BUSINESS & INVESTMENTS

CONFIDENCE IN FUTURE IS TEMPERED BY EVIDENCE OF DISQUIETING CONDITIONS

“Real Wages” Higher Than Since 1913; New Loans Readily Absorbed; But Business Men and Farmers Realize Acutely That, to Considerable Degree, They Must Wait on Europe’s Recovery

GILBERT E. JACKSON November 1 1923
BUSINESS & INVESTMENTS

CONFIDENCE IN FUTURE IS TEMPERED BY EVIDENCE OF DISQUIETING CONDITIONS

“Real Wages” Higher Than Since 1913; New Loans Readily Absorbed; But Business Men and Farmers Realize Acutely That, to Considerable Degree, They Must Wait on Europe’s Recovery

GILBERT E. JACKSON November 1 1923

CONFIDENCE IN FUTURE IS TEMPERED BY EVIDENCE OF DISQUIETING CONDITIONS

BUSINESS & INVESTMENTS

“Real Wages” Higher Than Since 1913; New Loans Readily Absorbed; But Business Men and Farmers Realize Acutely That, to Considerable Degree, They Must Wait on Europe’s Recovery

GILBERT E. JACKSON

Mr. Jackson has just returned from Europe where he was in close contact with certain aspects of the problems he discusses here, and where he had the opportunity of discussing with business men and noted economists various phases of the present situation as it affects Canada.

DESPITE the shock to public confidence given by the failure of the Home Bank, we have much to be thankful for in the developments of the past season. The spring months were filled with warnings whose gravity could not be disregarded. The sudden revival of business in the United States was producing a labor shortage in many trades, and costs in general were rapidly climbing. The labor market in this country was » being denuded of numbers of its best workers by the attractions which many American employers—not least of them, the United States Government itself—• were able to offer to migrating Canadians and others. There was an ugly possibility that with limited immediate industrial resources, and rapidly growing credit, a runaway market might develop in one industry after another, which would reproduce some of the most dangerous and unsatisfactory conditions of 1920, pres ently heralding another great depression.

This has not occurred. The warnings were. taken to heart, the brake was applied, and in place of a feverish expansion, which must always in the long run be paid for, there has been a steady growth in activity which is much to be preferred.

It has been a good season for the manual worker. Spectacular profit-making has not been much in evidence: but the fall in wages has been arrested almost universally, and there have been many wage advances. It is impossible to doubt that the United States has experienced a solid increase in well-being; and Canada may claim to have shared in this, though not, perhaps, as yet in full measure. The National Industrial Conference Board states that American labor has been receiving higher “real wages” during the past summer than at any time since 1913, higher even than in the peak period of 1920; and although no definite estimate is possible at present of the ordinary workman’s position in this country, it is at least a tenable opinion that in Canada the same holds true.

Not the least of our blessings is a wheat crop which appears to be larger even than the crop of 1922, and very much larger than anything that we could legitimately count on.

No Signs of Unusual Activity

NEVERTHELESS there are other states than Denmark in which all is not w^ell. Wheat prices are still, it seems, on the down grade, and to some extent have discounted in advance the bounties

of nature. Those who make money must still employ much of it in the liquidation of back debts. The reports of the Employment Service suggest that the working population of this country is not yet, in spite of the revival, as fully employed as it was at this time four years ago. Buying or the part of the general public is still cautious. Many a small retailer, who was grimly hanging on in the spring months, waiting for something to turn up, has been compelled to relinquish the struggle. It is true that reports still speak of a shortage of labor in not a few of the mining and lumbering districts; and in Ottawa (whatever be the case at present) there seems to have been something not unlike g labor famine within the last few weeks. But news from manufacturing districts is almost unanimous in its use of the word “quiet.” “The marketing of the crop,” says the latest Bulletin of the Canadian Bank of Commerce, “is causing a slight revival of business iiqevery line, but there are no signs of unusual activity in any particular line.”

Moreover there is a degree of apprehension for the future among business men, which is, to say the least of it, unusual. Despite the pronounced and obvious gains of the last eighteen months, there is no great confidence that in the next eighteen months this upward movement will continue. Without repeating a well-known phrase of the Montieal Star about what is being whispered in clubs and boardrooms, we shall do well to recognize that the pessimist is again abroad in the land.

Now despite our apostles of uplift, it is no crime to be a pessimist. The prophet may make blunders, but the only crime for which, in his trade, there is no forgiveness, is the crime of intellectual dishonesty. If there is nothing to be gained by crying “Peace, Peace” when there is no peace, still less can we help matters by crying “Dividends, dividends” if there are none. Where, then, does this pessimism come from, and what is it about?

A Growing Understanding

THE doubts that have been cast during the summer upon the fundamental soundness of Canada (principally by the mouthpiece of Lord Atholstan already mentioned) have already been reviewed at length in two issues of MacLean's. It is difficult for any individual to gauge the feeling of the great mass of men in executive positions, whose ideas in the aggregate are Canadian business opinion; but I do not believe that the pessimism

NATIONAL DEBTS (In Paper Millions) 1922 1923 Increaa Jugo-Slavia (Dinar) ................ 5,100 6,000 -+• 18% France (Franc) ................... 317,000 388,000 + 22% Netherlands (Florin) ............... 2,736 3,500 -j28% Portugal (Escudo) .................. 2.224 3,067 4* 38% Poland (Mark) .................... 455,000 4,120,000 + 806% Austria (Crown) .................. 1,437,568 16,500,000,000 + 1.046% Hungary (Crown) ................. 54,453* 954,686 -j1,652% Germany (Mark) .................. 1,559,000 2,830.060,000 -f 18,314% *1921 Figure.

which we are new discussing has anything to do with this unfavorable diagnosis of Canadian conditions, by the sombre specialists of Montreal. It is a feeling that is shared by the business men of a number of other countries, and is founded, not on a distrust of the Dominion, but on a growing understanding of conditions in the world at large.

Indeed, if we are to look beyond the borders of Canada for estimates of our own ultimate future, confidence in the coming greatness of this country has seldom been higher than at present. For example, the National City Bank of New York in its latest Bulletin, after noting that “the event of the month was the refunding operation on behalf of the Dominion of Canada, entered upon for the purpose of meeting the Victory loan of $172,000,000 issued in 1918,” adds:—

“On the basis of population, this approaching maturity would be comparable in size to one of two and one-quarter billions in the United States. . . In planning to take care of the approaching maturity, the Dominion government desired to place the refunding issues so far as possible within ‘Canada.... This effort to place the refunding bonds in Canada has been a great success.”

“... The debt burden will diminish relatively with the increase of population and wealth in the country, which is certain to be very great in the coming years.” (The italics are mine.) “There is no occasion for anybody to be pessimistic about Canada. Her credit has the best kind of backing—abundant natural resources, and a population of the sturdiest and most reliable character.”

There is more in this than goodwill and courtesy. It is a testimony both to the productive resources and to the spirit of Canada. But for the present, our capacity for ùsing those productive resources depends on our capacity for trading with the world at large: and to put it very bluntly, the world is very sick—far more so than most of us imagine.

Waiting on Europe

IN HIS triumphal progress through our cities, Mr. Lloyd George has taken occasion repeatedly to warn us that if in our time another world war should be permitted to develop, it would almost certainly spell the doom of civilization: reducing the struggle which we now describe as The Great War to the proportion merely of a prelude before the real Armageddon. It is a point which does not need any laboring in this country. We know too much of modern warfare to take the next war lightly. But there is a question no less urgent, perhaps a good deal more so, which receives far less attention than the one propounded by Mr. George. Supposing for the moment that we can avoid war for a whole generation—that none of the Mussolinis of Europe will so far forget himself as to make it inevitable on the grand scale—can we then set bounds to the gangrene which has been destroying Euiope since the Peace was signed, and is still destroying Europe? Can we assure ourselves that within any reasonable time the patient will get well again?

“When Europe recovers” is the glib phrase in a good many mouths at the present time. “When Europe recovers,” we are told, “business will be pretty good in Canada.” For “When” read “If,” and the statement becomes a truism. If Europe recovers, then wheat will recover, and the West stand on its feet again. But that “if” introduces a disquieting element of doubt.

Let us ask ourselves what has been happening in Europe these twelve months. On page four (facing) are some items from the financial balance sheet.

There is a regular crescendo here, from the mere whispers of death emitted by the Jugo-Slav and French figures, to the veritable screams and groans of death contributed by Central European finance. But though they differ in degree, from an annual increase in indebtedness of eighteen per cent, to an annual increase of 18,000 per cent., all of the figures are, to say the least that can be said, disquieting. All óf the countries concerned are on the same steep and slippery slope—some, it is true, not far from the top, some near the crash at the bottom. Whether they find themselves there owing to circumstances beyond their control—and this is the case with most of them—or whether they owe their positions to a fondness for steep places running into the sea, the danger

that faces them all is much the same. What else can the figures mean, for those that remain on the slope, but further inflation of their currencies, more depreciation, new risks to foreign trade, rising living costs for the mass of their people, growing discontent, increasing poverty? It is not on this foundation that recovery will stand.

Bolshevists vs. Lice

THE long debate between Lord Curzon and M. Poincaré which enlivened the dog-days of last summet for so many weary victims of modern statecraft, leaves us in little doubt as to the main reason why Europe in 1923 still resembles so closely the Europe of 1919. Europe is not recovering, chiefly because the most powerful political group in Europe is determined, at all costs, to prevent a section of Europe from recovering, and that section is the keystone of the continental arch. Before the war, as Mr. J. M. Keynes told us four years ago, “Germany was the best customer of Russia, Norway, Holland, Belgium, Switzerland, Italy and AustriaHungary; she was the second-best customer of Great Britain, Sweden, and Denmark; and the third best customer of France. She was the largest source of supply to Russia, Norway, Sweden, Denmark, Holland, Switzerland, Italy, Austria-Hungary, Roumania and Bulgaria; and the second largest source of supply to Great Britain, Belgium, and France.”

The truth of this description has been slowly sinking into the mind of the man of business since 1920, and is destined, unfortunately, to sink a good deal deeper in the years to come. This was the country that we so carved up in our zeal for “self-determination” and weighed down in our eagerness for fantastic indemnities, that as these lines go to press she is plainly becoming a derelict among the nations.

It is not unnatural if several of her neighbors, dependent as they have always been on her well-being for their own, are at present in a sorry plight. “We are not in the least afraid of the Bolshevists,” said a Polish savant in Warsaw this summer, “but we are terribly afraid of our plague-infested lice.” A British visitor to Warsaw was advised not to put up in any of the big hotels, for none of them was free from these invaders. So near is civilization still to the breaking point in the largest of all the new Succession States.

Itinerant spokesmen for the League of Nations have been announcing during the summer, not without complacence, that the League has succeeded in “saving Austria” at a net cost of only $35,000,000. Saved Austria certainly may have been— for the broker of foreign exchange: but we may well doubt whether the mass of the people has had any chance, so far, to accept salvation. Starving mothers are still abandoning their children on the doorsteps of the British and American relief hospitals; beyond this mother-love has no resource.

Trade Within Empire

ENGLAND herself inevitably suffers with the rest. In spite of the slogan of Lord Beaverbrook, “Do your trade within the Empire,” no conceivable development of Empire trade in the near future can make up to her for the markets she has lost. At the moment of greatest industrial activity this summer, she had still almost one-and-a-quarter-million of unemployed workers. It is agreed on all hands that in the coming winter the number will be far greater.

This is the European continent to which the Canadian farmer and his American cousin must sell freely at profitable prices, if American and Canadian manufacturers and traders are to be kept occupied, permanently and fully, by the home demand. It is a continent that needs cur food; for even with the pre ent favorable harvest, Europe is still undernourished. But the means of payment is hopelessly lacking, and each new refusal of France to relax her grip on her victims makes the situation, if anything, more hopeless.

So when M. Poincaré launched his legions on the Ruhr, announcing that he must really put pressure t bear on the defaulting debtors of Berlin, he was also, quite inevitably, putting another tu n of the screw on the Canadian prairie farmer, and on all who must live by cate ing to his wants. We have done our best to treat

the France-German crisis as no concern of ours ; but the facts will not permit this.

The situation is the more exasperating, because we serve no useful purpose by asking, “What shall we do about it?” So far as immediate remedies are concerned, there is nothing that we can do about it. If at the moment the British Government is helpless, our own is in the same case. We are quite impotent.

In the long run, of course, should the situation in Europe continue to grow worse, we can adjust ourselves to some extent. That is to say, we can reduce our wheat acreage for a while, till the growing American demand for food makes possible the next stride forward, and we can scale down the prices of our manufactured goods, till they come into line with prices on the farm. Either of these adjustments must be painful: but in the modern world, war is a luxury for which everyone, even the victor, must pay heavily. Payment involves, of course, a restricted standard of life.

Meanwhile, the signs for the immediate future are generally thought to point towards a slackening of business, The stock market has been slumping heavily for some months past, and that, to the barometrist, is a sign of bad weather. The comparative tightness of money just at present, and the prospect of dearer money to come, suggest that this slump has not yet run its course; that industrial securities are feeling their way towards a lower level.

One astute Canadian financier goes so far as to state that the shrewdest heads in New York discerned trouble not later than last March; and that the warnings so assiduously circulated last April and May, to which I have already referred, were intended to clear the decks and get the hatches battened down, before the break in the weather.

That anything in the nature of a severe slump is in front of us, I hesitate ta believe. There has been too much caution in the markets to permit of heavy commitments on the scale of 1920. We have not forgotten the lesson that we learned then, and we do not intend again to be taken by surprise. On the other hand, if the forecast of the security market is a correct one, the troubles of the last three years have left a number of firms in no position to stand fresh shocks. Business, like politics, prefers tranquillity just now.