The Election Issues As I See Them

An article by the present Prime Minister of Canada defining the policies on which he, as leader of the Liberal party, is seeking reelection to office

RT. HON. W. L. MACKENZIE KING July 15 1930

The Election Issues As I See Them

An article by the present Prime Minister of Canada defining the policies on which he, as leader of the Liberal party, is seeking reelection to office

RT. HON. W. L. MACKENZIE KING July 15 1930

ON JULY 28 of this year the people of Canada will be asked to decide the policies and administration which are to guide the destinies of the Dominion during the next five years. It is not a question to be lightly answered. It is the privilege, and indeed the duty, of Canadian citizens to examine carefully the views presented by those who seek their confidence, and to record their votes freely and honestly in support of those policies which they believe are designed to serve the best interests of our country.

There are three outstanding issues in the present campaign. The first is the record of the Government in the discharge of its public duties since it first assumed office. The second is the budget of 1930, representing as it does the views of the present administration on important questions of fiscal and trade policy. The third is the direct issue of a choice between the Liberal and Conservative parties as the representatives of Canadian opinion at the Imperial and Economic Conferences which are to be held in London in September of the present year. This last issue is necessarily related to the question of the personnel of the Ministry which is to manage the affairs of our country during the ensuing term of Parliament. The Liberal Ministry is known; its record is clear; its qualifications have been determined by administrative experience. It is for Mr. Bennett to advise the country of the names of those whom he intends to take into his Cabinet, should his Party be successful at the polls. The representation of Canada at the forthcoming conferences in London should not be left to uncertainty or conjecture.

The Government’s Record

THE record of the present Liberal Administration is an open book, which he who runs may read. It is required of good stewards that they be found faithful. The financial record of the last Conservative Administration was such that the Canadian people demanded new stewards of the national estate. When the Liberal Government assumed office in December, 1921, the Dominion was staggering under a load of debt, which was increasing by leaps and bounds, through the wasteful extravagance of the Conservative Administration of that day. The net debt of Canada at March 31, 1922, was $2,427,296,798. During the last two years of the Conservative Government there was added to the debt of Canada the vast sum of $174,000,000. This was not during the war, or during the active period of demobilization, but in the years 1920 and 1921, before the first Liberal budget was brought down. It became the first duty of the Liberal Administration to check the growing deficits, cut down wasteful extravagance, and through economical management to reduce, if possible, the tremendous national mortgage which was a joint legacy of the war and of the extravagance of the Government which was in power until 1921.

The present Government has not forgotten the trust reposed in it by the Canadian people. Wasteful administration has been cut down. Extravagance has been replaced by economy. A record of financial stewardship has been inaugurated which has converted deficits into surpluses, has reduced the net debt out of surplus revenues by the enormous sum of $273,000,000, and in recent years has made possible a progressive reduction of taxes. On March 31, 1923, the average family of five persons owed, as its share of the net debt of the Dominion, the sum of $1,358.95. On March 31, 1930, this amount had been reduced to $1,097.55. This is a record of debt reduction unequalled by any country which participated in the war from its commencement.

Debt Reduction

NOT only has the national debt been steadily reduced, but expenditures have been kept down to the minimum consistent with efficient administration. Despite a period of unparalleled prosperity during the past five years, the Government has kept national expenditures within prudent limits and has thus set an example of thrift and economy for the country at large. If the test of efficient government is to be found in the manner in which public money has been expended, the present Government is prepared to meet such a test with the utmost confidence.

In 1914, when the Conservatives were in office, prior to the war, the total expenditures were $186,241,048, In the fiscal year ending March 31, 1930, the estimated expenditures were $376,929,000, or slightly more than double the 1914 figures. Account must be taken, however, of the expenditures attributable to the war, and these, as furnished by the Minister of Finance, amounted during the last fiscal year to $158,803,000. In other words, almost forty per cent of the total expenditures of the Government in the last fiscal year was directly attributable to the war. When this amount is deducted from the total, it will be found that the total expenditures of Canada today are very little more than in 1914, and this notwithstanding the great increase in the population of the country from 1914 to the present time, and notwithstanding the fact that the value of the dollar today is only two-thirds of what it was in 1914.

If any further evidence were needed of the economical expenditures of the Government under the Liberal Administration, it is afforded by a comparison between the expenditures of the provincial governments and the Dominion Government during the same period. From 1914 to 1928 the ordinary expenditures of the provincial governments of Canada increased by 186 per cent. This increase took place in spite of the fact that the Dominion Government has borne the whole of the direct obligations arising out of the war. During the same period, if the war obligations are included in the Dominion expenditures, the increase of the Dominion Government was only ninety-six per cent. So much for the financial record of the Government.

In the normal course of events a country pays off its national debt by increasing taxation. The present Government did not shrink from this necessity when it first assumed office, for it was determined, above all else, to convert the deficits into surpluses with the least possible delay. Within a short time, however, it succeeded in its object, and with the growing prosperity of the country in subsequent years it has been able to carry out a programme of progressive reduction of taxes.

There is not space to deal in detail with the main important reductions which have been made since 1924. It must suffice to say that with regard to the income tax a reduction from four per cent to two per cent was effected in 1926; and at the same time the exemption limit was raised from $2,000 to $3,000, in the case of married persons or those with dependents, and from $1,000 to $1,500 in the case of other persons. This was followed by a further reduction of ten per cent of the 1926 rates in 1927 and again in 1928. In the latter year, the corporation income tax was also reduced to eight per cent on incomes in excess of $2,000, and in the last budget provision was made for the exemption from income tax of bona fide companies and associations, while the exemption in the case of those supporting dependents was enlarged to include dependent parents, grandparents, brothers, sisters, sons and daughters incapable of self-support owing to mental or physical infirmity. At the same time a generous provision was made with respect to exemption on account of donations to charitable institutions.

The sales tax has also been progressively reduced, from the time that the Government was able to show a surplus instead of a deficit in the national accounts, until it is now one per cent, as compared with three per cent when we assumed office. Moreover it is now no longer pyramided as was formerly the case, and a considerable class of commodities has been removed from its operation.

Letter postage in Canada has been reduced from three cents to two cents and penny postage has been re-established from Canada to the other parts of the British Empire.

As a result of the reduction of taxes by the present Government since it assumed office, it is estimated that the remission of revenue, which would otherwise have been collected, now amounts to the total of approximately $116,000,000 a year.

One further word must be added in dealing with the record of the Government. Under the guidance of policies initiated and administered under the Liberal regime, Canada has enjoyed a period of unprecedented prosperity which is so generally acknowledged by competent observers that it no longer stands in need of statistical confirmation. To quote Sir Charles Gordon, president of the Bank of Montreal, at the meeting of the shareholders in December, 1929: “It should be kept in mind that there have been five years of almost uninterrupted expansion. In that brief period Canada has achieved a degree of development quite unprecedented; not in one or two directions, but practically in all, remarkable progress has occurred—in agriculture, in mining, in many lines of manufacturing, forestry, water power, production, and building construction.”

Liberal Policies, Past and Present

IN DEALING with the policies of the Liberal Party and more particularly with the budget of 1930, I wish first of all to emphasize a certain point of view from which these issues ought to be approached and considered. Political philosophers of ancient times very wisely made a distinction between laws and constitutions which were ideally the best and those which were the best as applied to particular circumstances of time and place. In other words, it is the privilege of philosophers to propose abstract laws for the mythical inhabitants of a Utopian state. It is the business of government to deal with the realities of a given situation.

Keeping this central fact in mind, it should be pointed out in the second place that the economic situation of a country is not static but dynamic. It changes from year to year and from decade to decade. As Lowell expressed it:

“The world advances, and in time outgrows

The laws that in our fathers’ time seemed best.”

Since the beginning of the present century we have witnessed a transformation of the Dominion which has called not only for a new outlook on world affairs, but for new economic policies to meet the requirements of a nation which resembles in few respects the Canada which adopted the National Policy of 1878. In 1878, and to some extent for the next two decades, it was possible for the alleged benefits of protection, namely, increased employment and convenient markets for farmers, to be distributed with a fair degree of equality among the closely knit communities represented by Central Canada and the Maritime Provinces. But with the rapid development of Western Canada and the emergence of a great agricultural population engaged in the production of a commodity which must seek its markets throughout the world, high protection, or an all-round increase in the tariff, could no longer be called a national policy. According to figures given in the Canada Year Book of 1929, over eighty per cent of Canadian manufacturing is concentrated in the two Provinces of Ontario and Quebec. This percentage is based on figures of production, capital employed, and number of employees. While it is true that manufacturing has developed to a considerable extent in Western Canada, these manufactures are based largely upon the primary industries of agriculture and mining and do not require a tariff protection to any considerable extent. It is, therefore, true to say that a general increase in the tariff in 1930 is essentially a sectional policy so far as the distribution of its benefits is concerned. It has forfeited every right to the name—National Policy—given to it by Sir John Macdonald in 1878 and by Mr. Bennett in 1930.

But if high protection is a sectional policy in the distribution of its benefits, it is equally true that having regard to the present industrial development of Central Canada a free trade policy would he detrimental in its immediate effects to one section of the Dominion, even though it conferred benefits on those of our citizens who are obliged to seek markets abroad for their agricultural produce and who derive no advantage from a protective tariff.

It is apparent, therefore, that both a high tariff and free trade are sectional policies when applied to the existing conditions in Canada. What, then, is the answer? The answer given by the Liberal Party is moderation and compromise. Face the facts of our situation. Take Canada as it is, with its changing needs and its conflicting interests. Acknowledge the facts of geography and of divergent industrial development in east, and centre, and west. And having examined the realities of the situation, and having considered the demands of different sections for policies suited to their needs, so mold our social, fiscal and transportation policies as to hold the scales evenly between class and creed and section and thus weld a far-flung country into a united Canadian nation. Such a policy and such an attitude are not new to the Liberal Party. It was the motive of Laurier in his efforts to heal the discord of race and creed. It was the motive of Fielding in his long series of budgets, beginning in 1897. I find it expressed in one of his last speeches in the House of Commons on June 12, 1922:

“All political matters are essentially matters of compromise in some degree, and so long as the compromise is not one of principle there is no reason why men should not compromise, because it is only by a policy of that nature that governments can ever be carried on. We are apt, each of us in our own part of the country, to look at things from a sectional point of view and that is unavoidable . . . As we meet together in the contact of mind and mind we discover that we are able to take broader views.”

This, then, is the issue presented by the Liberal Party. The budget of 1930, the legislation implementing the recommendations of the Commission on Maritime Claims, the transfer of the natural resources to Western Canada, the return of the railway lands and Peace River block to British Columbia, the Hudson Bay Railway, the West Indies Treaty for the eastern provinces, and the Australian Treaty for British Columbia—each and all of these represent an attempt to meet the realities of the political and economic situation which confronts Canada today.

Time does not permit a discussion of each policy in its relation to the interests of a particular section of our country. I shall content myself with setting out briefly the essential features of the budget which was announced by Mr. Dunning in the House of Commons on May 1, and which will doubtless be the outstanding issue of the present campaign.

The 1930 Budget

THE budget of 1930 was framed first of all to meet a situation in Canada arising from the requirements of different sections and economic classes for policies suited to their needs. But because of the place which Canada has come to occupy in international trade, it was influenced also and in a special degree by our relation with two countries with which we are most closely associated in matters of commerce. The one is Great Britain. The other is the United States.

Since Mr. Hoover assumed office as President of the United States on March 11, 1929, the United States Congress has been carrying out a far-reaching revision of the tariff in conformity with the pledges given by the Republican Party during the presidential campaign of the previous year. As that revision proceeded, it became increasingly apparent that the duties against Canadian agricultural products would be raised to such an extent as to cut off a considerable proportion of the existing Canadian exports to that country. In these circumstances, and in accordance with its policy of using every endeavor to find wider markets for Canadian products, the Government gave instructions to the Tariff Advisory Board to make a careful survey of the tariff schedules then applying against American imports, with a view to determining to what extent these imports could be purchased from Great Britain or from other parts of the British Empire.

While this enquiry was proceeding, it was announced that an Imperial Economic Conference would be held in London in September, 1930, to consider the subject of closer co-operation in matters of trade between the various parts of the Empire and to discuss the various policies which would contribute toward that end. At the same time, a condition developed in Great Britain which led to a marked curtailment of purchases of Canadian wheat and resulted in a serious tie-up of our wheat in elevators, with consequent loss not only to Canadian growers, but to our transportation systems and to many branches of our industry and commerce. Prior to this development, Great Britain had purchased far more goods from Canada, largely because of our wheat exports, than Canada had purchased from Great Britain. It became apparent that if Canada was to maintain a British market for Canadian wheat, it was desirable that measures should be taken to increase British imports to Canada and thus create an economic and psychological condition in Great Britain more favorable to the importation of Canadian wheat. These circumstances must be kept clearly in mind when examining the proposals in the budget presented to the House of Commons on May 1.

The budget of 1930 is the response of the present Government to a combination of internal and external factors in our economic situation. It contains four main proposals, each of them designed to assist the great underlying purpose of assuring a continuance of prosperity in Canada and of widening as far as possible the boundaries of our foreign trade.

1. The iron and steel tariff revision.

2. Countervailing duties.

3. The fruit and vegetable tariff revision.

4. Extension of the British preference.

The Iron and Steel Tariff Revision

THE revision of the iron and steel tariff schedules has been based upon investigations of the Tariff Advisory Board which have been conducted over a period of several years. Never in the history of Canada has there been so complete and exhaustive an enquiry into the relation of the tariff to one of our great basic industries. The purpose kept in mind by the Government in prosecuting this enquiry, and later in bringing about a revision of the iron and steel schedules, was the double one of promoting a greater efficiency and productivity in the Canadian iron and steel industry, and at the same time of diverting a large proportion of our necessary imports of iron and steel products from the United States to Great Britain. This, in turn, was in conformity with the announced intention of the Government to facilitate trade with those countries which are willing to trade with Canada on equal terms. This is not a new policy. As Leader of the Government, I gave particular point to it at Winnipeg on November 1, 1929, in the following words:

“The people of Canada may rely upon the present administration taking care of Canadian trade in the future as we have taken care of it in the past. They may rely upon the Canadian tariff being made to serve Canadian interests. The Government is fully prepared, in the interests of Canada, to readjust its fiscal policy from time to time to meet any changes in existing fiscal structures which may affect our markets. If the United States or any other country does not want to trade with Canada except on unequal terms, then surely we can look as never before to the rest of the world and particularly to the rest of the British Empire.”

The next feature of the budget, namely, the countervailing duties, is designed to give a practical illustration to the United States of the desire of Canada to trade at all times on fair and equal terms. The present Administration has watched the revision of the American tariff with the greatest interest, and regrets exceedingly that in respect of a considerable range of commodities the tariff duties have been raised against the importation of Canadian products. The wisdom of this policy, however, is for the United States to decide for itself. We, on our part, through the countervailing duties on a selected list of commodities, which are the subject of exchange between Canada and the United States, announce our intention of trading with those who are equally prepared to trade with us. For the present we raise the duties on these selected commodities to the level applied against Canadian exports of the same commodities by other countries, but at the same time we tell our neighbor frankly and sincerely that we are ready in the future, as we have been in the past, to consider trade on a reciprocal basis. On this point there can be no misunderstanding of our attitude. Friendly, not hostile, trade relations with the United States have always been a primary concern of the present administration. This is a sound neighborly attitude. But we are resolved, in the interests of the Canadian people, that our commercial relations must not be one-sided, but conducive to our mutual advantage.

The Tariff on Fruit and Vegetables

IN REVISING the customs tariff on fruits and vegetables, the Government has had before it the evidence presented to the Tariff Advisory Board on several occasions by those who were primarily interested in this important branch of our agricultural production. There has been for many years a tariff schedule imposing duties on the importation of fruits and vegetables. It was represented to us, however, that the existing scale of duties permitted an unreasonable competition at certain seasons of the year from the earlier maturing crops of other countries. It was not easy to devise a means of meeting the needs of the fruit and vegetable growers without at the same time imposing a severe burden on Canadian consumers. We have met the situation by combining ad valorem rates, which operate throughout the entire year, with specific minimum rates, which apply at certain designated seasons, which are set out explicitly in the new schedules. In this manner we have endeavored to meet the requirements of the growers during the period when they suffer from instability of prices; and at the same time by the limitation of the season during which these specific duties apply, we have kept clearly in mind the interests of the consumers of these commodities. In past years, moreover, a large proportion of our early fruits and vegetables has been purchased from the United States. We believe that the British West Indies are capable of supplying us with an increasing share of this business. Under the existing trade agreement these islands have assured us of a preference in their market. In accordance, therefore, with our declared policy of trading with those who are willing to trade with us, we have made provision for the free entry into Canada of fruits and vegetables under the British preference.

The British Preference

THIS brings me to the last feature of the Budget which I propose to discuss briefly at this time. Throughout the entire revision of the tariff we have kept in mind the possibilities of increased trade with the British Empire. We have done this in no spirit of economic exclusiveness. Our portals of trade are open to the world on fair and equal terms. At the same time we do not forget that Canada is a member of a great community of nations under the British Crown which offers an unexampled opportunity for economic cooperation in the period of rapid development which lies before us during the present century. Great Britain purchases far more from Canada than we buy from her. If we are to maintain in Great Britain an assured market for Canadian wheat and other articles of export we must be prepared to increase our imports from that country. The present Budget is framed with this purpose definitely in mind. It is not a new policy. It is the traditional policy of the Liberal Party as inaugurated by Laurier and Fielding in 1897. It was opposed by the Conservatives then as it is opposed by them today. They have said that we must have preference for preference and that no favors should be extended to Great Britain until she is prepared to forego the policy of free trade. If Great Britain comes to the point where she is willing to concede an enlarged preference to any country, is it not reasonable to suppose that through the voluntary action of Canada in inaugurating and extending the British preference this Dominion would receive first consideration in any new fiscal arrangement Great Britain might adopt? If the Government of Great Britain indicates its desire to do so, the present administration can be trusted to carry forward any proposal for reciprocal trade to a successful conclusion. But in the absence of any such proposals from Great Britain, the Liberal Party stands for the policy which is not only of benefit to Canadian consumers but is vitally related to the maintenance of a British market for Canadian wheat and other commodities of export. The Conservative policy would deny the preference except on a basis unacceptable to Great Britain. It would cut down our imports from Great Britain at a time when Great. Britain must sell us an increasing quantity of goods in exchange for our wheat. From the point of view of Western Canada it is of secondary importance if Great Britain does or does not extend a preference to Canada. The essential point is that Canada must enlarge her imports from the mother country in order that she may enlarge her exports to the mother country. In the far-reaching extension of the British preference under the budget of 1930 this has been our purpose and our objective. We have studied the situation with the utmost care and have revised the tariff schedules with the definite aim of diverting a considerable portion of trade from the United States and other countries to Great Britain. We firmly believe that this policy will receive the whole-hearted approval of the Canadian people.

The Imperial Conference

IN SEPTEMBER of this year, Canada Will be represented at the Imperial Conference and at an Imperial Economic Conference which is to consider the important question of co-operation in Empire trade. The Imperial Conference will give the seal of its approval to the farreaching changes in constitutional status which have been brought about during the past seven years. In the task of creating a British Commonwealth of Nations on the basis of the national autonomy of its members, Canada has played a pioneer rôle. At every step in our progress to the fullness of national stature the Liberal administration has encountered the opposition of the Conservative Party. It opposed the separate signature of treaties. It opposed the establishment of Canadian legations abroad. It attempted to throw derision on the profoundly significant declaration of the Imperial Conference of 1926. Each of these events is recognized in Great Britain and throughout the Empire as an essential feature of the great co-operative community which we call the British Commonwealth. The people of Canada must decide which party shall represent Canadian opinion at the Imperial Conference. Shall it be the party which labored and achieved, or shall it be the party that obstructed and opposed?

Finally, Canada must be represented at the Economic Conference in the discussion of ways and means of enlarging the field of co-operation within the British Commonwealth. The Liberal Party inaugurated the British preference and has made it a central feature of the fiscal structure of our country. In the budget brought down by Mr. Dunning on May 1, a Liberal Government announced the greatest extension of British preference since 1907. We have declared that it is in this spirit of co-operation that we shall approach the Economic Conference in September. Which Party shall represent Canada at this Conference? Shall it be the Party that established and extended the British preference and negotiated the Australian Treaty and the West Indies Trade Agreement, or shall it be the Party which has opposed or criticized each of these great policies designed to enlarge the boundaries of Empire trade and cooperation? This question must also be decided by the electorate of Canada on July 28.