National Stock-taking Finds Business World Optimistic
BUSINESS & INVESTMENTS
J. HERBERT HODGINS
IT IS time for a national stock-taking again.
If New Year’s day serves no other particular purpose, it may, at least, be turned to good effect in reviewing our national, as well as our individual, position.
In other words, what have we accomplished in 1926, and what may we look forward to for 1927?
A year ago, at this time, we found the thinking, well versed, Canadian business man full of confidence for the incoming 1926. Perhaps we are incorrigible optimists, we Canadians. Youth is invariably optimistic. The fact is, that in spite of setbacks of past years we still have the ability to rise above passing discouragements and to look forward buoyantly.
However, no Canadian who knows them with any degree of accuracy will class those executive heads of the Bank of Montreal, Sir Vincent Meredith, Bart., the president, and Sir Frederick WilliamsTaylor, the general manager, as dangerous optimists. In fact, time was when certain Canadians were prone to rank at least one of these two distinguished bankers as the Dean Inge of Canadian finance. But what were once regarded as gloomy forebodings, have now come to be recognized as sound, economic caution, and, having ridden past some of the dangerous shoals, at least, whiqh threatened to perturb business, we now can look backward and count this season of caution as an entirely reasonable corrective. In other words, the medicine, bitter as it was at the time, has remedied the ill—at least to a measurable extent.
And at this time, as we are about to enter another year, we find Sir Vincent Meredith, Bart., summing up his business conviction with, “I believe the underlying conditions are sound and that the future can be viewed with confidence.”
Another pleasant bit of reading comes from the economist of the New York Trust Co., who makes the statement, “Continuing the progress noticeable in 1925, Canada, so far, this year, (1926) has given evidence of its generally increasing prosperity.”
With a background of enlarging business, Canadian business men confidently bid good-bye to a passing year and enter into a new twelve month in a spirit even
more hopeful than was theirs twelve months ago.
When all is said and done, in the main, 1926 was a bountiful year for Canada— bountiful that is in the economic sense, by reason of an abundant crop, a crop which, perhaps,was not equal to that of the previous year, but still so substantially large that the out-turn from agriculture alone will be but slightly under the previous year’s figures. In all other departments of our economic life, we have gone forward.
What are some of the straws by which the winds that blow may point to our increasing progress?
An estimate for The Finavcial Post Survey, 1927, shows gross revenue of Canadian productive industries to be $5,656,241,624 for 1926. This represents an increase in the purchasing power of Canadian people $50,000,000 greater than in 1925.
Agriculture shows a lower revenue, the decline being less than $30,000,000, however, which is to be regarded as highly satisfactory in the face of the spotty results in many groups of products. Forestry revenue shows a slight decline, the immense gains in the pulp and paper industry being more than offset by declining lumber production. Every other line of activity in Canada shows gains.
Improvement in purchasing power is concentrated in six provinces, three provinces, Ontario, Quebec and Alberta, showing slight declines in revenues.
Actual improvement in the physical volume of production in Canada is greater than the figures indicate as the price level has been lower this year than last.
Summary of the figures prepared for The Survey, below, with comparisons over a term of four years.
All is not disappointment because our cereal crop is down. The wheat crop of the West may be less for 1926 than it was for 1925. It may have suffered in grade, because of unfavorable weather conditions at harvest time. But the fact remains, as Mr. Peleg Howland, president of the Imperial Bank of Canada, stressed the other day, “that the returns for the western farmer will be good, and that owing to the reduction in his debt from the proceeds of the previous crop, he will
GROSS REVENUE BY PROVINCES Province 1923 1924 1925 1926 Prince Edward Island $ 22,692,692 $ 24,675,000 $ 25,200,000 $ 30,023,980 Nova Scotia ....... 169 069,112 166.000,000 175,000,000 181,004,610 New Brunswick 128,569,024 124.050.000 131.500.000 136,254,660 Quebec ............................ ■ 1,239,158,892 1,250,000,000 1.320.000. 000 1,310.337,040 Ontario 2 187,229,479 2,350,565,000 2.425.000. 000 2,400,092 606 Manitoba ...... 202,478,428 280.750.000 295.750.000 323,598,388 Saskatchewan . .. 336.458,857 424.500.000 451.500.000 499,289,976 Alberta ....... 301,105,188 373.873.000 398.873.000 361,414,710 British Columbia 351,697,803 352.700.000 371,140,237 408,897,996 5,503,853 5,650.000 5,950,000 5,237,658 Total $4,946,900,333 $5,352,763,000 $5,599,913,237 $5,656,241,624
GROSS REVENUE BY INDUSTRIES Industry 1923 1924 1925 1926 Agriculture ....................... $1,350,156,000 $1,453.368,000 $1,708,567,000 1,677,520,360 Forestry 426,696,350 426.000. 000 456,000,000 450.000. 000 Fishing ...... 42,565,545 44.534.000 50,500,000 54,781.000 Trapping ..... 16,164,559 15.786.000 15.000. 000 15.618.600 Mining ...... 214,079,331 209,516,000 224,846,237 237,921,164 Electric power 91,141,296 94.560.000 95.000. 000 98,600,500 Construction 324,745,798 325.000. 000 350,700,000 370.000. 000 Manufactures . 2,481,351,554 2,695,053,582 2,700,000,000 1,751,800.000 Total revenue ..................... $4,946,900,333 $5,263,817,582 $5,599,913,237 $5,656,241,624
hâve more money to spare than for some time past.”
After all, our agrarian spending power is the thing that counts in this country. It is good to know that the farming community is sufficiently rehabilitated that it can now buy with its crop proceeds the things which make for convenience and comfort in rural life. It is good to know this, not only because it enriches rural Canada, but because it makes for the further progress of Canadian enterprise.
A Survey of Achievement
JUST what have we accomplished in the past year to give us further national prosperity?
For one thing, there is our international trade. Donald M. Marvin, economist of the Royal Bank of Canada, makes this statement: “The relative importance of foreign trade in the commercial life of Canada is far greater than it plays in most countries.” There is no doubt that considerable argument can be brought forward to support Mr. Marvin. For one thing, for a country of such vast potentialities, yet small population, as Canada, to prosper, it is vital that we secure an outlet for the goods that we produce.
In the twelve months ending September 30, 1926, the value of Canada’s foreign trade amounted to $2,300,000, or more than $250 per capita, as compared with a foreign trade of less than $150 per capita for the United Kingdom, and less than $100 per capita in the United States. The Royal Bank of Canada Review points but: “World trade has not yet Tecovered to a point where it has surpassed the volume of 1913, and it will be some years before it catches up with the normal growth which might have been expected in these intervening years, but Canadian external trade now has a value in terms of pre-war prices at least 25 per cent, ahead of that for 1913, and the dollar value of the present trade is nearly double that of 1913. Changes in price levels make necessary this double statement of the change. In 1900 Canada’s loreign trade amounted to $64 per capita; in 1913, $136; in 1922, $166; in 1923, $191; in 1924, $210; and in 1926, $250. The rate of the recovery and expansion of Canadian external commerce has far surpassed the rate of general Tecovery and this movement suggests that the further stabilization of Europe will bring further demand for Canadian goods.”
Business in many departments has contributed to the country’s general prosperity throughout the past year, or, as Sir Vincent Meredith, Bart., has said, “A broad survey of trade conditions in the year under review, finds much to hearten and little to discourage.” Confidence finds ample, practical demonstration in an increased capital investment. This expresses itself in a further development of our natural resources and to a lesser extent in an expansion of our pulp and paper industry, the aggression in our mineral development and the fuller harnessing of our water powers.
Probably, the growth of our pulp and paper industry is the most remarkable, and certainly it has produced large profits. In a ten year period, Canada’s exports of wood, wood products, and paper, increased from $83,000,000 to $278,000,000. The consumption of newsprint in the United States exceeds 3,000,000 tons annually. Canada supplies more than half of this amount. Within the coming twelve months, Canadian mills, now advancing to completion, will add approximately 450,000 tons a year to the present output. Obviously, unless the present rate of consumption expands, our newsprint manufacturers will be confronted with The possibility of a surplus in the market at no distant date.
In our hydro development the most outstanding effort is that being undertaken by the Aluminum Company of America on the Saguenay. This is an
undertaking of more than local interest. The completed plans provide for a total of 1,100,000 horse power, or approximately 50 per cent more than is available at Niagara for Canada. The creation of this new industrial centre, clearly, will add substantially to the Province of Quebec, if not indeed enhance the prestige of the whole of Canada.
Canada is making rapid and enormous strides in the opening up of our great mineral resources. In 1913, for instance, the mineral production in this country was $145,000,000. By 1925, the annual production had gained 57 per cent, at $228,000,000 and the possibilities are for still greater production for the year just closed. Canada will soon rank second among the world’s gold producers.
But with all this remarkable development in our national wealth of recent years, probably the finest thought which we can bear in mind with regard to the longer future, is as Sir Vincent Meredith has pointed out, that “no limit can reasonably be put upon their progression.” At the earliest, any apprehension which we might reasonably entertain with regard to Canada’s pulp and paper resources, or as to Canada’s mineral resources, must be removed far into the future.
Resourses and Responsibilities
THOSE assets, which we continued to accumulate in 1926, unquestionably make a fine carry-over into 1927. At the same time, it would be unwise to overlook some of the concomitant liabilities—or if not actual liabilities, at least responsibilities.
To begin with, we have a newly elected Government at Ottawa, and it more or less remains for the newly convened parliament to determine the possible reactions of this new administration upon business generally. At least, it may be accepted that the political situation has cleared. There are not the same uncertainties which existed a year ago at this time. Then, it will be recalled, we had a Government in power under uncertain circumstances and the result was very much as anticipated, general unsettlement throughout the country. However, the Government has gone back to power in the meantime with a fresh mandate from the country. More firmly ensconced, it should proceed to restore confidence to business.
Taxation has been the great bugbear of business throughout the post-war years. Finance Minister Robb, gave us a certain ^measure of reliëf in the past year by paring down the income tax. His first step in this direction was perfectly sound and so popular that many individuals have been disposed to regard his Budget decision in this respect as contributing in no small measure to his government’s return to power at Ottawa. As the year closed there were hints of further tax reductions in the offing. Both the Toronto Globe and the Toronto Daily Star gave significant indication of the Hon. Mr. Robb’s possible decision. It was forecast that he would aim to lop off another $20,000,000 from the income tax impost.
If you have any doubt as to the possible effect of tax reduction upon the country as a whole, just stop and consider for a moment the extent to which the past year’s clipping of the income tax has increased your own personal spending power. The general manager of the Imperial Bank of Canada, speaking at the fifty-second annual meeting of the shareholders expressed the hope that the Honorable Minister of Finance in considering further reductions in taxation for his 1927 budget, “will give some consideration to capital.”
“To my mind,” said Mr. Phipps, “incentive for gain is the stimulus to all business, and consequently vital to the prosperity of the country. When taxation presses too heavily on capital, those who possess it may naturally be expected to
be slow to risk it in business ventures, which, if successful, will, instead of enriching them, merely bring profits which will be swept away by the tax gatherer. On the other hand, if a disposition is shown to deal fairly with capital in the matter of taxes on profits and income, effort will be stimulated and millions of dollars perhaps now invested in tax free bonds and such like, will again seek employment in other channels which seem to afford a greater opportunity for gain, and, what is equally important, men of business capacity and large ideas, who may now be indifferent, will devote themselves energetically to the promotion of business activities, which cannot fail to bring about better markets for labor and the products of the agriculturists, the lumberman, the manufacturer, etc., which means greater prosperity for the whole community, and which cannot in the end fail to attract desirable immigrants to our shores. It is a thought worthy of consideration.”
There can be no doubting Mr. Phipps’ contention. It has been demonstrated wholly and abundantly in the United States, as I pointed out in my article in the December 15th issue of MacLean’s Magazine, which set forth the results of tax reduction in the United States.
Other standing problems of business interest which carry forward into the New Year have regard to immigration of people, immigration of capital, and the annually recurring problem of a government-owned railway. “This is the opportune moment for Canada to make a supreme immigration effort,” according to President Beatty of the C.P.R. This statement from an executive of an organization that represents the largest single investment in the future of Canada, is not to be regarded lightly. “Canada is still lukewarm on immigration,” according to The Financial Post, which, however, is convinced that “this is indeed the golden moment to be seized in immigration, and we should not let it slip by carelessly, indifferent to our own needs and our world responsibilities.” The Financial Post does not attempt to blame the Government for indifference on the subject of immigration, but rather the people. As it points out, “It is not surprising that the Government should be playing with the immigration issue, since they cannot move ahead of public opinion and public opinion is only mildly interested in and perhaps even antagonistic to increased immigration activity and expenditure.”
As to immigration of capital: “From a purely material point of view,” says Sir Frederick Williams-Taylor, “it makes no difference whether the capital that develops our resources comes from the United States or elsewhere, but I shall not be misunderstood if I say that for Empire reasons, which are more than merely sentimental, Canada as a whole would heartily welcome a greater influx of British capital. One of the many misfortunes which Britain and the Empire have had to face as a result of the war has been the curtailment in the Motherland of exportable capital. This condition will gradually improve, and although the lower interest rates now current in the United States preclude for the present the floating of Canadian public loans in London, this condition is not altogether applicable to money borrowed for private enterprise.”
Whether a government-owned railway is business or politics is just a little difficult to determine. Suffice it to say that Sir Henry Thornton has made vast progress with the C.N.R. There will be no quibbling over the fact, however, that the" C.N.R. surpluses come at a time of general upturn, and car loadings, as the Imperial Bank president has stressed, are one of the important industries which indicate the existence of better business. The combined gross earnings of C.P.R. and C.N.R. for the twelve months ending September follow: 1924, $296,000,000; 1925, $289,000,000; 1926, $322,000,000, or
an increase this year over last year ^f ten per cent.
These, then, are some of the high spots in business as Canada experienced them in 1926. There are problems ahead for 1927—there are always problems ahead.
If we did not have problems to solve, we . would make no certain progress. And it is in the extent of their solution that we measure our nation-building.
Let this serve as encouragement to enter another year: Those who give
serious thought to our business problems, \ and those who are versed by practice and precept to be our guides, reflect in their views—confidence, confidence, and more confidence.