G. E. JACKSON September 1 1922


G. E. JACKSON September 1 1922




Associate Professor of Political Economy, Toronto University

TYPICAL of the general uncertainty which prevails at present is the weekly budget of rumours from the wheat districts. Wheat has had abundant moisture—wheat has suffered heavily from drought—wheat will yield at least an average of sixteen bushels to the acre—wheat has ripened too fast for proper filling: rumours such as these have been offsetting one another forsome weeks past. Confidence and the lack of it have alternated in the markets.

The course of the retail merchant has been comparatively simple. Depending, as he does in most instances, on the market of a limited area, he had often been able to judge with fair certainty the harvest prospects of his neighbors. In districts whose crops are abundant, he has been stocking fairly heavily; where the local harvest promises a disappointment, he has lived from hand to mouth. Risks of this kind are naturally minimized by the merchant living on the spot.

For the wholesaler, conditions are a good deal different; still more so for the manufacturer. The latter, whether his practice be to make for stock or only for order, must in any case assemble his raw materials—often from long distances— and organize his plant in advance of the demand he satisfies. Unless he is willing to risk “missing his market”, he must make large financial outlays before the demand of the customer is even expressed. Moreover, since the customer’s demand will depend on the customer’s income, itself an indeterminate quantity, there is always a speculative element in these commitments. The whole thing must be made a matter of guesswork; and since the customers of a large manufacturing concern, instead of being concentrated in a single district like those of a country storekeeper, are likely to be scattered all over the country, the guesswork cannot be confined to the crops of a single district, but must be broadly based.

The view put forward in these columns all through the summer has been simple to the point of dulness: that before wholesalers and manufacturers can look forward to sustained prosperity, we must have an agricultural revival; and that such a revival can come about only when abundant crops are sold at remunerative prices. For more than two years the prices of farm products and of manufactures have been out of equilibrium; and just at present the forces making for a new stable equilibrium seem to have been arrested.

Despite the maze of rumour, there is a growing assurance that wheat will be more plentiful than last year. The latest estimate to hand at the time of writing foresees an American crop some 10,000,000 bushels larger than that of 1921; and a Canadian crop nearly 40,000,000bushels in excess of the quantity harvested here twelve months ago. Thus, the North American Continent as a whole promises to yield about 50,000,000 bushels more wheat this season than last; and even if present estimates should be revised a long way downward, the forecast of an increased supply can be made with a very large margin for error.

If conditions in the markets were as hopeful as conditions on the farm, there would indeed be solid foundations for confidence. But there is little prospect that wheat will be sold for more thanitfetched last year, and more than a possibility that the bulk of it will be sold for less. In August, 1921, the mean Winnipeg price for No. 1. Manitoba Northern was almost exactly $1.80; as these pages goto press its range is between $1.25 and $1.30— some 50c, less. When the crops began to move in the fall of last year, the spot

price sank to an average of $1.16 in October, and $1.13 in December. A similar seasonal decline from the present prices would result in the sale of most of the present crop at a very low level; and though the movement in 1921 was quite abnormal, the trend of prices at this season of the year is almost always downward.

British Buyer Forehanded

IT SHOULD be noted in this connection that the British buyer has been more than usually forehanded. The figures that follow (which are taken from the London Economist) represent in English hundredweights of 112 lbs. the total quantities of wheat and flour received at British ports during the first six months of 1920, 1921, and 1922 respectively:—

British Imports of Wheat and Flour.

Jan. June, 1920 82,200,000 cwts.

Jan. June, 1921 75,600,000 cwts.

Jan. June, 1922 85,600,000 cwts.

We have no means at present of knowing how deficient the British harvest is likely to be; but in all likelihood it has already been more than made up by these large imports.

Even if No. 1 Northern should eventually sell down to $1.10 or less, it is, of course, reasonably certain (unless there is another catastrophic slump) that the Canadian wheat crop as a whole will be worth more money this year than last. On the other hand, anyone who makes his plans in expectation that farmers generally will be buying goods on the same scale as in a normal year, runs the risk of an expensive disappointment. Nothing less than a world-wide shortage, coupled with abundant crops in Canada, could have produced a sudden recovery; although, financially, the skies are bright, industrially, despite recent gains, the depression is not yet at an end.

Meantime (since trade depression affects different people in very different ways) it is worth our while, perhaps, to put the question, How far have the crises of 1920-22, and the subsequent stagnation, curtailed production in this country?

The first impression gained from any set of industrial statistics is inevitably disappointing. Price is the simplest common term to which pig-iron and automobiles, boots and shoes and breakfast goods and the thousand and one other products of Canadian enterprise can be reduced. Generally, therefore, dollar values are quoted rather than the physical volume of production, and these are likely to mislead. Indeed, in a time of quickly falling prices, a tremendous drop in the dollar valuation of goods produced might conceivably hide an actual increase in production. Such a contrast between falling values and increasing volume of production occurred in the building industry during 1921, when (according to Maclean Building Reports, Ltd.) a decline of $24,000,000, or 27%, in the dollar values of new building, as compared with 1920, was accompanied by an actual increase in building output of 2%. Though the facts are not always accessible, the same thing may have occurred in more industries than one.

Little less misleading is the first impression gained from the perusal of employment figures. Of every 100 people who were employed in Canada in the summer of 1920, it is probable that not more than 85 are employed at the present time. Of the remainder, some have returned to the countries of Europe from which they have drifted into

thte United States, and many remain in Canada without employment. If output per man could be regarded as at all uniform, we should be tempted to conclude that the troubles of the last few years have entailed production in Canada by something like 15%. Actually, we cannot even for short periods of time regard output per man as approaching uniformity.

Even if (as I suspect) it is quite apocryphal, a story which dates from the fall of 1920 provides an apt illustration of this. A large manufacturing concern in Eastern Canada was faced with an alarming falling-off in sales. Unsold stocks were accumulating fast; for—so the management believed—the firm had been producing to capacity. With a view to curtailing output, 500 workers were discharged. Within a short time the plant was producing in greater quantities with the diminished number of workers, than it had been doing with a full staff. The Working force was again diminished: 500 more workers were laid off: and production reached a new high level. How the firm subsequently met the problem history does not record.

Three factors are at work in a trade depression, which tend to raise output per worker, while the working force diminishes |1) In the closing stages of a trade boom, when numbers of quite stupid people are making “easy money”, many businesses spring up like mushrooms, which are incapably managed and have little prospect pf survival. Even old established firms diend to develop easy-going ways. In the hard times which follow, the badly managed business goes to the wall. The wellestablished business is pruned and trimmed. Weak executives are demoted or discharged. There is a general tightening of control: and the working force is generally better handled. (2) The workers Selected for discharge are, as a rule, the less efficient. As these are weeded out there is a natural increase in average efficiency. (3) This is apt to be raised still further since the workers who retain their jobs, faced with the risk of discharge, are likely to work their hardest. During a period of prosperity, when there is little risk of unemployment, the temptation is felt in all walks of life to take life easily. Never was this more evident than in the two years following the war, when everyone relaxed. Nature never fails with her corrective; a spell of hard times is a brutal but effective goad.

Measuring Production

HAVE we then no means of measuring variations in the physical volume of production during recent years? Estimates have from time to time been made in various Universities—none of them, as yet, complete or accurate. But if there is no place in which these variations are recorded for us, our statistics of exports and imports are an indirect means of arriving at what we want to know.

Mr. Gladstone, in his prime as Chancellor, used always to say that he regarded the variations in a country’s imports as the best index of variations in its wellbeing—for the simple reason that variations in its imports represent variations in its purchasing power abroad. (If, instead of budgeting at Westminster, Mr. Gladstone had gained his experience in a young country, he might have added that variations in its imports also represent variations in its power to borrow,). Large imports are in any case closely connected with brisk business, and a large home production; small'imports, with poor business and struggling domestic industries. Exports, which fluctuate less in accordance with domestic changes than with changes in the purchasing power of other countries, are also an obvious index (within closely-defined limits) of changes in the physical volume of production.

Most people (wrongly, I believe) regard export returns as the more important. Neither, of course, can safely be neglected.

The calculation of variations in the physical volume of trade is by no means difficult. We need only to combine the statistics of exports and imports, published by the Department of Trade and Commerce at Ottawa, with the statistics of export and import prices, published by the Canadian Bank of Commerce. In the table shown below the trade of Canada has been analyzed by calendar (not fiscal) years. The quotation of exports and imports for each year in terms of the prices of 1913, makes it possible readily to compare variations in physical volume from year to year. The physical volume of the total external trade of Canada for each year in the series is stated on the right as a percentage of that of 1913.

The most noteworthy features are easily summed up. The volume of imports has never been as great since 1913, as it was in that year. Even in the banner year 1920, when the tremendous sum of $1,337,000,000 was spent on imports,

their quantity was less by 15% than in the last of the pre-war years. On the other hand, the shrinkage of $538,000,000 in the sum spent on imports in 1921, represents a falling off in volume of not more than 7 %.

The change in the volume of exports was altogether different. The previous high level of 1913 was exceeded in 1915; and in 1917, the year of her greatest war effort, Canada nearly doubled her 1913 record. There was a great falling off in 1918. Prices were higher in 1919, but quantities almost identical. The declared value of exports in 1920 showed an increase of $8,000,000 from the year before; but this concealed a reduction in the volume of exports, extraordinary in a year which saw the climax of a trade boom of no less than 13%. Exports declined like imports in 1921; and (in the same degree) by 7%.

In view of the fact the physical volume of exports and of imports fell in the last year of the series at an identical rate, we shall probably not be far wrong in concluding that the volume of production generally declined to much the same extent. At a time when the collapse of prices, and the continuance of widespread unemployment are alike discouraging, it is reassuring to reflect that the reduction in the current income of the nation has been comparatively small.


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