GENERAL ARTICLES

The DEPRESSION

I.—Its Extent

HONORABLE E. C. DRURY May 15 1933
GENERAL ARTICLES

The DEPRESSION

I.—Its Extent

HONORABLE E. C. DRURY May 15 1933

The DEPRESSION

I.—Its Extent

GENERAL ARTICLES

HONORABLE E. C. DRURY

WHEN, in the fall of 1929, the stock market crashed and the prices of primary products began to go down the long toboggan slide, ushering in the Great Depression, few people, I venture to think, expected it to run the course it has. The general opinion was that it was one of those more or less regular economic phenomena which we have come to expect as a regular part of the business cycle, that it would run its course in a year or two, and that Canada and the world would presently emerge from it into the sunshine of renewed and even greater prosperity. Indeed, during the early part of the depression, voices, some of them weighty, were raised from time to time to proclaim the cheery news that the worst was past and prosperity was just around the comer. As time went on, however, and the cloud, instead of lifting, grew' darker, these cheerful voices became less numerous and frequent.

It is now plain that they knew no more about the recovery they hailed than a chirping sparrow in December knows about the coming of spring. After nearly four years of depression, conditions grow worse instead of better. There is no sign of recovery, and nothing apparently in the existing situation that can bring it about. We may as well admit at once that the conditions we are passing through are not those of the ordinary business cycle, that they are due to extraordinary causes, and that recovery cannot take place until these causes are ascertained and steps taken to find the necessary remedies. It is equally apparent that unless remedial measures are taken quickly we will find ourselves in the midst of a catastrophe greater than anything we have passed through as yet, in which confusion will be worse confounded and untold suffering and privation will ensue.

Meanwhile, effective leadership is strangely lacking. The heads of finance, industry and commerce have no plan which promises betterment, and the suspicion grows that they are blinded by self-interest. Of political leadership there is little. Nero fiddles while Rome bums, and the same old game of party advantage goes on—here in Canada, in the United States, even in Great Britain. It is becoming increasingly clear that the remedy, if there is to be one, must come from the people themselves; that somehow' there must be an access of clear economic thinking on the part o e public, which will find its ow'n leadership and force

necessary action. For the situation is not hopeless by any means. There is plenty for all, and the only reason for distress and want is found in the artificial imjiediments the products of human ignorance and greed—which have been placed in the way of proper distribution. Since the depression was caused by human action, it can be removed by human action. Practically all economists agree on this; also they agree on the major steps which must be taken to bring about the desired result.

It is my hope, in this and succeeding articles, to let in a little light on this problem, so far as it affects Canada.

1 shall endeavor, first, to examine the depression as it affects this country; second, to diagnose its causes, at least in part; and, third, discuss the remedies that may be applied.

Increase of Unemployment

UNEMPLOYMENT IS, of course, one of the major

features of all depressions.....and possibly the most

tragic. That men, able and walling to work, with families dependent upon them, should be unable to get work and be driven to want or to the loss of self-respect involved in accepting charity, is a crime against humanity at any time. When large numbers find themselves in this position for a long period, it constitutes a national calamity of the first magnitude. There is not only the irreparable loss of productive pow'er and the cost of relief; these probably being the least serious features. The worst results are found in the condition of the workers. There is the loss of life savings and property, the destruction of independence and selfrespect. There is the disruption of domestic arrangements, the forfeiting of advantages which children should have and which but for unemployment they would have had. There is the destruction of the morale of the workers themselves, the depreciation of skill caused by idleness, the engendering of bitterness and discouragement. Let us see how Canada has fared in the matter of unemployment.

Statistics on this question are notoriously difficult to obtain. For such as I will use, I am indebted to the volume “Unemployment and Relief in Ontario, 1929-1932,” prepared by Professor Cassidy of the University of Toronto.

There were, according to the professor’s estimates, some 750,000 unemployed in the spring of 1932, or one-third of the entire . ,

number of workers in the Dominion. Decoration by

It is significant, too, that the number of unemployed has steadily increased since the depression began. In 1929, the average of unemployment amounted to 164,000, in 1930 to 395.(XX), in 1931 to 497,000, and for the first six months of 1932 to 728,(XX). There is nothing in the conditions of the past nine months to warrant a belief that this evil progress has been checked, and it is almost certain that at the present moment unemployment far exceeds the figures of last year.

Of further significance is the fact that seasonal improvement in employment conditions has shown a marked tendency to flatten out. In 1929, the improvement between the worst month of the winter, January, to the month of highest employment, August, amounted to 25L(XX). In 1930, the improvement from January to July, inclusive, w-as only 91,000; in 1931, from April to September inclusive, 84,000; while in 1932 the last month estimated (June) shows a worse condition than existed at the beginning of the year. This condition is ominous as indicating that, under pressure of the depression, even the normal seasonal improvement in employment is being destroyed and the resiliency of the labor market is lost.

The numbers who are in receipt of direct public relief have increased in a manner equally alarming. In 1930 the average number receiving direct relief in the City of Toronto the figures being taken at quarterly periods — was 9,152. In 1931 this number had increased to 27,992; and in 1932, for the first two quarterly periods, to 72.718. The number of persons dependent on direct relief in sixteen Ontario cities in April. 1932, was 157,817.

Concerning the extent of unemployment relief, Professor Cassidy has this to say:

“In these sixteen municipalities, more than 150.000 persons, or nearly twelve per cent of the population, were on relief in each of the months January and April of 1932.”

On the assumption tfiat the percentage of dependency was as high in other urban sections of the province, there must have been from 200,000 to 250.000 Ontario citizens on public relief during each . of the winter and spring months of

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Continued from page 15

Such figures as have already been noted tend to understate the extent of dependency and destitution, for they do not take into account the substantial number of people who obtain assistance from private charitable bodies or those who depend upon the bounty of their friends and relatives.

Cost of Relief

WHAT HAS unemployment relief cost Canada? That is very hard to say at the present time. Certainly the total sum has been enormous. In 1930 the Dominion Government voted $20,000.(XK) for relief works estimated to cost $70.000.(XX), the provinces and municipalities being responsible for the difference. After ten months of operation, some $18.(XX),000 of the Dominion allotment had been expended, and. it is to be presumed, an equal proportion of provincial and municipal funds; but. in proportion to the total number of unemployed, the results were small. Quoting Professor Cassidy again:

"These Government-assisted undertakings had provided the equivalent of about one month’s employment for 300.000 men.” The total cost of direct relief is also impossible to arrive at. Professor Cassidy places the amount spent in this way in Ontario at $4,000,000 in 1930-31. at $11,000,000 or $12,000,000 in 1931-32. and estimates an increased amount for the next period. Moreover, as to the scale of relief granted, he has this to say: “In no city that was studied did direct relief meet the full costs of maintenance of dependent families on an adequate minimum scale, so that public relief only met the problem of destitution partially.

Aside from unemployment relief direct and indirect, there is no question that the depression is responsible for greatly increased demands on the Mothers’ Allowance and Old Age Pension funds. How great this increase may be it is impossible to say, but certainly it is very substantial.

These figures, fragmentary though they are, are at least sufficient to indicate the magnitude of the unemployment menace. They represent an appalling amount of human wastage, of privation, moral deterioration and loss of self-respect.. And even then they take no account of the fairly numerous class which is perhaps to he pitied most of all, the “transients” who throng the highways—homeless, often hungry, lodging at night in lock-ups of small towns, and “moved on” by day, whatever the weather may be, to seek another lodging and meal. No nation can long tolerate a state of affairs which exposes so large a proportion of its people to such conditions, without suffering almost irreparable damage.

The other side of the question, the money cost of relief, is also a matter of major importance. How long can the municipalities, or even the provincial and Dominion governments, stand the added strain of unemployment relief, and this. too. at a time when the taxpaying ability of the public is seriously impaired. Just the other day an Ontario city was forced to discontinue unemployment relief because its bank credit was exhausted—a very significant thing. Another municipality warned its schoolteachers that it could not be responsible for their salaries. How long before such conditions become general, and the machinery

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of municipal government falls down, as it has in certain places in the United States?

Serious Rural Situation

UNEMPLOYMENT is mostly an urban problem, and its extent measures the seriousness of the depression from an urban standpoint. I^t us turn now to the rural situation.

Of Canada's 10,374,(XX) people, 4,802,000 are classed as rural: that is, they live in the j country or in villages of under 500 inhabitants. Of this number, probably ninety ix>r cent live on farms. There were 728.664 I farms in Canada, according to the census of j 1931. with a total capital investment in land, j buildings, equipment and livestock of $5.888,355,000. The average area of Canj adian farms was 224.48 acres, and the average capital investment, at the depressed values of 1931. $8,081. The average value of j farm production for the ten-year period : 1920-29—which included several years of j relatively low prices—was $2,237. In 1931 ; this figure had fallen to $1.207. In 1932 it is certain that it was still lower, as farm j prices had fallen to still lower levels in that year.

Now. before the average farm income, on which the purchasing power of the farmer and his relative prosperity depend, can be arrived at. certain very considerable deductions must be made from these values. The value of farm products consumed at home and the feed of work animals must be taken off. Necessary repairs and replacements must be allowed for. Wages, insurance, interest on money borrowed and taxes must be met. Some of these charges, it is true, may be reduced or put off under the stress of hard times. But others such as interest and taxes are unavoidable if the owner’s title in his land is not to be lost. And these charges have generally increased. Rural taxation in Ontario, for instance, was nearly | twenty-five IXT cent higher in 1931 than j for the average of the ten-year period 192029 and more than three times as great as it was before the war in 1913. Interest charges, too, are certainly not less than they were before the beginning of the depression. I While it is impossible to arrive at any figures that would be in any sense accurate, it is certain that the net income of the average Canadian farm has been reduced to an even greater extent, proportionately, than is shown by the decrease in value of average production. And this conclusion would j seem to be amply borne out by the numerous cases in which farmers have not been able ] to pay interest and taxes. Anyone acquainted with the characteristics of Can¡ adian farmers knows that these charges are ! generally very promptly met, and that they I will not be defaulted until every possible curtailment in other expenditures has been made.

This decrease in the average Canadian farm income has been the result of the lowest prices on record. Even the prices of the ’Nineties in the last century were not nearly so low for standard products. Recently I looked over the farm books of a careful neighbor whose record ran back j beyond the ’Nineties. I found such prices | as these, in the very worst of that period: ¡ Wheat. 92c per bushel: oats. 29c; barley, j 35c; hogs 4c per pound; wool 13c per : pound. True, there were eggs at 10c a dozen and butter at 14c per pound, but in such cases it is to be remembered that the quality of these and similar products has been greatly improved by standardization.

But these comparatively low prices were balanced by equally low prices in the things purchased. For instance, 1 found that in 1899 he had purchased a broom for 25c. a butcher knife for 25c, a pair of rubbers for , 40c. a pair of men’s work shoes $1, a barrel of salt $1. a lantern 75c, a pair of overalls 75c. On 100 acres of land with a good house and barn he had paid the township taxes of $11.33. These things were purchased in the usual way, at retail in a small town.

¡ Let the reader, if he wishes, compare them | with the cheapest prices listed in that j cheapest of all places, the department j store catalogue of the present day.

Higher Cost of Implements

“THE DIFFICULTY in which the farmers I find themselves lies in the fact that, while the prices of what they have to sell have fallen to almost the lowest point in history, their overhead has not been reduced, and cannot be, and the prices of what they ’ must buy remain at a high level. For instance, in the latest price indexes issued j by the Bureau of Statistics we find that, j rating the pre-war year 1913 at 100, prices of all farm products had fallen in December, 1932, to 68.2; while prices of fully and chiefly manufactured goods were 105.1, and the cost of living stood at 123.

In the matter of farm implements and machinery, the plight of Canadian agriculture is even worse than it is in regard to other necessities which must be purchased. For instance, a six-foot binder which twenty years ago could be purchased for $125, now costs $225; a mower which was $45 is now $85. An ordinary walking plow was $12,

! now it is $18; and a plow point, which is merely a rough iron casting which we used to buy for 25c each, or 20c if we took a dozen at a time, now costs 65c. And these implements, it is to be remembered, are standardized and have long been so. They have not been improved in any substantial way during this period.

Of course, under these conditions, farmers simply are not buying implements or machinery. They can’t. I tried to telephone the other day to the largest implement j agency in my local town, which formerly did a very brisk business supplying a large i section of some of the best farming land in ! Ontario. I found the phone had been taken out because the business done didn’t warrant j the expense !

I am not here accusing the implement ; manufacturers of profiteering. As a matter of fact. I know they are not prosperous. They are merely tied in a knot. They can’t | sell their products because their prices are too high, and they can’t reduce their prices because they can’t sell their goods and so cannot manufacture in volume. And meanwhile the purchasing power of their customers has been almost completely ; destroyed.

I am not here asking for sympathy for j the farmers. I am not asking sympathy for anyone. What is required, if national disaster is not to overwhelm us in the very near future, is cold, hard, economic thinking—and then action. The fact, however, remains that Canada’s basic industry, the very foundation on which the national economic structure is built, is facing ruin. It has never been too prosperous. For more j than half a century a high protective tariff j has seen to that, taking from it at least a ¡ third of its earnings to give to favored Î interests and giving it nothing in return.

; At the present moment it is going through a * retrogressive revolution of a major sort. It i is being forced back into the position of a i self-contained, primitive peasantry. Unless ; this process is checked and speedily— j already much ground has been lost—it spells inevitable disaster on a nation-wide I scale, involving every section of the econ! omic structure, and from which even the most highly protected industries cannot j escape.

What Must be Done

ALONG WITH the workers, who suffer ^ the agonies of unemployment, and the farmers, who are facing the ruin of their industry, most other classes have suffered ! to a greater or lesser degree. It is the custom in a mad world which holds the : rights of money—the mere medium of ! exchange, the flux in the economic crucible— sacrosanct above all other rights, to interpose the investor, generally in the persons ; of hypothetical widows and orphans, when ; any major economic reform is mooted. But !

I now, except in the case of that lucky ¡

minority whose investments were in Government or municipal bonds or. better still, in the stocks of gold mines, the investor finds himself as hard hit as anyone else. In many cases the value of his “securities” has vanished into thin air, leaving him with neither realizable principal nor interest. Even the holders of those most conservative of investments, farm mortgages, are no better off. They cannot, in many cases, collect their interest, and if they foreclose they find themselves possessed, not of assets but of liabilities. Government and municipal bonds so far have been safe, but even here security is not secure, especially in the face of the rapidly decreasing taxpaying ability of the public.

One feature of the depression which may tend to minimize the impression of its intensity in the mind of the casual observer has been the comparatively small increase in the number of commercial failures. In 1932. these numbered 2,938; in 1931, 2,563; in 1930, 2,741; and in 1929, 2.310. And while both the number and the net liabilities have shown an increase, the increase has not been alarming and both number and net liabilities have been considerably lower than the worst year of the last depression, 1923.

But it is probable that these figures do not present a picture of the real state of affairs.

From enquiries I have made and opinions I have heard, it seems prohable that a good many concerns are dead on their feet and are being carried by their creditors only because there is little to be gained by closing down on them; and some hope, if they were left alone, that they may retrieve themselves. But this state of affairs cannot continue indefinitely. It would be a fairly safe guess that the coming months will show a very great increase in the number of such failures.

And so we must conclude that the whole economic body is in a bad way, and that the depression carries within itself no seeds j of improvement. This is not pessimism, it is mere honesty. It is clear that something must be done before the depression can be lifted. The course of wisdom is to determine if possible the inducing causes, to find the appropriate remedies, and to apply them at once before the disease becomes incurable. The worst foes of society at the present time are those who have no plan, who do ¡ nothing, who sit helplessly while the country drifts to inevitable catastrophe.

Editor's Note—This is the first of a series j of three articles by Mr. Drury on the current economic situation. The second will follow in j an early issue.