Thank you. It is the same thing for Wood Gundy because Woods, Gordon is somewhat tainted with Liberal tendencies; Wood Gundy is not. Therefore, it makes it more useful to talk about Wood Gundy.
I presume Wood Gundy have been reading the polls, like everyone else, and I presume that they are making the assumption that perhaps the Liberals will not be in office in 1980 and that the Conservatives will be in office then. Yet despite that kind of possibility, Wood Gundy is saying that "we are still following the same disastrous course that we are on at present." With that in mind, I think the hon. member for York-Simcoe has one or two conclusions to reach. First, his party is not going to form the government in 1980, and Wood Gundy is making these predictions based on the Liberals remaining there and continuing their policies. Second, they are going to form the government, and it isn't going to make a damn bit of difference if they do or not, because the predictions are not going to be changed. That is really the point I want to make.
When one looks at $17 billion one has to ask and tell oneself that this is a serious problem. When you deal with the magnitude of that problem, what sort of suggestions are made as to the cause of it? We hear about a misspending of $5 million on telegrams, $17 million on courier services, and $400,000 to an advertising agency. Even when you add up all these little figures, you do not come anywhere close to $17 billion.
Even assuming there is some waste and mismanagement, as there tends to be in all large organizations, the way to correct it is not simply by being more efficient in government. As desirable as that may be, it is not going to knock out the $17 billion loan requirement.
When we talk about the economy it reminds me of a skit that sometimes appears over television. I think "The Honey-mooners" used to use it. Someone walks in and goes over to the stove. When he turns it on, instead of getting a flame, he gets a shot of water in the face. When he rushes into the bathroom and flushes the toilet he gets the triumphant march from "Aida" bursting forth in the living room. Something is not working. The whole economy is mixed up. The blue plumbers are sent for. They come with their wrenches and tinker with it. The whole system breaks down, and there is water all over the place. That is like the shape of our economy. It just is not working. Something is dramatically wrong with our economy and it will not be corrected by looking at an advertising or telegraph expenditure, or something similar.
The importance for parliament in trying to deal with this subject is to look at some of the underlying causes and some of the choices that face us with regard to what we can do with the economy. We have the blue choice, the one put forward by my
October 19, 1978
Borrowing Authority Act
friends on my right, that the only thing wrong is with the present government and the fact that government expenditures are out of control.
We also have a pink choice, the choice of the New Democratic Party, as to what can be done. We feel that the problem is not in government expenditures. The problem is essentially that the market system in this society has broken down. It will not be corrected by the government getting out of and not managing the economy. That would only make it worse.
We have reached the point in the development of our society where we need more government management, rather than less. To the extent that the private sector has failed, and it has failed, the public sector has to take up the slack.
In that regard I must ask my friend from York-Simcoe if he really meant what he said when he stated that if the government were borrowing $17 billion for housing, it would be a different matter. I presume he is saying he would support a $17 billion public expenditure on the part of the government. If it is for current needs, he will not support it; but if it is for investment, he will. I am not sure he meant that and, therefore, I do not know why he introduced it.
Let us look at some of the problems and how this government and, to a very large extent, my friends on the right would handle it. At the moment we have a need to bolster the Canadian dollar. There are a number of ways in which that can be done. The government has chosen to increase rates for the fifth time.
What is the consequence of increasing interest rates in order to keep money in Canada? They have come to the conclusion that much of the devaluation of the Canadian dollar is because of the outflow of capital and the importance of inflowing capital. Raising interest rates has not worked in the past and it will not work now. However, the government is going to do that in order to stop some of the outflow. The consequence will be to slow down the whole economy. Raising interest rates will slow down the housing industry, investment, and all those other things about which they are concerned. The justification will probably be they had no choice, there was nothing else for them to do.
But there is a choice in these matters. It is not an easy choice or a perfect choice. However, it is preferable to raising interest rates. 1 refer to imposing exchange controls. I think the problem is that there is too much money in this country for gainful investment. The government have been too generous to people with high incomes, to people in businesses, particularly in the large business sector, and they have more money than they know what to do with. It is leaving the country for that reason. It must be stopped. There is a responsibility on those who make their money in this country to have some response to national needs.
The figures that we have bear out where the problem is. I agree the trade deficit is important and that it has something to do with it. However, what is more important is the fact that so much money is leaving the country in large amounts. Small amounts, such as those for people going on holidays or buying
a home in Florida, are not the real cause of the problem. Rather, it is that there are large sums of money leaving the country in an attempt to find more gainful interest rates somewhere else.
If we look at the section of the quarterly estimates, the Canadian balance of equal payments, page 56, under the heading of "Interest and Dividends", we can make a comparison. In 1969 we had a deficit on that account of $915 million. In 1977 the deficit was $3,480 million, almost four times as much in eight years, leaving this country.
When I discussed this matter with the people at Statistics Canada in order to try to get an accurate picture they said they could not give an accurate picture because the statistics were not good enough. They had to lump it under various headings, and they were not sure how much was private money and how much was business money.
They have an item called "Net Errors and Omissions", a very exact thing. Under that heading is shown a deficit of $219 million in 1969, whereas, in 1977 the outflow was $2,746 million, an incredible increase.
If you look at the offsetting amount of capital coming into Canada you find that, while it has increased, and I do not want to put the figures now, it has not increased at nearly the same rate as the outflow of money from this country.
Money does not flow out of the country just because there is no confidence. Anyone who does not have confidence in this country has to be out of his mind! I cannot think of any country in the world that has a more brilliant future than Canada. Any investor who does not see that does not deserve to be called an investor.
You cannot say this money is leaving Canada because there is no confidence in this country. It is leaving for other reasons. I suggest it is leaving because of public mismanagement. There is so much money around that it is just trying to find a place to light down. It moves back and forth on a quarter per cent rise in the interest rate.
The liquidity in large corporations is so great that some of these corporations make more money by placing their money for interest than they do on their own operations. A lot of this has arisen because of the very generous capital allowances we have allowed to large corporations. It has increased the liquidity and enabled them to do this kind of thing.
This is the kind of thing we have to examine. Therefore, you impose exchange controls. The minute you say that, however, someone says, "That means that if I want to go on a holiday I cannot do it without going to a bank or agency." But you do not have to do it that way and in most countries where there are exchange controls it is not done that way.
You can impose these controls on any sum of money over $50,000 in order to ensure the large sums of money-those that are affecting these figures-are taken into account. It will be much more desirable to try to deal with the dollar problem in this way than to keep raising interest rates in a losing battle of one-upmanship with the United States. This is a battle we
October 19, 1978
cannot win. Why is it not done? It is not done because the government does not want to manage the economy.
It is not easy to impose exchange controls. It means a government has to accept responsibility, and the present administration does not want to accept that kind of responsibility and it is this reluctance to do so that is at the heart of our economic problems.
The government has been cutting taxes over the years. One of the reasons we have borrowed to this extent is because the government has cut taxes, but they have cut them for the wrong people! The cuts have stimulated saving by those at the higher income levels. Taxes were cut for the more fortunate to such an extent that the people concerned could not spend all their money. The Minister of Finance (Mr. Chretien) himself said we were saving ourselves into a depression.
The New Democratic Party has said that cutting taxes might be necessary in the short term but, if taxes were to be cut, they should be cut for those at the lowest income levels so as to help those with consumption needs. In that way we derive a double benefit. Surplus funds are not created and the extra purchasing power stimulates the economy, putting people back to work. Revenue from taxes is greater, and the deficit is reduced at the same time. This is not only a more decent way to do things, it is a more efficient way. Why is it not being done? Because it means you have to make a decision in favour of the poor rather than the rich and at the moment there seems to be a blue tide running-the people who "have it made" are insisting on retaining their position, a position endorsed by the government.
It is not only tax benefits that are greater at higher income levels. The trend to more favoured treatment extends to such things as registered retirement savings plans and various other premiums. The Minister of Finance has, on occasion, pointed out that it is not just the rich who benefit from these programs. He tells us that some people from the middle income levels also benefit. But the benefits to the rich are disproportionate to the small amounts received by those at the lower end of the scale as a result of which the system works to increase savings at a time when we really need an increase in consumption.
The only solution proposed by hon. members to my right is that we should cut the public sector. Mr. Speaker, cutting the public sector simply exacerbates the problem. We are all familiar with examples of too much fat in the public sector, and to the extent that this is identifiable it should be cut out. But that is not the mood of those who sit on the government benches. Their idea of cutting the public sector is not to trim the fat but to make cuts across the board on principle, and this principle might be described, more or less in these words: we are going to get out of the economy, we are going to show the people we do not want to be in the economy, we are going to leave room for the private sector.
The other day my leader asked the Minister of Finance whether it was true that a recent study showed that the cuts made by the government would result in close to 100,000 being
Borrowing Authority Act
unemployed. The minister had to do some mental gyrations before answering that question. He attempted to demonstrate that by making 100,000 people unemployed in the public sector he would create jobs in the private sector. Yet the hon. gentleman has himself expressed disappointment with the performance of the private sector in this regard. Every time cuts were made on the assumption that the private sector would take up the slack, it did not happen. Unfortunately, the private sector increases the problem instead of diminishing it.
How could anyone in his right mind conclude that just because the government stops employing people the private sector would suddenly develop confidence and hire them? Business does not expand its operations in proportion to the number of employees the government has dismissed. The only reason business expands is because there is a market for what it is trying to sell, or the services it is providing. The actions of the government in this area are of no consequence to a businessman beyond becoming the subject, possibly, of conversation at the golf club.
We have much more compelling difficulties to face. It seems to me we are living in one kind of society, a society we think we understand, while moving rapidly into another kind of society, one we do not understand and one for which the government is not prepared. The government is attempting to manage by crisis, by election dates, and the official opposition is not being of much help in that regard though one would not expect them to be. The reason we find ourselves in this great economic difficulty is our reluctance to face the fact that the world is changing before our eyes and that the solutions we were once able to apply are no longer as useful as they were.
It seems to me that when we debate as parliamentarians we should try to understand the changes which are taking place and to listen to arguments in favour of one course of action as against other courses of action, arguments, if you like, of a philosophic nature; I recognize that philosophy is regarded as somehow unparliamentary, but I feel, nevertheless, that parliament should be a forum for philosophy. A great many things are changed in our society.
My hon. friend, the hon. member for Winnipeg North Centre (Mr. Knowles), reviewed what has happened in our society, when he spoke last week. He spoke of the changes that have taken place, many of them because of the presence of a social democratic party in Canada. There can be no comparison between the society into which he was born-and into which I was born for that matter- and the society we see today. For want of a better term, we call it the "welfare state". Nobody is going to dismantle the welfare state because, whatever faults it may possess, we are not willing to go back to the kind of jungle which existed before, in all its insensitivity. In our desire to be a more humane civilization we have removed many of the pressures which pushed civilization in a certain direction. We have removed combative presssures; pressures of poverty and pressures of illness and desperation.
October 19, 1978
Borrowing Authority Act
This is not a desperate society. It is not the world of Adam Smith, if there ever was such a world. It is not a world of small shopkeepers competing against each other. We have a different society. Because it has been gradual and because we have fought every step of the way in order to attain this society, we have not stopped to analyse and ask what the implications are for the future, now that we have this kind of society. Ours is not the only welfare state. I do not think there is a country in the western world, including the United States, which does not devote much of its resources to the field of medicine, education or pensions, all of which are associated with welfare states.
Another thing that is happening is that growth in the western world is slowing down. That is not so just in Canada, but in the whole western world. Those of us who have been travelling to Japan, Germany, France, Britain, or even Sweden, will note that the preoccupation of those countries is the same as the preoccupation here: what happened to growth? What we tend to forget is that we have come through a period of the most rapid growth in human history. The last 30 or 40 years have been a period of incredible growth. This is not usual for the world. The world did not grow at that rate before, but because we have been living in this period we think it is going to go on forever. But suppose it is not going to go on forever, and suppose we simply have to adjust to making a decent society which is not constantly being prodded and pushed into consumption? I think that is in fact what is happening.
If we look around at people today, we find that they have changed a great deal. Their attitudes toward clothing, cars, and security have changed. Out of the old society a new one is emerging. The great difficulty is that, whatever we say about the old society, it is both true and false. Whatever we say about the new society is both true and false. But a government which continues to ignore the fact that it has a double problem, how to manage the existing society, and how to make the transition to the other one, is doomed to failure.
I will give some examples of failure. The government cuts taxes. I say the cuts are being made in the wrong places. Perhaps that is part of the failure, but it is a general failure in a relatively affluent society and in a welfare state. The Keynesian idea is that if we cut taxes we stimulate demand enormously, but instead, when we turn on the stove, we get a shot of water in the face, and the government stands there wondering what happened. Governments think they are doing the right thing but then wonder what happened.
Topic: GOVERNMENT ORDERS
Subtopic: BORROWING AUTHORITY ACT, 1978-79-80 MEASURE TO GRANT SUPPLEMENTARY BORROWING POWER