THE BUSINESS OUTLOOK
Why Banks Are Urging National Economy
By JOHN APPLETON, Editor of The Financial Post
EDITOR’S NOTE.—In the accompanying article the causes behind the present prosperity of the country are convincingly shown and an interesting forecast is given of the conditions which may arise on the conclusion of peace. Although it is shown that there are reasons for anticipating a development of Canadian industry the need for economy is strongly emphasized.
WHEN the war ends bankers generally anticipate business trouble. There is by no means unanimity in this opinion. A month ago we quoted Mr. Elias Rogers as saying at the annual meeting of the shareholders of the Imperial Bank that in his opinion when the war ended Canada would not experience any severe depression. “At the end of the war,” he said, “I look for rapid and permanent developments of the immense natural resources of Canada. The timber and mineral interests in the West are already beginning to improve and as water transportation facilities can be provided on the coast these industries cannot help making very substantial progress.” Such optimism from so good an authority cannot be entirely disregarded. Nevertheless bankers generally deplore the fact that Canadians are not exercising the most rigid economy. The CanaBankers and dian Bank of Commerce, Buying of for instance, in its monthly Non-essentials letter says that, “until in Canada there is manifested the same earnestness in saving our dollars and in eliminating unnecessary work and expenditure as is being exercised in Europe it cannot be said that the nation is taking its full part in the greatest duty that has ever fallen to its lot.” Then the same letter proceeds to point out that in the four months of this year Canada purchased from abroad, chiefly from foreign countries, commodities valued at $228,830,856, or $91,868,764 more than in the corresponding period of the year previous. These purchases are largely unnecessary. Many articles are being made in the country that might well be dispensed with and the labor thus employed diverted to making of those things which armies need. Every dollar saved and placed at the disposal of the government, and every sacrifice to save labor in order that it be devoted to the production of imperatively necessary things, or to the performance of essential duties, bring9 nearer the end of the war. Only by greater economy and thrift and by curtailed purchases of nonessentials from foreign countries can our credit, commercial and national, be conserved. That is the opinion of another banker. Two different opinions have been given which do not conflict with each other. Others could be given which would
set at rest any doubt as to the view of the banker as to buying unnecessary articles.
But why, when the people have money, do the banks say that it should not be utilized in the purchase of unnecessaries? To answer the question satisfactorily it is essential to define what is meant by “unneeessaries.” The point might be elucidated by indicating the respective economic conditions in Canada and Germany. In the latter country the war is being carried on at the expense of the German people. They are shedding their blood, and perforce are yielding up their household goods and comforts. After the war it will be found that the German debt will be a debt to the German people and not to people abroad. When the day comes to settle with the Allies the indemnity will not be gold or lands, but if such a thing is exacted from the German nation it will be in the form of commodities. It is true that the German nation has in its possession a large amount of gold, but that would not suffice to approximately pay for the loss they have caused the Allies. The only thing left for them to do is to give their promise to pay which will be finally settled by the handing over of commodities. For two years the Teuton has been practising, to the utmost, frugality. By scientific distribution and utilization of food on a national basis the people in Germany have no doubt learned to live at less cost, and when war ends will be content with remuneration accordingly—and will thus be able to market commodities at an extremely low figure. Up to the present time Germany has no destroyed factories to replace; they will merely Competition have to be adjusted to their of Germany normal use. When ammuAfter the nition is no longer necesitar sary dye works will not be
called upon to produce explosives; nor will the engineering shops be asked to turn out death-dealing missiles. Sentiment in countries where Germany has hitherto done so large a trade will be adverse to purchasing German commodities, which will be met by the low prices made possible by low wage rates in Germany and most economical methods of living. There will not be any decline in efficiency, but rather a decided improvement in that respect. It is safe to assume, therefore, that manufactuers not only in Canada but elsewhere, will, after the war
be met with a competition from Germany more vigorous than they have hitherto experienced. All the ingenious tariffs that can be devised will not ultimately exclude German goods if they are produced at a cost sufficiently below the standard of other countries.
Very much has been said and written about the enormous waste that is taking place on account of the war. In a sense it is true, but the point is labored too much. While accentuating the destruction incident to war, the economy and frugality incident thereto is not put into the balance. In Germany very few people are employed in picture shows, in entertaining the public on the stage, making fancy dresses for the idle rich or in carrying backwards and forwards to fashionable resorts health and pleasure seekers. Resources cf that nation are being devoted to carrying on the war. Even in frugal Germany a great deal of How national waste took place in
Germany is operating unnecessary
Paying for places of amusement, in
the War drinking and other forms
of absolute waste. No particular objection to this is taken in normal times, but at a time such as this, when the nation’s existence is at stake, every possible economy is enforced thereby as much is being saved as is being wasted. It costs very little more in Germany to carry on the war of that country against its enemies than it does to sustain the high livers, chorus girls, moving picture artists, quacks and other superfluities in times of prosperity. Likewise in England the enforced economy is resulting in much money being placed at the disposal of the nation that hitherto went into high living and pleasure seeking. Moreover, England usually loans to other countries every year nearly £500,000,000, and at present that sum is being put into the war. So far England has borrowed less abroad than she has loaned to other countries, her Allies principally, during the war. Therefore, while the guns have wrought havoc in a great many districts in France and in the whole of Belgium nevertheless that wastefulness is to a very large extent counterbalanced by the economy and abstemiousness of the nations at war. We should, however, properly exempt Canada from the charge of being abstemious. Just as much money is being spent by Canada to-day in elaborate dresses and in pleasure seeking, as at any other time. It may be said that such economy as we have indicated may be iustifiable in France, Germany and England; but why in Canada? While the German producer, the factory employee and the laborer Getting are being trained to still
Trained to harder conditions than was High Living their lot previous to the war the factory worker in Canada is being initiated to a higher standard of living than he has hitherto been accustomed. The same is true of the United States; but that is incidental. We are speaking of Canada. The operators of factories, especially those that are making munitions, will tell you that the expert men are not content with less than $6 or $7 per day. Even the female workers, when trained, demand high wages just as
soon as they realize that they have attained to the necessary standard of efficiency. Both sexes are spending such earnings generously in pleasure and in dress. As already indicated the imports into Canada are very much greater than they ought to be and amongst them are to be found many commodities far from being in the class of necessaries or even desirable things. They are coming into this country because they are sought for by the people who are earning high wages and who are living high. At the end of the war what position will this class of workmen be in to meet the competition that will come from the workmen in Europe? Workmen will have to take lower wages and the factory operators will have to put his plant in a most perfect condition, upto-date in every respect and capable of producing at the lowest possible cost. There is no labor-saving device available in Canada or elsewhere that will not be duplicated in Germany. Instead, therefore, of spending earnings at the present time on dress the banker would rather see the well-paid employee put his money into the bank or into government securities. When the banker tells people to save their money for the good of the nation it does not necessarily mean that he is boosting his own business. It has to be confessed that the banker takes a broad view of things and does not speak selfishly. He recognizes, however, that, when the economic position of the country is sound, it is safer and better for business generally. If the workmen have savings in the form of government securities at the end of the war they will be in a posiCanada tion to tide themselves over Must be a period of readjustment.
Prepared Moreover, if their savings
are put into government bonds, they will be aiding their country to fight its enemy. The latter is probably the best explanation of bankers’ enthusiasm for economy. But the other one. that is being prepared for the period of readjustment after the war and being Drepared to meet the competition that will come from Europe and that will meet our nroducts in foreign markets, is equally as important. The manufacturer to-day who neglects to free himself from the bank or neglects to prepare to meet maturing bonds is neither his own nor his country’s friend. To do this profits must be applied to liquidating indebtedness. One eminent financier in speaking of mortgages and the way many mortgagors were meeting interest payments observed that it would be a good thing if all mortgages were paid off. If such a condition in Canada could exist at the close of the war nothing occurring after that event need be the cause of anxiety. If. however, on the other hand we continue to go into debt abroad unnecessarily; if we fail to save and thus necessitate borrowing abroad the naving of our interest obligations and our debt after the wav will be extremely diffir cult. Since the outbreak of the war Canada as a nation has borrowed from the United States anproximately $284.000,000. From the commencement of the present vear to date the borrowing from that country amounts to practicably $120,-i 000,000. If such economy as is being prac-
tised in Germany could be enforced in Canada it would not be necessary to borrow one cent abroad. The banker is right when he views with alarm the continued tendency on the part of the Canadian people to buy from abroad more than is necessary and even to devote more time, capital and energy to the production of unnecessary things. The tradesman and manufacturer, the professional man and the farmer can look confidently to a period of read’ustment after the war that will be less troublesome if the people are economical to-day. But if we continue to borrow unnecessarily and continue to be extravagant it will be the more serious.
A month ago we were able to say that all the factories in Canada were very busy. There has been no change. In any industrial town where factories are located you will see at the present time announcements to the effect that help is wanted; particularly in the larger centres. As a result some of the larger operators are considering building factories at suburban and rural points. They hope by this means to catch a new supply of labor. At the same time wages have a tendency to advance. It has been stated and it is the fact that raw material is somewhat difficult to obtain. But at the same time the factories are busy and in some way or other they manage to obtain the raw material. The plants adapted to the making of ammunition are very busy, but there are other forms of industries that are busy supplying the domestic markets. In the case of one mill which in the past devoted its attention to making the lowest priced goods, such as find a place in the fifteen-cent and ten-cent stores, it is now busy turning out a high-class article which hitherto was supplied by Germany. In place of selling the “ninety-cents-a-dozenarticle” they are selling the “eight-dollara-dozen.” and thev are finding a big demand for it. During the past twelve months this particular factory netted profits equal to 20 per cent, of its capital. Of course the demand for the high class article is no doubt due to the high wages so many are obtaining for Can our making munitions. But a Industries plant that can adapt itself Meet Afterso readily to making a high War Conclass article shows the
ditions ability to meet changing
conditions readily. As it met the demand for a high-class article and bv foresight obtained the necessary material before prices went out of sight, the same kind of management will no doubt be ready when war ends, to meet market conditions as thev arrive and by business sagacity and efficiency be prepared to meet competition.
Buying necessaries is not extravagance. Shelves all over the country have been depleted of the stocks of staples which loaded them down over two years ago. Many who thought they were down and out and asked for the sympathy and consideration of their bankers, now find that the stocks which were unsaleable then are now in great demand at higher prices. Instead of having to sacrifice, a big premium on their old stock was obtained and that stock remaining is worth more today than before the war.
There is only one conclusion to be drawn from practically all facts indicative of business conditions and it is that to supply the domestic demands of the immediate future in Canada the factories will be kept busy. At the present moment we have to pay to the United States a very high price for anything required from that country. Consumers there are at the present time spending as much money or more than are the well-to-do Canadians. Factories over the line are being extended to meet the demand, but by so doing the output is not sufficient to stem the tide of rising prices and the demand of labor for higher remuneration. At the moment of writing it is the opinion of a number of eminent business men in the United States that the apex has been reached, but railway earnings and other indices of business would indicate that it is likely to remain at the apex for some time. The greatest clouds on the horizon are the poorer crop outlook and the possibility of fewer orders from the Allies being received for ammunition. But as these orders diminish the United States manufacturer will devote attention to foreign markets that have hitherto been a source of great wealth and trade for Europe. It is likely, therefore, that industrial producers in Canada will be called upon to meet the very large domestic demands not only during the course of the war but immediately after.
A few weeks ago the French Government placed an embargo upon the importation of lobsters obtained very largely from Canada. Naturally the fishermen on our coast were a little afraid that this measure of economy imposed upon the French people by their Government would adversely affect lobster prices. Apparently it has not done so. Here is more evidence of the purchasing power of the United States. The market there took more lobsters and consequently kept the price above the average, although so large a market as that provided by France was closed. Under ordinary conditions the Maritime Provinces sent to France about 40,000 cases of lobsters, and this represents a normal value of $800.000. This is a tidy sum to be received Canada’s by fishermen. In 1914 and
Fish 1915. however, the pur-
Industry chase« by France dropped
to $703,469 and $556,317 respectively. Nevertheless the lobstefishermen of the Maritimes will this year receive for their products practically the same figure as in previous years. The annual value of fish taken from Canadian waters is about $35,000,000. The Government figures for the year 1915 set the value down at $31,264,631. The high mark was touched in 1912 when $34,657,872 was the value of the year’s output. Nova Scotia fishermen, however, say that the Dominion Government figures are inaccurate and certainly underestimate the products of that province. As in the case of every other industry it was expected that that of fishing would suffer very materially when war broke out. The reverse has been the case. Canadian fish has found its way into new markets and the quality of the product would enable it
to hold at least some of the new markets that opened up as the result of the war.
In making enquiries as to why building was reported to be more active in one or two of the prairie cities some interesting facts were obtained. For instance, in Saskatchewan the hotels a Some few months ago were de-
Obstacles to prived of their licenses to More sell intoxicating liquors.
Building Saskatchewan is not yet
dry, but there are no bars. This has led to the adaptation of hotel building into stores. For instance, a correspondent from Saskatoon writes:—
“The taking away of hotel licenses here has led to the making into stores of portions of one hotel here, the Western ; while the turning into a rooming hotel of the King George, and the abolition of their dining room and the reconstruction of two adjoining stores for a restaurant to be run in connection with the hotel, also accounts for some of the slight movement in building. Another cause is the financing by a Winnipeg capitalist of a moving picture house at a cost or $50,000. All the other jobs are small; some one-storey stores.”
One of the obstacles to building in the West is the difficulty in obtaining an adequate supply of building paper.
During the first four months of the present year the railways have done a record business from Saskatchewan, and in this respect, says our correspondent, Saskatoon leads. He adds also that “we should bear in mind that the freight does not include building or general construction material as in former years; but simply merchandise and grain. Our bank clearings are also increasing most remarkably; and in this connection I would point out that they do not include realty transactions, but represent legitimate commerce.”
It will have been observed by readers of this column that bank clearings are at a very high point in the West. Winnipeg returns may be affected by grain exchange transactions to some extent. At the smaller points, however, in the West the clearings are not affected in this way. They represent legitimate business trans-
actions and indicate how vast has been the change in conditions. From other points than Saskatoon, Swift Current, for instance, and Moose Jaw, Regina, the same story is told. Property that was a burden is now at any rate carrying itself and dwellings are fully occupied. There are, of course, empty houses, but not, an unusual proportion, that offer ordinary conveniences.
The year’s seeding has been completed with the result that in the entire Dominion conditions are normal. There are sections particularly in Eastern Townships and parts of Ontario where the weather has been so wet that seeding was impossible. The territory thus affected, however, is not large. In the grain-growing provinces the acreage under crop is approximately 15 per cent, less than a year ago. Conditions of moisture have been such as to give the grain an excellent start, especially the acreage that was sown on stubble. In dry seasons the sowing of grain on disked stubble is not satisfactory, but so far the crop Reports of progress indicates that this This Year’s year the poor farmer who Crop resorted to seeding in this
way will stand an excellent chance of obtaining a good yield., One banking authority speaking of the Western crop said : “The reduction of the acreage sown in the Western provinces is not a matter of regret, inasmuch as the increase of 1915 was unusually large owing to the special efforts to increase production for that season and to the greater preparation in the way of summer fallowing and cultivation made possible by the light crop of 1914. This season the acreage seeded is normal.” It can be taken then that so far the crop outlook is quite normal and the probability is from present indications that there will be 250,000,000 bushels of wheat. The price outlook is also promising from the producers standpoint. If such a crop is taken off there is no reason why business in the West should not steadily improve.