Lawrence waterway and the powers of the Ottawa river have been crying for decades for development. Down our Canadian rivers flow in waste countless thousands of horse-power energy. Yes, Mr. Speaker, we can electrify our railway system and from that electrification distribute electricity to the rural areas. In the electrification of our railways, in the streamlining of our tracks, in the rebuilding of our railway equipment, obsolete for years, we can find employment for that vast army of highly trained technicians and artisans who have made a contribution in this war that

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has given us an industrial revolution we could not otherwise have achieved in probably a hundred years of peace.
If we are to move forward and live in this new world that is to come, it is the financing of expansions of that type, of unprecedented magnitude, that our Department of Finance and our monetary system will be called upon to do.
I want to say this in conclusion. When we were before the banking and commerce committee we advocated, in addition to the things that have been accomplished, something more. We advocated that the Bank of Canada should be the national bank, that it should be responsible for financing the federal government; but we also advocated that a suborganization of that bank should be established in every province, and that the responsibility of that suborganization would be the financing of our provincial and municipal governments. We did not propose to take over commercial banking or to socialize private finance, but we did ask for a complete segregation as between public finance, the financing of public enterprise, and the financing of private enterprise and acting as custodian for private money.
We have made, of course, great progress. But we can go farther. We can finance the building of a Canada that will stand out as one of the foremost nations of the world, because our twelve million people, Mr. Speaker, are I believe the richest twelve million people anywhere in the world. We have more in our possession and more work to do than any other people in the world, and unless we allow ourselves to be hobbled and fettered as we have been in the past by the bad advice of our financial experts and by the misguided theories of orthodox finance, we can not only give a lead to our own people but make Canada an example for the whole world to follow, and make it one of the brightest parts of the world of English-speaking people.
Let me say, on social services and taxation, that with a proper management of our national currency and our monetary system we can give the government more power and we can impose less taxes on the people. We must have peace with progress; we must have peace with progress and prosperity. We can do away with things like the cost of living sales tax. We can eliminate the need for taxing wage earners to the point where they have not enough left to maintain a decent standard of living. We can raise the wages of our school teachers. We can raise the wages of our postmen and of our policemen.
Yes; we can finance these things with the same ease with which we have financed the war; we can bring about progress and prosperity for Canada through the budgets of our federal, provincial and municipal governments, and keep our economy moving forward on an even keel. It is along these lines, Mr. Speaker, that I feel we can approach with safety the revision of our Bank Act and monetary laws.
I do not think that I have by any means all the answers, but I believe the answers are there to be found, and that if we approach this great problem freed from the spirit of partnership, and uniting together, not in any spirit of critical antagonism to the Department of Finance, but more in the spirit of cooperative good will, we shall find the answers, we shall produce solutions, and we can look fonvai'd to the avoidance of that pitiable disruption which has swept over so much of the world in which we live.
But let me give you this warning. This land has no special dispensation against revolution or class conflict. Its seeds are already here. We have to face a world which is on the march forward, and if democracy as we know it is to survive, it will only be because it serves mankind as well as if not better than any other system of government.
Mr. JEAN-FRANCOIS POULIOT (Temis-couata): I congratulate the hon. member for Vancouver-Burrard (Mr. McGeer) upon his very fine speech, and I should like to say a few words about this bill. Looking at it, one sees that the proposed changes are not numerous. It is not so long ago that the Liberal party included in its platform the proposal to establish a national central bank to control rediscount, currency and credit. Some time afterwards the then prime minister, Mr. Bennett, stole that plank from the platform of the Liberal party and himself established a central bank, which was the Bank of Canada. The leader of the opposition at that time, the leader of the Liberal party, complained that Mr. Bennett had stolen the banking programme of the party. Mr. Bennett was gifted as a speaker, and his imagination gave him lots of opportunity to find rich metaphors of speech, but when it came to constructive ideas for the building of this country or the improvement of business he often fell short. When the matter came before the Liberal party I was opposed to it, but finally I bowed to the majority of my colleagues who were in favour of that bank.
So many views have been expressed about credit that it is time to say what is usually meant by the word. Credit is not money,
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though money is often called credit; nor is it currency. Both money and currency are not principals; they are accessories to a transaction which is no less than a barrier. In the old times when there was no money, rich men exchanged camels, cattle, et cetera, for services or goods. Afterwards carved stones or other objects came into use, but there was something to offer in exchange for goods or services rendered. So many things have been said on this subject that people are under the impression that there is a spontaneous generation of credit, and that, for instance, when a man goes to the bank to secure a loan, an entry is made in the books and it is called credit, when in fact it is a debt of the bank to the individual, and the asset which the bank has to cover that debt is the guarantee which is given by the customer for the amount that is advanced to him by the bank. Therefore there is a transaction which is made by the bank in favour of a customer; but it cannot be extended indefinitely. It is done in certain cases.
One thing to be praised in banking is the decentralization of responsibility. There are managers located in various places, and they know the people; they know what their needs are, and they try to help them as much as they can. I will never say that the banking institutions which we have now are perfect, but they can be compared favourably with those of any other country, particularly with the banking system of the United States.
1 have here a quotation from what was said by the Prime Minister (Mr. Mackenzie King) not so long ago, on March 3 of last year:
There is no doubt that society as it is organized to-day does enable those who are economically strong to become stronger, and at the same time does have the effect of causing the economically weak in many of the great struggles of life to become weaker. While the wealth of the world has vastly increased, its distribution has become increasingly disproportionate.
On the same occasion the same gentleman spoke as follows:
And if, as a result of the institution of private property, whether it be ownership of Jand or of capital, a special condition may develop which is inimical to the community as a whole, that institution has either to be modified in some particulars, controlled in some dealings, or make way for some other system.
On February 21, 1941, I mentioned in the house that there was considerable intrigue to bring about a union government in order that the rich might become richer and the poor be poorer. Two years later the Prime Minister declared that society as it is organized to-day does enable those who are economically strong, et cetera, to become' stronger and has the effect of causing the economically weak

to become weaker. The raison d'etre of the Bank of Canada was to control rediscount, currency and credit. Was it not established ten years ago? If it failed of its purpose, why is it not abolished?
Here I have some remarks to make about the right of ownership and the distribution of wealth. It will be very difficult to establish a proportionate distribution of wealth, but the suggestion that wealth should be distributed in a certain proportion to all necessarily implies the right of all to ownership. It is clear that if no one has the right to own, no one would have the right to own any proportion of -wealth, and if it is true that the distribution of wealth has become increasingly disproportionate, it is not because the wealth of the world has vastly increased, but precisely because the wealth of the few has vastly increased. Such a condition is due not to society as it is organized to-day but to society as it is disorganized to-day. Society as a whole should not be impeached for the excessive greed and unruly ambition of a few. If society is so much disorganized to-day, who is responsible for the fact that the greed and ambition of a few have not been checked1 in time? Who also is responsible for the fact that the strong became stronger and the economically weak, weaker, and if it was society that enabled them to become respectively stronger and weaker, how was it done? What was the length of the process in each case?
It is not the institution of private property, whether it be ownership of land or ownership of capital, which might develop into a social condition inimical to the community as a -whole. It is the abuse of the institution of private property by the few which could do it. Therefore it would be illogical and unjust to conclude that the institution of private property must "be modified in some particulars, controlled in some directions, and should make way for some other system." The matter is too serious. It cannot be left like that. One should be ready to answer other pertinent questions with regard to the institution of private property, whether it be the ownership of land or of capital. First, in what particulars should it be modified and by whom? Second, in what direction should it be controlled and by whom? Third, for what other system should it make way?
There should be no mental reservations, no demagogic appeals. Social security will never be artificially established, it will never exist unless the causes of social insecurity are suppressed. This is a most important point. If there is something wrong in our banking system, what is it? It cannot be only the increase of interest on small loans. That is

Bank Act-Mr. Pouliot
unfortunate, and I hope it will be corrected, as my hon. friend who has just spoken said. But there are other things. We must go to the source of the evil. We must see what is the best that can be done with regard to banking. .
At the present time the Bank of Canada is apparently independent of the Minister of Finance as well as the House of Commons. When the question was up before, the Minister of Finance said, on June 2, 1941-time passes very quickly-that the Bank of Canada is independent of the finance department and of the House of Commons. Sir, I regret very much that I cannot agree with such a theory.
I find it unsound, and for the information of the minister I will quote Hansard, page 3376, 1941:
Mr. Blaekmore: Do I understand the minister to say that the Bank of Canada is not directly under the control of the Department of Finance?
Mr. Ilsley: Correct.
Mr. Blaekmore: That it is independent of the finance department, and therefore independent of this house?
Mr. Ilsley: Correct.

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