Recovery in B.C.

Says this writer: Orthodoxy is again in the saddle in B.C, thanks to business revival, canny financing and a split in the C. C. F.

LESLIE FOX February 15 1937

Recovery in B.C.

Says this writer: Orthodoxy is again in the saddle in B.C, thanks to business revival, canny financing and a split in the C. C. F.

LESLIE FOX February 15 1937

Recovery in B.C.

Says this writer: Orthodoxy is again in the saddle in B.C, thanks to business revival, canny financing and a split in the C. C. F.


OCCUPYING the northeast corner of British Columbia’s Parliament Buildings at Victoria is a man who looks like an elegant white-haired bishop, talks like a hard-boiled Wall Streeter, plays excellent poker with cards or without, and is equally skilled in the handling of golf clubs at Colwood and men who tramp the legislative halls.

When you are ushered into the offices of Hon. John Hart, British Columbia’s Finance Minister, you'll probably find him looking out the windows of that northeast comer, across the rose beds in full bloom, across the green lawns and the inner harbor.

But Mr. Hart, you’ll discover, is looking much farther than that. He is looking past the harbor, past Vancouver and the mainland coast, out to the Rockies and beyond into Alberta.

It is Alberta’s Social Credit and all it represents that Mr. Hart has been watching from his windows these three trying years; watching and wondering whether the tide of the new monetary radicalism will rise above the mountains and flow down into British Columbia; wondering whether it will sweep away the financial structure, that we call old-fashioned, which he has been building here in silence and patience.

Others have shared Mr. Hart’s anxiety. Not only in British Columbia but in the East, in New York, in London, in fact wherever British Columbia bonds are held.

An acute alarm has existed in financial markets at the thought of Social Credit rolling out to the Pacific, as evidenced by the price of British Columbia securities.

These prices are low, lower than they should be; and they are based, Mr. Hart tells you, not on British Columbia’s actual position but on the fear that he, holding his finger in the dike like little Peter in the old Dutch tale, may not be able to hang on long enough.

That fear is being dispelled. The dike is holding. Mr. Hart is hanging on. Social Credit is dammed at the Rockies.

British Columbia is standing by tried and tested financial methods, paying its debts on the nail. A rapid recovery in business, swelling provincial treasury receipts to a new high record, has made it possible.

So long as Jack Hart occupies the northeast comer

there will never be anything but finance of the oldfashioned kind. At this writing he seems likely to sit in the comer for some time to come.

The Social Credit Threat

OTATEMENTS like this may surprise many people on ^7 the prairies and in the East, for they have not understood what we British Columbians were doing in depression years, any more, perhaps, than we have understood them.

Of late they have believed weird tales about us—like that of the inspired Aberhart organizer who went back to Calgary to say that British Columbia was just bursting to elect a Social Credit government. Or like the horror stories of the Ottawa politicians who thought we were trying to burglarize the Treasury and blow up the Mint; like the general guide-book impression of hard-working Toronto industrialists that British Columbians spent their time drinking cocktails at the Union Club, playing golf at Oak Bay, and turning up at the office for an hour or two in rough tweeds, Cowichan sweaters, and with bucktail fiy hooks in our hat bands.

This is not to deny that they had some cause for such thoughts.

There was a time, and not long ago, when events in British Columbia quite projxrly disturbed the sleep of its bondholders, had Mr. Bennett worried, and Mr. King wondering what was happening to Western Liberalism.

We saw that irrepressible force, Mr. G. G. McGeer, M.P., thundering through the country, talking turkey to the House of Commons banking committee, and rousing the Western voters to his new monetary system, his Conquest of Poverty. Wre also saw the Social Co-operative Commonwealth Federation becoming the strongest political force west of the Rockies. Even Liberal Premier Pattullo, no Socialist and no monetary mystic, was demanding a vast expansion of national credit to provide work and wages for all.

What, then, has happened to still this gathering storm?

An Unhappy Position

VXTHEN MR. HART took over the finance portfolio * ’ of the Pattullo Government, late in 1933, he was returning to his old job which he held in the Brewster and Oliver ministries after the war. At that time he had the unenviable task of straightening out British Columbia’s treasury after the wreckage of the war years.

In 1933 he was up against a new kind of public desperation, born of economic war. It meant fighting his friends as well as his enemies.

It was not a happy position for any finance minister. Competing against a growing Socialistic thought, the Pattullo Government had been elected on extravagant promises of work and wages, in which Ottawa was going to help. It had talked of a magic national credit to supply the wherewithal.

Sincere enough, the elected Liberals believed in their promises. The Legislature went so far as to endorse without question Mr. McGeer’s ideas of a planned economy and a Canadian financial revolution, knowing only faintly what it was all about. For political peace, even Mr. Hart considered it wise to pay temporary lip service to the current gods.

This is not to disparage the McGeers or any other reformers. The point is that Mr. Hart was heading in the opposite direction and he was steering the Treasury.

For, besides being a financier, Mr. Hart is a politician and, behind his faint Irish brogue and disarming smile, an extremely canny one. He works in politics as he had worked in business, to get things done, and he is an accomplished trader.

In those critical years he knew that if he pulled the purse strings too tight they would snap. He could have broken the Government by resigning, or by forcing out such men as Labor Minister George Pearson or Provincial Secretary George Weir through refusing to compromise in their demands for social expenditure. His chief knew that, too, and that it would have meant a Socialist government for certain.

Playing For Time

SO MR. HART made the best trades he could, playing politics ali the while. He gave a little here and a little there. He increased expenditures when it couldn’t be helped. He borrowed where he could, economized where he could, and got by from day to day where a financier who was not a politician would have thrown the whole thing up in disgust -with resulting glee to the Socialists.

On the surface, the Government was doing some highpowered bluffing, as in the case of dictatorial Special Powers Act, which it never dared invoke, with talk of default and some pretty disagreeable talking with the Liberal powers that be at Ottawa.

Mr. Hart was necessarily a party to these Cabinet manoeuvres and misfortunes, but it is fairly well known

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Recovery in B. C.

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now that he never agreed with wild ideas of vast credit expansion or defaulting measures.

Thus, beneath the public view, there has been going on in British Columbia an unvarying financial plan; a plan designed, at any cost of political embarrassment, compromise, trading, partial surrender, to save the credit of the province by paying its debts on the nail.

Trying to stall the radical elements, Premier Pattullo took an awful licking among the voters without a squeal. His popularity, never great, sank to an alltime low, but he stood unflinchingly by Mr. Hart; for Mr. Pattullo, while stubborn and sometimes rather headstrong, is a good sjxirt and has learned patience in public affairs.

The rest of the Cabinet, though grumbling a bit in private at the lack of miracles, stuck also as Mr. Hart built up his position little by little, persuading, humoring, giving way with one hand, putting the clamp on with the other.

What was the old-fashioned policy Mr. Hart was steering?

“It certainly wasn’t a spectacular one,” he admits. “It didn’t promise riches for everybody, but it did promise to stop our drift toward disaster. We determined, in brief, to pay all our current expenses out of current revenue by limiting them to the income, to borrow for unemployment relief as every government in America has been doing, and to pass up the major part of our sinking-fund payments for the time being, our sinking funds being proportionately the largest of any province in Canada. By these means, we could avoid increased taxation which would stifle recovery.

“This was a pretty drab prospect, I suppose, compared with social dividends and such things, and you have to wait for results. They are coming now, and people at last realize that a sound unpretentious policy is best in the long run. There was a danger three years ago, even later, that our people, desperate and without anything to tie up to, would insist on some wild scheme, some monetary nostrum. Now the danger has passed, I believe, for good.”

Liberal members were not the least impatient with this comparatively slow policy. Mr. Hart’s sermons on sound finance must have’ sounded fine in the Cabinet chamber and the caucus. What his colleagues wanted to know was where it was leading.

Efficient Financing

THE TEST came on the fifteenth day of last May. On that day, at noon, British Columbia had to meet a maturing short-term loan of $3,500,000. As Mr. Hart wouldn’t go into Mr. Dunning’s loan council and surrender his future borrowing powers, the Dominion Treasury shut down on him, just as it later shut down on Mr. Aberhart, who defaulted.

Where could Mr. Hart lay his hands on $3,500,000 in cash? Certainly not on the market. Ottawa was closed. The banks were holding several millions in treasury notes. Not even the rest of the Cabinet could tell you.

For a short time the betting was even that British Columbia, for the first time in history, would be unable to pay its debts. Financiers who trade in B. C. securities were frantic. The telephone companies made a small fortune on long-distance calls between Toronto and Victoria.

The financiers were told not to worry, but it was not till Mr. Hart on the fifteenth of May actually produced his $3,500,000 that they believed it. And he got the money not out of thin air, not out of new borrowing nor a raid on the sinking funds of other issues, but out of his current revenue. Like the shrewd poker player he is, he had been hoarding a private kitty for an emergency.

Looking backward now, that was the turn of the tide. British Columbia had survived the test and advertised to the world that it would pay its debts when they came due.

Since then, the industrial improvement which gave Mr. Hart his surplus revenue and his private kitty has continued. This year he will collect a new record revenue, and his estimates of receipts are always intentionally too low. In the three years ending March 31, his surplus on current account will have piled up to $6,845,342, and most of it is being used to pay off debt.

This takes into account, of course, the fact that British Columbia is still borrowing for unemployment relief and not providing full sinking-fund appropriations.

The next step is to jack up the budget so that we are providing all but capital expenditure out of income. But Mr. Hart thinks we are doing pretty well to date, thank you. So well that he has just discovered he will be able to find $1,000,000 out of income to pay relief costs in the present fiscal year. He had not anticipated this last spring, expecting to borrow the full amount of his unemployment bill from Ottawa.

Business Revival

T> RIEFLY, THAT is what has happened to British Columbia finances in the last thirty-six months. It is not the whole story, naturally, for it would be absurd to say that Mr. Hart and the Government alone brought the province to its present position.

A sudden upsurge of business has been the big factor. The Government could only hold the line until reinforcements came, until better times eased the tension

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and the public began to think we might get along under this system after all. It has been helped mightily by the gods of politics who have always had a warm spot in their hearts for Mr. Pattullo.

Out in the West the political gods sometimes work fast. A year ago the Pattullo administration and its policy were in deep water. Many a good Liberal, including some of the Cabinet, thought they were just about sunk.

When the Legislature met last spring, barely a round dozen of the thirty-five Liberal Members really expected the Government to survive the next general election. Eight of them were in more or less open rebellion, and threatened to force the Premier out before the House met again. It was a commonplace that British Columbia was in for a C. C. F. government. Nothing but a miracle could stop it.

Whereupon the miracle occurred. As they did in 1933, Mr. Pattullo’s enemies obligingly committed hara-kiri in his hour of need. The C. C. F., with the doors of power open before it and the warm odors of office already in its nostrils, met in convention, adopted an extreme Leftist platform, pledged itself to “provincial socialized finance,” elected radical Dr. Lyle Telford as leader, and rejected the views of Rev. Robert Connell, who had led its members in the Legislature and upon whom most people looked as the next Premier.

’ The moderates of the C. C. F. (who had the support of thousands who didn’t believe in Socialism at all) wouldn’t swallow the pill. At the precise moment when Mr. Pattullo’s Government needed help the most, facing a critical by-election in the big constituency of Vancouver-Burrard, Mr. Connell split with the C. C. F., got thrown out of the party.

With him he took three of the six private C. C. F. Members of the Legislature, no one knows how many of the moderate votes in the country, and enough strength to defeat Dr. Telford in Burrard. The C. C. F. lost the by-election, the Government won, the Liberal rebels folded up, and Mr. Pattullo was firmly in the saddle once more.

Vancouver-Burrard, of course, is only one seat in forty-eight, and Orriineca, which the Government also won, is the most faithful of pocket boroughs. But as everyone in British Columbia realized, Vancouver-Burrard might easily prove to be in miniature the next general election.

Not that the current Liberal administration has ever been idolized in British Columbia. It was elected on a minority vote because the people liked the socialist C. C. F. somewhat less. Its prospects now are even brighter. Conceivably a united, popular party could beat it, but there is only a badly shopworn Conservative Party which seems unable to regain its old strength: a split C. C. F.; a new group of moderate, middle-of-the-road reformers which Mr. Connell is forming; and on top of that, an embryonic Social Credit move-

ment. Altogether, it is hardly what you’d call an opposition, but a chaos which should succeed in splitting the anti-Government vote four ways if it doesn’t unite. That is all very lovely for the Government.

The Next Election

Y\7TIAT, NOW, of the future arising

** from this background?

First, Mr. Hart wants lower interest rates, and he insists that any investor would be glad to accept them if it weren’t for our proximity to Alberta and the fear that we may catch the Social Credit measles.

He wants the Dominion to recognize in some practical way that British Columbia, borrowing nearly $30,000,000 from the Dominion Treasury for the purpose, has looked after the Dominion’s unemployment problem out here.

Finally we are to get a royal commission to consider our old historic claim for increased Dominion subsidies or some other concession because we didn’t get a square deal under the original Confederation pact.

With these things ahead, British Columbia is looking forward to a complete balancing of the budget—something which very few governments are achieving. I land in hand with this, it is looking for that credit in the money markets which will permit the proper development of a young and growing province with vast natural resources.

Meanwhile Mr. Hart is still casting a glance now and then out of those northeast windows. For he knows that, right or wrong, he must continue with his finger in the dike. If Social Credit produces what it promises in Alberta, it will sweep through the Rockies westward ' as it will sweep eastward.

Hardly anyone in British Columbia expects anything of the sort. But the Pattullo Government is as wise and worldly as any in the business. It plans to go to the country next June or September. But it will not go then if Mr. Aberhart is paying dividends. It will wait until he stops. It will wait, if necessary, until its last legal hour of office in 1938.

Meantime, watching these events, the Premier and Mr. Hart have launched an energetic campaign to persuade the financiers (and the voters) of the soundness of their fiscal policies. In December they attended the National Finance Council meeting at Ottawa and visited the money centres of Toronto, Montreal and New York.

Said Mr. Hart on his return to Victoria:

“We spent much of our time explaining that British Columbia’s problems are entirely different from Alberta’s. We think we have been successful in drawing the important distinction between this province and the prairies.”

Said the Premier:

“The East is amazed at our recovery, not only in an economic way but governmentally as well.”