GIVING AWAY OUR PROFITS

AGNES C. LAUT April 15 1921

GIVING AWAY OUR PROFITS

AGNES C. LAUT April 15 1921

GIVING AWAY OUR PROFITS

NO. VIII. IN THE SERIES “CANADA REVISI r ED’’

AGNES C. LAUT

IF CANADA were to-day getting the entire profits from the development of her national

resources, she could pay off her war debt of two billions in a year; and without any increase of taxation to the consumer in higher freights or to capital in heavier imposts.

This is a large statement; but I am going to prove it; and if I don’t prove it, pass along the facts to correct me; but don’t chuck up a lot of opinions and grouches and kicks, which never get you anywhere unless they are “lifting kicks.” Never kick, unless it is a “lifting kick.” Find out what is wrong and put it right.

Right here as a Canadian writing to Canadians and loving Canada second to no patriot on earth, I want to put down something on Canada's “kicklets.” It is said that child, who does not kick vigorously as a baby, is not a lusty healthy youngster; but the trouble is Canada is no longer youngster.

In point of age, Canada is older in settlement than the United Stat es.

In point of wealth, she is richer in natural resources than the United States; for she has barely scratched the surface of her natural resources in forest, mine, farm lands; while the United States has reached the stage where many of its natural resources are close to the end. This is true of oil, of free farm lands, of forests and fisheries and mines of the rare metals. : ' .

Yet in point of developing crude natural resources and transforming raw dormant resources into liquid wealth, Canada is a pigmy compared to the United States. Don’t wince at these words. Just examine facts. Take the aggregate production of wheat, of coal, of steel, of paper products, of corn, of beef, and compare Canada’s total to the the United States’ total. The liquid .wealth of the United States is a flood. The wealth of Canafia is dormant.

It may be answered that Canada’s foreign trade per capita is twice the foreign trade of the United States. That is true; and it is because it is true and proves the virility of the race that it is up to Canada to ask herself these pointed honest questions; If Canada can show such aggregates of foreign trade, why does her development of natural resources not go ahead faster? Why are her young Western municipalities toiling under such loads of debt that they stagger? You can’t make fast joyous progress if you have too heavy a burden on your back. Wby with wealth and climate second to no country in1 the world, is Canada’s whole population increasing only as much as the increase of one American city, or one American state?

United States is Cashing In

"f/I^HEN you ask these questions, you are not slurring »» Canada. You are trying to get at causes; and causes at bottom are facts. To shut your eyes to facts will not change the facts. You have to find out the facts and then change them to make them work out to the ends you have in view. Yet when you mention these facts, Canada too often regards them as a personal insult and utters what one protestant to me expressed as “a mighty chorus of righteous indignation.” If the “mighty chorus of righteous indignation” were keyed to facts it might become a symphony of prosperity; but when the chorus is out of tune with facts, the result is a shrieking discord and the world stands back; especially, stand back—investors.

Americans are not putting anything over on us. It is because we are so inert that they are doing what we ought to be doing for ourselves; and they deserve all the profit they are getting out of it. They are simply “cashing in” on our lack of enterprise. We are so busy playing small politics, that we are not foreseeing and grasping unified national

Now for the facts!

I have written of pulp and print paper. Where Canada is selling these products at $90 to $110 f.o.b., these very Canadian products are being resold in the United States at $220 to $360 and $380. Now the last figures are a gouger’s price; but the $220 isn’t, especially in view of the impending famine in print paper. If Canada were selling her output of print paper at $220, her. annual sales of pulp and paper to the United States now would total $200,000,000 instead of $80,000,000 to $120,000,000; and in a few years, when her output has been doubled by new machinery being installed, her output would easily be worth $400,000,000.

These figures may fluctuate a few dollars a ton as hard times, or good times, in the United States, decrease or increase the demand for newsprint. At the time of writing, March 15th, there is a slight recession in the price of newsprint owing to two causes: the lessened demand for newsprint owing to a 50 per cent, slump in advertising; the importation of German paper. But Germany’s maximum possible exports cannot exceed 300,000 tons; and when order} is restored in Russia and Austria, much of this will have to go to these countries. It is coming to the United States now because Austria and Russia are not buying. It is also coming because at the value of the German mark— around lc on the dollar—the price which Germany gets in the United States for her paper—$120 to $140 a ton—is

equal back in Germany in German currency on a pre-war dollar basis to 14,000 marks, or on the pre-war basis of five marks to a dollar—$2,800 to $2,400 a ton.

Germany can afford to undercut American prices and then by taking the dollar value and translating it into the buying value of marks before the war within her own boundary, get what is equal to about $2,500 a ton; and this is what the German paper companies did who shipped to New York freight prepaid in November and December; but Germany’s possible supplies are only a fraction of America’s needs.

Out of the Panic with a Bounce '^’O MATTER how bad a panic hits the United States, no matter how advertising falls off in the great dailies, no matter how supply catches up with demand, a nation with $10,000,000,000 owed to it in gold by Europe and a population growing at the rate of twenty-one million people in twenty years, is not going to remain in the trough of the panic wave long. The United States is going to come up out of the war slump with that bounce, which has heaved her out of every panic in which she has plunged from ’71 to ’93. The American mills will have no pulp wood left East of the Mississippi after ten years. They will have to move their plants to the forest reserves in the Rockies; and they are not going to do that during the panic years. When her finances come up out of the war slump, her paper demands are going to be greater than ever; and if Canada is ready to fill these paper demands she will take in more yearly than all the gold production of all the world for a year. The gold production of the world runs at from $380,000,000 to $410,000,000 a year. Her forests will become to her that Golden Thread, of which the great divine, Norman Macleod, wrote a child’s fairy story, when a golden strand put in the hands of Youth led the boy through Wilderness wood to Paradise.

Am I wrong? If I am, where?

Or, take the matter of just common rough timber ex-

LEACOCK

'“pHE author of “Frenzied Fiction,” “Winsome Winnie,” “Sunshine Sketches” and many other books and magazine articles which serve to make life more cheerful and worth living, will shortly commence another series of inimitable articles in MACLEAN’S. The witty professor from McGill has always been a prime favorite with MACLEAN’S readers. The first article of this neto series—which is being written exclusively for “Canada’s National Magazine” —will appear inan early summer number. They will be illustrated by C. W. Jefferys, and articles and drawings tvill have that irresistible appeal which is assured by the combination of the work of these two masters in their respective fields.

ported from Canada. It is being put on the cars of the interior in British Columbia just now at $35 a thousand. It costs $10 to $11 to produce there, with the highest scale of wages ever paid to loggers, lumber men, saw mill hands, from $5 a day and board to $8 and $10 and $11. The freight from interior points to New York and Pennsylvania is $21 plus. Wholesale prices receded a little from November to March, and a great many mills in British Columbia closed down because while the wholesale prices ceded the labor costs did not.

Now I happen to have been building a good deal in the East for the last four years; and it always gave me a feeling of pleasure to see that the lumber that I bought in New

York eame from Northern British Columbia.

That is—it gave me a feeling of pleasure till I

S»t the bill, when I quit building. In fact 500,000 other people in New York State quit building. At least that is the number of people estimated for New York City alone, who moved out of New York because there is not adequate housing for them; and I think the figures are in proportion for every great industrial centre in the Eastern States.

Building has simply not kept up with population. Building is not at a stop; but the overhead cost is so high, no one builds just now who is not compelled to. Before the war, I used to pay for British Columbia lumber from $32 to $42 a thousand; and the $42 made me squeal. Since the war, that same lumber costs me from $72 to $120 a thousand. Yet, allowing for freight and f.o.b. costs, Canada is only getting out of that lumber $21 plus $35.

Where the Difference Goes

\Af HO gets the difference? Dealers on. the other side of . y the boundary. I remember saying this once before in an American magazine; and the retailers’ ring wrote the editors I had done no building, my figures were wrong and I was “a fakir.” I sent them my lumber bill and they didn’t answer. A later public investigation, which fizzled out, substantiated the figures. If the lumber were sold at only $10 more than freight and f.o.b. costs, there would be twice as great a demand for lumber; for the builders could afford to go on and build; and on the number of board feet cut in British Columbia alone in 1919—which are the latest figures available—two billion feet—the increased profit to Canada would be $20,000,000 over what she is getting for one province’s output alone.

“We could afford to sell all the lumber New York and Pennsylvania want at $45 and could make fortunes doing it,” said a mill owner of Prince George to me.

“Yet I was paying $72 to $120,” I interjected. “Why don t you establish a co-operative Canadian sales agen cv’ * ’ I asked him.

“Well,” he answered, “I suppose because we don’t know what is going on with the lumber after it leaves. Because we are so desperately in need of money, we have to have bills of lading to draw on at the banks for weekly wages. We would have to have the money to prepay the freight. We would have to have an agent on the spot to get the order direct from the consumer in car lots and avoid delay and demurrage—”

All of which the Citrus Growers* Co-operative Union of California did to save their orange groves from ruin,” I interjected. “They paid their co-operative sales managers from $25,000 to $50,000 a year; but when that was charged back against the profits on cases of oranges that sold at from $4 to $7 it did not exceed j^c. to lc. a box.”

“Well, I suppose,” he answered, “we just haven’t because we just haven’t. We have our noses so eternally close to the grindstone to raise money for operations that we don’t see our way financially to expand.”

I heard of a still more striking case of fine grade lumber —one million feet of it ordered from the Queen Charlotte Islands. A broker in Calgary bought it—a travelling American. He hadn’t directed where it was to be shipped. Calgary first. He sold it in Calgary to a broker in Vancouver. Before it was loaded, the broker in Vancouver sold it to a broker in Minneapolis. While it was being loaded, the broker in Minneapolis sold it to England; and the broker in England again re-sold it to the ultimate consumer. Poor consumer! He must have had a fit of indigestion. Each of the brokers cleaned up $15,000. When this lumber left the mill it represented to Canada $35 a thousand. When it reached England, it represented $95. Canada got a little more than a third of its real value. The rest of the gain went to England and the United States; and all the brokers did was to put a stroke of their pens to a telegram. I could tell of hundreds of such cases from Montevideo to Valparaiso and Hong Kong to New York and Liverpool. Yet a co-operative Canadian sales agency on the scale of costs to the Citrus Growers of California would not cost $7 a car to handle Canadian lumber direct from producer to consumer.

Why don’t we do it?

For the same reason we don’t peg the dollar at par with the United States. Because what is everybody’s business nobody’s business. '

Increasing the Lumber Yield

AS I RECALL—and I am writing from memory just now—Canada’s lumber exports of paper, pulp,'wood yield her annually in all more than $200,000,000. If she handled her own sales and paid the producers pro rata profit s as the Citrus Growers'do, her lumber should yield her $600,000,000 to $700,000,000 a year.

But this is not the whole story of the lumber re-sold by five American brokers to English buyers. This leads to one Continued .on page 45

Continued from page 14

of the deepest problems of Great Britain’s commercial ascendancy in the world. Great Britain re-sold much of this lumber to France, to Belgium, to Holland. Some she manufactured into parts of machinery, some into ready-made houses for devastated areas,some she sold in the raw just as she got it from Canada. Each re-sale represented a profit first to the English

broker, second to the continental seller. This is what is meant by Great Britain’s re-export trade. We are accustomed to saying England’s greatness rests on her supremacy on the seas. It does, but only because her merchant ships feed her reexport trade. It is really on England’s re-export trade that her commercial wealth rests. Now supposing Canada got for her lumber exports not the $35 f.o.b., nor the $95 delivered in an English harbor, but the $120, the $135, the $140 for which that lumber is re-laid on the Continent, her exported lumber would net her four times more than it does to-day.

But how is this to be done?

Just as it is done by the big exporters of the United States—through banks representing Canada, through Canada’s fiscal agents in every centre in Europe, through Canada’s own trade commissioners in the leading markets of Europe. Before the war, the United States legations and embassies abroad were beginning to act as fiscal agents for the extension of American commerce. During the war, there was attached to every legation and embassy a special banking trade or commercial expert for the extension of American sales abroad. And the world knows how American foreign commerce did extend.

Does not this imply Canada’s own legations abroad, Canada’s own consular agents, her fiscal scouts? Yes, to be sure it does; and that is what is really at the bottom of Canada’s request for her own legation in the United States. The matter has been held in abeyance pending the functioning of the League of Nations and the settlement of war reparations; but if Canada’s status in that League is to be •• anything more than honorary, if her nationhood won in the war is to be anything more than an empty shell, her own legations and consular and fiscal agents must come just as surely as death and taxes.

Or take bunkering coal!

Coal at Fifty Cents a Ton ' I 'HERE are bituminous mines in Al-*• berta, w'hich by hydraulic mining can produce coal at 50c a ton. They can deliver it at the ship side at $2 to $3.50 a ton, freight to be added to this. For this coal Sweden, Belgium, Italy, Chile, Peru, Argentina, Brazil are glad to pay $36 to $37 a ton. Why does Canada not get this price? Because what she sells under $4 a ton is resold by foreign brokers up to $36 and $37 a ton.

If Canada could get the full returns for her bituminous coals on the world markets, the sky would be the only limit to the wages she could pay her coal miners.

Or take wheat!

At the war prices of $2 plus, Canadian wheat farmers prospered beyond their wildest dreams. I happened to be in Mexico the months immediately after the armistice. Do you know the prices which Mexico was paying for white flour wheats all the way from the Vera Cruz Coast up to Mexico City, wherever there was gold to buy it? Mexico was paying $3.75 to $4 (U.S. currency) a bushel for inferior grades to $7 a bushel for first grades; and her prices for oats were in proportion; for Mexico can never raise either wheat or oats enough for her own needs; and it pays an ocean cargo carrier big profits to carry wheat from either a Canadian Atlantic or Pacific port to Mexico at 5c a bushel.

I am afraid to set down the price at which good butter was selling without a photograph of a meal check to prove I am not a relative of Ananias. South of Tampico and Vera Cruz, you hardly ever see good butter. If you know of what Mexicans make their butter, you will never use that commodity outside the best hotels in the biggest cities. It may be goats’ milk, or it may not. It may be rat lard. White people do not order it unless they know where it comes from. On the menu card, the little square you get on your butter plate is extra 50c a square, or 25c U.S. currency, which would make a pound worth up to $7 or $10. And these conditions practically apply to the most of Latin-America, certainly outside the big cities. I saw cases of condensed milk, for which one used to pay $2 to $3 before the war and $7 during the war, re-sell in Mexico on the Gulf at $45 a case.

Who got the enormous profits? The re-exporters and brokers and middlemen.

And Mexico and certainly all of tropical Latin-America can never raise all they need of wheat, of oats, of hay, of beef, of milk, of butter. Of cheese, she has her own goats’ supply which i^not so bad.

Why isn’t Canada in on these markets,

(with the exception of the West Indies)? Because zhe is now selling through reexporters and has not her own consular and fiscal agents on the spot.

But does Canada buy in large quantities the exports of these countries; so that cargo carriers would not come back empty of freights? Look at the dividends paid by the United Fruit Company if you want to I know. Does Canada consume bananas, oranges, cocoa, coffee, sugar? Do her farmers use binder twine from Yucatan? Do her mills not manufacture cotton?

More Trade Scouts Wanted

YET Canadian products are almost unknown on all these markets except the West Indies. Why? Because the legations of other countries act as trade scouts; and Canada’s exports are largely going through the hands of foreign reexporters.

Or take furs!

I have already dealt with furs in another article; but to repeat in brief:—The fur trade suffered from such abnormal conditions last year as alwaysTring vultures round a boom. The United States is to-day fur crazy. Furs—good furs—are in greater vogue than diamonds; and a free spending nation that once gets a taste for furs will never lose it. The point of saturation in buying may be reached ; for good furs are like diamonds. They last a lifetime. Y ou don’t buy them year after year. True; but new generations are coming on. Children don’t stop growing up; and furs are the most beautiful frame for any face, the child’s, the girl’s, the grown woman’s, the old man’s, the dandy of fashion. The fur demand will always continue when it has been created, though it is to be hoped the summer fur fad will pass; for it is foolish and extravagant.

The boom in furs came with such a rush that prices shot up to the prices paid for rare jewels.

That was a danger signal, for into the game jumped Seventh Avenue gamblers of New York, who knew more about fake oil stocks and gold bricks and boot-legging in grape juice than they did about the intricate, highly technical game of furs. They rushed out on the field from Siberia to Athabasca and bought wildly at fabulous prices “to bust the old companies,” as they boasted; and “the old companies” grinned. They let them buy at fabulous prices good, bad, and indifferent furs.

When the spring sales came on in St. Louis, Montreal and New York, the trade demand was insatiable. Good furs never sold so high; but the poor furs, the unprime furs, didn’t sell at all. To save their faces, the gamblers bid in their own lots; and the banks closed down on them. There was a slump, but not in good furs. Only the poor were dead stock on a “busted” bankrupt market. They will be absorbed, dressed, dyed and ultimately go out to the trade in cheap grades; but the trade demand is as great to-day for good furs as it ever was.

Comes now the reaction on Canada!

The commission buyers of furs in the big cities are standing first on one foot, then on the other. Is marten going to sell at $100 to $200; or go back to $30? Is mink going to sell at $90, or drop to $5? Is otter going to bring $105, or $18 a pelt? Will silver fox stay at its level of $1,000, or drop to $100? Is the muskrat worth $7 a pelt; or 50c to 25c? They have wired the buyers at all remote interior points to hold off the market till they see what the mid-winter sales do; and men, who hunted in the far North all last winter, have had to store their furs at local banks in the nearest settlement and go back without a grub-stake for next year till they see what the spring sales of 1921 do. Either that or sell at slaughter prices. What many have done is store their furs in the bank and abandon the trapping field for a year, to take a high priced job in lumber mills or on rail construction, or to pre-empt a homestead, or go timber cruising.

Some Fur Prognostications TT DOES not need much of a guess to foretell what that will do to next year’s sales. The gamblers are off the field as buyers. Their poor haul bought recklessly at high figures will be off the market as a factor next year; for the banks, who backed them, have squeezed them to a forced sale; and countless trappers have abandoned the field for a year. I write this after having traversed about 1,600 miles of fur trapper’s ground in Northern Alberta and British Columbia, and after having talked

with countless local buyers, who are not buying but storing what they have.

Good furs will sell higher than ever next year. Poor furs will not have a look in at high prices; but good furs will be scarce by the spring of 1922.

Now for the reaction on Canada!

There has never been any known way to compute accurately the value of Canada’s exported furs. Undressed furs—as you know—are not dutiable. Some go to England by post. Some go to St. Louis by express, some to Seattle. There is no way of checking up the values going out; but it is supposed Canada exports from $10,000,000 to $14,000,000 worth of raw furs to the United States alone.

I have given elsewhere the prices at which these furs sell in the United States. The spring sales of 1920 saw good muskrat sell at $4 to $7, AÍ otter at $90 to $100, best marten from $90 up to $345, silver fox from $500 to $1,200, mink from $30 to $90, blue fox and cross fox from $100 to $240, fisher or pekan $145, white fox to $100 plus, timber wolves of a fineness, in black and gray, young and perfect, at $89 up, bear $40 to $89, and the other good furs in proportion. The sale of 1921 dropped 33 to 50 per cent. Now at time of writing I have but recently come from the wilds, where these furs were trapped, Northern British Columbia between the headwaters of the Skeena and the Peace, down the Peace, up the Pacific Coast, at the headwaters of the Athabasca. Here are the prices netted by the trappers locally, before the furs passed through the hands of half a dozen brokers; muskrat not sellable, owing to the slump in sales, though trade demands in 1920 are 7,000,000 against 4,000,000 last year; otter AÍ, $18 to $35; marten best not $20; silver fox being held, no sales; mink $5 up; fox $20 up; fisher $40 up; white fox $20 up; wolves of the rarest beauty I have ever seen—one from Alaska borders-—fine as silver fox, $25 to $35; bear $12 up; and so

One does not need to figure what a cooperative sales agency would do for these trappers or the communities where they bank and outfit. Prince George is a good case to illustrate. Prince George has been waiting for the P.G.E. and Vancouver road to come through for seven years. Seven years are a long time to have money tied up. Yet Prince George in these hard waiting war years has been doing a $750,000 business in furs a year. If the trappers radiating out from Prince George— down the Peace, up to Stuart Lake and Babine—-had been getting the American trade prices for undressed furs, her fur total would easily have been $2,000,000, instead of three-quarters of one million.

What Prince George Missed T VENTURE to say even with the ex-*pense of needing to store the furs for a year and get advances from the banks in the United States on them, it would have paid Prince George to spend $100,000 a year on a co-operative sales agency for her

I could tell the same story of timber and mining lands held under lease at a small cost, which have changed hands among speculators a dozen times since 1907, netting each broker thousands at each turnover; but Canadians did not get the benefit of the turnover, though they will when the lands begin to be producers. Later I shall tell what British Columbia is doing to correct such conditions, and what the other Western Provinces are not doing because they do not control their own natural resources.

The point I make is—we do not want to impede the development of our natural resources by stopping the brokerage activity in our raw resources, but if we had horse sense and enterprise, we would be our own brokers and get out of it all there is in it for Canada. If we were getting our own brokerage profits, we would have more capital to do our own developing.

Whether a co-operative sales agency should be left for private enterprise in each industry—as the Citrus Growers of California handle it—or should be a Government agency—I do not say. That is a matter of opinion ; and I am trying to keep anchored to facts; and the fact is up to the present private enterprise has shown greater efficiency than Government enterprise. It pays in proportion to results. It does not increase taxes. It is not subject to reckless and irresponsible attack. Above all, it is not subject to periodic elections and upheavals; but that is for Canada to work