GENERAL ARTICLES

PIE IN THE SKY

CANADIAN STYLE

BRUCE HUTCHISON April 1 1943
GENERAL ARTICLES

PIE IN THE SKY

CANADIAN STYLE

BRUCE HUTCHISON April 1 1943

THE newest and the most fundamental fact in our current Canadian politics, I venture to suggest, is this: The politicians of all sorts have promised us permanent prosperity. Pie in the sky has become practical politics in Canada.

In an era of abounding promise such a program may appear commonplace. Many people have become so accustomed to great expectations that they hardly stop to consider the recent extraordinary pledges of the politicians. To my way of thinking this is a very dangerous mistake. We cannot afford to take these miracles of prosperity for granted, or to imagine that someone else will produce them without our help or under standing.

For our own protection we must find out precisely what the politicians mean. If they don't know we must compel them to find out. We must discover where we are going in this country. We must ascertain whether there really is pie in the sky by-and-by as they tell us. We must know these things because the promised pie is ours and we must pay for it.

We have to begin by realizing that our politics have recently undergone something like a revolution. The promise of permanent prosperity, and on a scale never seen before, is something entirely new as far as the major political parties are concerned. They never promised anything like this before the war. They promised then, at the most, that the state would create conditions favorable to prosperity. They did not promise that the state would underwrite prosperity. In actual practice, when elected, they did not create prosperity in recent times; they did nothing fundamental about the depression; and they governed on the assumption that permanent prosperity was really outside their control.

Now observe the revolution in their thinking.

Mr. King, for the Liberal Party, has demanded as a “national minimum” in the postwar era useful employment for all willing to work; adequate standards of nutrition and housing; social insurance against all the calculable accidents of life. A minimum, mark you.

What a contrast is this to Mr. King’s thinking and his performance in thirteen years of office before the war! Mr. King has clearly changed with the times. In his “national minimum” speech he admits that we have all learned much of late, have learned that the “only limit to our productive capacity is the limit of our resources and our will and skill to use them.” This principle was not applied by Mr. King’s administration before the war.

For the Progressive Conservative Party Mr. Bracken has given the same sort of guarantee. His acceptance speech at Winnipeg lists the fundamental rights of Canadians and among them is “the right of every man to have a job.” He does not call this total employment a mere hope, a far-off, divine event. He calls it a “right.” The state, in other words, must see to it that every man has a job and not only a job but fair wages, full education, security against sickness and against other disabilities.

The C.C.F., of course, made even larger pledges long ago. The New Democracy Party would provide all these excellent results by its ready-towear system of managing the nation’s credit and price structure.

The conclusion, therefore, is inescapable. Almost unnoticed in the rush, a new era has quietly dawned in our politics. The state, through its working instruments—the political parties—has promised us all a living, and a good one. With respect 1 suggest that most of the politicians and a vast majority of the people do not know what this means, what it involves, or what it may lead to.

The Layman Must Understand

NOW I am not a politician or an economist. I am a layman, like most of the people who will read this. The lay reasoning which follows may contain economic flaws. All the more reason why the views of the layman should be brought out into the open and examined, for no reform of our society can ever succeed without the layman’s support and full understanding. If he is wrong in his calculations he wants to know it. If the politicians are wrong he wants to know that, too.

The layman, then, will take the politicians’ new guarantees and place them against certain known facts. The first, of course, is that we went from a depression into the war. It was the war which brought full employment.

From this a sovereign fact of politics emerges and can never be submerged. This fact, of course, is that whereas in peacetime we could not prevent depression or find jobs for everyone yet in wartime we have learned to do both. It is a sovereign fact of politics because the people will never be satisfied to go back to the depression, will always insist that the state which managed to do it during the war can certainly give them jobs afterward.

With a plain layman’s reasoning, let us go into this a little more deeply.

When the war began the income of the nation, the measure of its total production of everything, was roughly four billion dollars a year. By 1942 it had risen to eight billions. There are disputes among the experts about the exact figures and the proper way to reckon them, but we can assume for our purposes that in three years we have about doubled our income by the curious processes of the war.

Everybody Wealthy

WHAT does this mean? Not what many of our people apparently suppose—that we have discovered in this war a way of making ourselves all rich. Many of them, including some politicians, talk as if we were now producing enough in this country to give us all a large income, if it were fairly distributed. Even a layman can see how false is this widely held assumption.

Before the war our income, if divided equally between everyone, would have given every living Canadian about $347 a year. This would hardly have made us rich. Today our income would give us each about $695 a year. This amount represents an astounding accomplishment of production. Such an amount, if fairly distributed, would provide a greater prosperity than we have ever known. But it would not be opulence.

For the present, of course, we do not enjoy all our high wartime income. About half of it is going into the war. The remainder, however, is more equally distributed than ever before. Now assume for a moment—a daring assumption—that we can maintain our present income, undamaged, after the war, and use it all for ourselves. Still we shall have on the average a very modest wage.

This wage is produced, this total income is possible, when our economy is working full blast, when our whole machine of production is groaning under the load, when our public services are taxed to the limit, when we are desperately short of workers, when we are pressing the old, the young and the partially disabled into service and pushing everyone around. Even when the men come back from the war and re-enter the productive processes it will be no mean task, physically, to maintain this output. Economically and practically it will be much more difficult. Yet we must do it to provide even an average income of $695 per capita in this country.

Can we do it? This is the real question of our postwar economy in Canada. We should never take our eyes off this question. We should never become confused by general statements, by political labels, by glittering promises. The thing to watch is our wages as a people, and to watch them as closely as the working man watches his own pay envelope. For if our wages, our national income, seriously decline, no theory, no system of taxes, no redistribution of wealth, can make us prosperous. It is important to cut the pie into fair slices. But let us make sure that the pie is large enough to go decently around.

Enormous Wartime Dimensions

IF WE are to discover whether we can maintain the present size of the pie, or anything like it, we should consider how it reached its enormous wartime dimensions. This result was accomplished, as a layman sees it, by four distinct methods.

First, by enormous expenditures of government money.

Second, by the government control of our whole economic system and of our individual lives.

Third, by a repeal of our basic constitution wherever necessary.

Fourth, by the sudden appearance of an unlimited foreign market for our goods.

If these factors can all be maintained indefinitely there should be no difficulty in maintaining their end result, which is a high national income. But can they be maintained?

Let us examine each of them separately.

Government spending has induced a gigantic output of goods, from uniforms to airplanes. This spending has been made possible by huge taxes and huge borrowings. It can continue on this scale only with huge taxes and huge borrowings. Therefore, the question which the layman must ask himself at the start, when the politicians make their large promises, is whether he is prepared to continue paying huge taxes and lending huge amounts to the Government. True, as most of the Government’s present spending is wasted, in a purely economic sense, much smaller spending could produce large results in peacetime, but it cannot be denied that if the Government is to maintain a very large budget the money must come out of our pockets. Are we ready to pay it?

I do not know. Many laymen, and certainly this one, would favor very high taxes if they produced prosperity and employment. I only suggest that when the politicians promise us prosperity, through state intervention, they should admit all the disagreeable necessities involved. The politicians have not been frank enough about this. They have soft-pedalled it. Some of them have left the impression that the rich somehow would pay. They ought to tell us that if money is to be spent we must pay.

There is another, larger question in Government spending. How far can it go, even if we are willing to permit it? To hear some politicians talk you would think there was no end to it. You would think that if we can spend over four billions a year through our Government in wartime we can spend at least as much in peacetime. This is a common and very dangerous assumption, for it assumes the continuance of war conditions and war Government into peace.

State Control In Peace

THAT brings us immediately to the second factor which has made our high wartime income possible. This factor is the Government’s present control of everything. If this control is continued into the peace we can safely continue to spend gigantic sums through our Government, but not otherwise. Even at the start such government spending would, in all probability, cause a flight of capital out of the country. Then, as spending alters the value of the country’s money in foreign countries, the government must control foreign exchange, which finally means controlling exports and imports. Such spending also tends to send up prices at home and the government is obliged to control prices and hence wages. This is not a matter of theory. We have been compelled to do all these things, and more, in Canada during the last three years in order to finance our budget.

Spending to create full employment is quite practical, given enough government control. But, as The London Economist said the other day, it is “incompatible with the automatic technique of the free market.” A nation which is going to spend on the scale we are discussing must be prepared to control foreign trade, probably to engage in barter, to control prices, wages and production, just as we are doing now. Altogether a country which is going to depend for the prosperity of its people on gigantic state spending must be ready to depend on the state for almost complete management. Germany is the final example of such a system.

The politicians do not usually tell us that. They tell us about the spending of money. They do not so often tell us of the restraints, restrictions and regimentation which must go with all-out spending. The outright socialist is more honest when he promises prosperity but admits that it means actual government ownership of' the productive machinery, that it means regulation of everything and everybody.

In Canada we are now witnessing a considerable, though not by any means a final, government control of everything and everybody. I hope you like it.

The third factor which has gone into our huge wartime income is the War Measures Act itself. By this statute the Federal Government has assumed any power it requires, wherever necessary, and thus has driven a coach and four through the peacetime restrictions of the British North America Act. It has overridden some of the most cherished prerogatives of the provinces, as for example, in the control of prices, wages, labor conditions and health. When the politicians talk of postwar planning they are talking in a legal vacuum, for the moment peace is declared and the War Measures Act lapses, there will be no machinery to effect any large national plan of economic reform. Unless specific steps are taken in the meantime the Federal Government will lack the means even to inaugurate any general scheme of social insurance.

Will the provinces be prepared to abandon some of their powers and perhaps some of their revenue sources? A few of the largest provinces have shown no desire to do so up to now. Three of them torpedoed a conference called to consider these very things only two years ago. Before we can lay any foundation for the postwar period we must clear away the present debris of constitutional confusion, conflicting jurisdiction and local politics. And we should be doing it now.

Postwar Markets

THE fourth factor which produces our present prosperity is the unbounded market for most of our goods abroad. Britain wants all the food we can ship. The United States wants our metals and timber. The battlefronts will take every weapon we can turn out. We are building a large part of our wartime boom on export trade. The question we must ask ourselves is whether such markets as these will continue after the war.

This is, perhaps, the most difficult question of all, since it is not in our sole control but will depend primarily on the trading policies of the world at large. This question involves all the others we have been considering. For if we cannot maintain our export trade on a large scale after the war, and if we still insist on prosperity, then assuredly we must submit to government control in a very drastic form all along the line. A nation which refuses to allow international competition to affect its economy through the export and import of goods must regulate its own economy through the state. The only alternative is to allow a few large monopolies to regulate it for their own purposes. Autocracy, wherever tried, has led to government regulation inevitably.

On this question of maintaining our foreign trade the politicians are now amazingly unanimous. Even the traditionally high-tariff Conservative Party has embraced the Atlantic Charter, changed its own name and chosen a low-tariff man from the low-tariff prairies as its leader. All the politicians of every party assure us that they want to maintain our foreign exports, to remove trade barriers and to allow goods to flow through the world. They agree that if goods do not flow through the world, and give all men a chance to share them, our next peace will be, in the words of Hobbes, “poor, nasty, brutish and short.”

Before the Winnipeg convention of the Progressive Conservative Party we never witnessed such agreement on this point. The old issue of tariffs, which was the core of our politics for two generations, has largely disappeared—if we are to believe the platforms and the speeches.

Again the politicians are not frank enough. They do not tell us how they are going to maintain our foreign trade and remove the barriers to it— even assuming that the world at large tries to do the same. They do not come forward boldly and say that, if we are to sell our goods in foreign markets in their present huge quantities after the war, we must import huge quantities in return. They do not say that we shall have to import many goods that we can make here and are making here. They do not usually descend out of the pleasant general into the unpleasant specific and say that we shall have to expose some local industries to grave and perhaps fatal outside competition.

They do not point out another vital fact—that as we have industrialized Canada during three years of war on an almost unimaginable scale, we have thereby built up a huge new potential interest in tariff protection. We have built up great joint interests of capital and labor which will want to control the home market, and will certainly resent the competition of foreign goods. Let no one underestimate the domestic stresses and strains inevitable in any real attempt to develop the postwar foreign trade which is essential to our welfare.

A final prospect should be noticed. That is the certain advent of social insurance which has already started with unemployment insurance. Under any future Government we certainly will have a broad program of social insurance in Canada, some equivalent of the Beveridge Plan in Britain. This is desirable and necessary and the sooner we set about creating it the better.

But let us never exaggerate its possibilities or imagine that it is a cure-all. Let us never forget that social insurance does not guarantee prosperity, does not produce new wealth of itself and does not necessarily increase the national income, though it may help to do so by the spread of purchasing power. We could have the largest scheme of social insurance ever devised and still go broke, until presently all of us would be asking for insurance benefits with no one able to pay them.

Pie On the Table

NOW all this, in a layman’s fashion, explains how we got to where we are in Canada, with everyone at work. It explains some of the difficulties of keeping us that way.

I am aware from long experience that in saying these things I shall be accused (1) of being opposed to any improvement of our economic system and (2) of advocating an impossible and immediate Utopia. As a layman I venture to think that most laymen don’t stand for either of these viewpoints. They are not looking for an immediate Utopia and they are not satisfied to let our economic system go on as in the past. They are seeking, it seems to me, for the practical and possible compromise which will give them a reasonable life after the war, expecting no miracles, determined to preserve their personal freedom outside the reach of the all-powerful state, but also determined not to retreat into another depression.

How sound are these hopes? No sounder than the condition of the world after the war. No sounder than the assurance of an enduring peace without which assurance our civilization cannot be rebuilt. But assuming such a peace in the world, can the politicians make good their large and general promises inside Canada? Is the new theory of Canadian society, the theory of assured prosperity, sound or false, a considered program or merely pie in the sky by-and-by?

I believe the thing we are looking for can be found, given a world of reasonable sanity. I believe it is plain lunacy to imagine that we can go back to our pre-war pattern in Canada, or that we should want to. I believe, on the other hand, that to expect high incomes for all within any measurable time is equally lunatic and equally dangerous. And I believe, as a layman, that the true course for us as a nation is to be found in a combination of all the factors mentioned before—government spending, government regulation, constitutional reform and foreign trade.

That all these things will be tried there is no doubt. The whole question is whether they will be tried in the right proportions or fatally bungled.

How to use them? After a hectic postwar inventory boom some government spending to create employment unquestionably will be necessary and desirable. The danger is that we shall depend far too much on it and so discourage private enterprise that it will fail to do its part of the job. Government investment should be enough to take up the slack after private business has expanded to its limit but, unless we want to produce a totalitarian state, government spending must not become the mainspring of our system and the chief user of our savings. Spending is so easy politically that it may be used to evade any real solution and we can well spend our way into ruin and totalitarianism. Merely to spend should not be the objective, either. Money can be spent to create permanent values; or spent merely as a shot in the arm to create temporary work. Spending must be used, but used with care and with advance planning.

It is clear that after the war the state will probably have to employ the second method at least to some degree. It will exercise larger controls over our economic system than it did before the war, whether we like it or not. Here again it is a problem of definition which it is essential that the layman understand.

Private industry can function, private capital will invest money and start new enterprises, if it knows that it has a guaranteed place in our system, even though the state has advanced over a large new area. But if there is no assurance that the state will not advance all the way, if there is the danger of constant encroachment and constant harassment, private investment will dry up, private initiative will die, and most of our freedom as individuals with it. In no country where private initiative has died has political democracy or individual freedom survived.

To the layman,. therefore, the problem here seems to be to outline as clearly as possible the future boundaries of a state operation and control; to draw them as widely as necessary, but then to agree that in its own realm business can operate without the threat of unnecessary interference and expropriation.

At the same time, if private industry is to last, its own fatal trend toward monopoly must be broken in its own interest, for, as President Roosevelt has written, “The power of the few to manage the economic life of the nation must be diffused among the many or be transferred to the public and its democratically responsible Government. If prices are to be managed and administered, if the nation’s business is to be allotted by plan and not by competition, that power should not be vested in any private group or cartel, however benevolent its professions may profess to be.” In other words, if business insists on being a monopoly the state inevitably will take it over. Business must not be permitted thus to commit suicide.

The constitutional problems, which hardly anyone has mentioned since the last interprovincial conference blew up, are not mysterious. They should yield to solutions when the people at large understand them and compel their local politicians to face them.

Overwhelming Instinct

THE fourth problem, that of foreign trade, is much more difficult for the reasons already noted. It will not be solved unless the other problems are solved also. I mean that there will be no chance of developing the foreign trade of Canada in the necessary volume unless prosperity is maintained at home. There will be no chance of increasing imports of other countries’ goods, hence increasing our own exports, unless our own people are at work, our own business active. If we have another depression the overwhelming instinct of the nation will be to prevent the entry of outside goods, in the belief that our own industries and jobs must be protected. No long-range wisdom, no appeal to larger reasons and future international dangers will be sufficient to counteract this primitive instinct of local security. Depression would doom trade. That is one of the chief reasons why our Government will have to spend the money necessary to prevent a depression, if private business cannot prevent it alone.

In fact, all these four factors are as essential to one another and to the whole as the four wheels of a coach—careful spending, regulation confined to fixed limits, constitutional reform and the development of foreign trade. And larger than any of them is the necessity of a stable and peaceful world to which Canada must contribute its share by undertaking large international responsibilities.

The problem is to fit these ingredients together, to balance them, to prevent the excess of one from ruining all the others. That is where the layman comes in. The economists, the experts employed by the Government know about these things, can figure them out in detail and draw fine blueprints. But all their plans will be pushed aside and ruined if the layman does not have a clear understanding of what we are trying to do in Canada, what we can do and what we can’t do; unless he understands the dangers as well as the opportunities of the postwar era. The whole reconstruction of the nation can be bungled if ignorant laymen, through their local pressures, upset the delicate balance of our affairs.

My complaint against the politicians is that they do not tell the layman these things. They talk in generalities as if we could afford to leave everything definite to the experts. They do not seem to realize that whatever solutions they may devise, the final essential ingredient is the ordinary Canadian who controls Parliament. He must know how our economy works, what it can do at present and what it cannot do. He must know what good and evil various solutions can produce. He must have a working knowledge of our society sufficiently complete so that he is not made the easy prey of false prophets or mere reactionaries. He must not accept too little or expect too much all of a sudden. He must not be encouraged to high hopes that cannot be fulfilled, for he may well turn in disillusionment toward ruinous expedients.

The politicians have volunteered their general pledge of prosperity. Now let them tell us in detail what they really propose so that we can examine it and judge it and see if it suits us. Only in this way can we possibly prepare ourselves for our essential job of decision in the days ahead. Pie in the sky by-and-by is not good enough at a time like this.