EDITORIAL

EDITORIAL

KEN LEFOLII November 16 1963
EDITORIAL

EDITORIAL

KEN LEFOLII November 16 1963

EDITORIAL

Why the Economic Council won’t work if its important reports are hidden

HIDDEN REPORTS are beloved by almost everybody in public life: civil servants love to make them (no public responsibility); politicians in office love to get them (no public pressure); and politicians in opposition love to ferret them out (great public indignation). The public itself, on the other hand, views them — except in the special case of documents dealing with the security of the state — with suspicion or downright hostility, and the public is perfectly right. The reports that are most commonly hidden are those that deal with employment and economic growth; our livelihood and our prospects. There is almost never justification for politicians advised by bureaucrats to make economic decisions in the dark; not when there is a national forum of business managers and labor leaders, investors and ordinary electors, who together bring to bear a quality of judgment in economic matters that no government, democratic or despotic, can command.

No one recently has made this case with more energy than Walter Gordon did when, as a Liberal outside parliament, he criticized the late Conservative government’s intention to set up an economic board that would report privately to the responsible minister rather than publish its findings to the country. Now, however, as Liberal minister of finance, Mr. Gordon has apparently changed his mind — the Liberal Bill setting up our new Economic Council of Canada instructs the chairman to “report to, advise or make recommendations to the minister with respect (to its activities) as the circumstances require.” The council is also instructed to report once a year to parliament through the minister, and to publish an annual review of medium and long-term economic prospects and problems. Finally, the Act says the council “may (the italics are ours) cause to be published such studies and reports ... as it sees fit.” The Liberals’ council, then, is no more public a body than the Conservatives’ board was intended to be.

On the eminently able chairman of the new council, John Deutsch (see Peter C. Newman's first National Affairs column, page 2), rest the choices that may give the country a strong new instrument for stimulating economic growth, but that could merely give the cabinet yet another source of inside dope for their private consumption. Well, we urge Mr. Deutsch to see fit to publish a report or study

whenever his council has information to bring forward, or a case to make, that bears importantly on the public interest—to regard his council, in other words, as a public tribunal. Most tax and fiscal experts concede that the people at large play some part in shaping economic growth, but tax and fiscal experts in Canada, at least, have always assumed that their manipulations set the pace and the public follows it. Economic growth really works the other way around, and if Mr. Deutsch needs to convince anybody in Ottawa that this is so he can quote his opposite number in the United States, Walter W. Fleller, the chairman of the president’s Council of Economic Advisers. Heller, like Deutsch, is a distinguished academic economist; his council is in business to do the same job as Deutsch’s; the difference is that the Americans’ council had been advising U. S. presidents for almost fifteen years when Heller took over in 1960. Heller says:

“One of the keys to economic growth is the time-honored practice of plowing back profits. But recent studies carried out at the National Bureau of Economic Research at the RAND Corporation, the Massachussetts Institute of Technology, and other leading research centres in the United States indicate that less than half (again, the italics are ours) of the increased output and potential output since the turn of the century can be attributed to the increased labor force and the enormous increase in the volume of capital behind each worker. The other half is mainly accounted for by the growth of technical knowledge, the higher quality of the labor force, and the economies of large-scale production as national and international markets have expanded.

“These relatively abstract and invisible sources of economic growth suggest that we would do well to broaden our concept of social ‘capital’ beyond bricks and mortar, to include investment in education and training, and the stock of useful knowledge.”

Bricks and mortar, machine tools and mineral resources, fiscal measures and the flow of venture capital — we now have the RAND Corporation’s word for it, if we didn’t know it already, that these technical components account for less than half of the impetus to economic growth. The important half is the human one, the brains and skills and energy that go into running the economic machine. In other words, the public. We believe the new council should be a public tribunal because we believe the electors should know what the government is doing, and why, on this or any matter-of public concern; but from what Heller says it’s also clear that an economic council can only stimulate economic growth if it deals with the entire public — its schooling, its technical training, its incentives and interests. If the council isn’t a public tribunal, it wont work.

KEN LEFOLll