¹ Timlin, M. F., “Recent Developments in Canadian Monetary Policy,” American Economic Review, 05, 1953.Google Scholar

² It is only fair to add that some of the most senior civil servants sincerely welcomed this revival of monetary criticism in Canada.

³ Canada, House of Commons Debates,1936, p. 3260.Google Scholar

⁴ Ibid., 1941, p. 3377.

⁵ Ibid., 1941, p. 3936.

⁶ Neufeld, E. P., Bank of Canada Operations and Policy (Toronto, 1958), 10–12.Google Scholar

⁷ H. of C. Debates, 1951, p. 4393.Google Scholar

⁸ Standing Committee on Banking and Commerce, Minutes, 1954, 714, 883.Google Scholar

⁹ Ibid., 1348.

¹⁰ Neufeld, E. P., Bank of Canada Operations and Policy (Toronto, 1958), 13.Google Scholar Professor Neufeld also argues that steady progress towards this position is demonstrable from the historical record. “The Bank,” he says (p. 4), “was originally thought of as being subject only to the ultimate supremacy of Parliament, but the idea developed, in fairly distinct stages, that the Bank not only should be subject to the government of the day but should be, in fact, the instrument for implementing the policy of that government.” With this I would disagree. It seems to me that Mr. Dunning's statement of 1936 was almost as definite as Mr. Towers' and Mr. Abbott's in 1954. And we should not forget Mr. Ilsley's extemporaneous gaffe of 1941.

¹¹ Professor Neufeld has himself noted this. See his “The Bank of Canada and the Radcliffe Report,” Saturday Night, 10 24 Google Scholar, 1959, 10, and “Disowning Canada's Dear Money,” Banker, 11, 1959, 667.Google Scholar

¹² H. of C. Debates, 1956, p. 7351.Google Scholar

¹³ Ibid., 7352.

¹⁴ Ibid., 7352. It is interesting to note that the specific issue which engendered this exchange–the raising of Bank Rate and the responsibility therefore–was nicely obscured a few months later when the Bank of Canada announced (Nov. 1, 1956) that it would no longer set Bank Rate but allow it to be determined automatically at ¼ per cent above the latest Treasury Bill Rate as determined by the weekly auction of bills. Thus ultimate responsibility for Bank Rate was given a triple play-from Government, to Bank, to market. Or perhaps it was a version of the hidden ball trick, which seems to be in growing favour in official circles in Canada. When the authorities are unwilling to bear responsibility for anything, blame is placed on either the United States or the law of supply and demand. Both of these have the supreme merit of being beyond the control of Parliament.

¹⁵ ibid., 7457 ff.

¹⁶ Ibid., 1959, p. 3098.

¹⁷ Ibid., 3098–9.

¹⁸ Ibid., 3123.

¹⁹ See, e.g., his speeches to the Canadian Life Insurance Officers Association on May 26, to the Atlantic Tax Conference on October 20, and to the Canadian Tax Foundation on November 20. Mr. Fleming admitted, upon occasion, that “while the Government has no direct control over money supply and the volume of credit, nevertheless its fiscal and debt management policies unquestionably affect the total credit situation.” (Speech to the Empire Club of Canada, Toronto, Oct. 8, 1959, 6. See also his speech to the Annual Convention of the Union Commerciale Mauricienne, Inc., Shawinigan, Nov, 4, 1959, p. 7, where the same sentence is repeated.) Such admissions however were invariably accompanied by a reassertion of his doctrine of demarcation of responsibilities and were, clearly, not regarded by him as weakening that doctrine in any way.

²⁰ H. of C. Debates, 1960, pp. 2353 ff.Google Scholar

²¹ My italics.

²² Text of address in the Nation's Business series of the CBC, Oct. 1, 1959, 4.

²³ For example, (a) it should be noted that departments too are created by act of Parliament; (b) if one sees great significance in the corporate form of the Bank, one must also remember that the Minister of Finance is its only shareholder.

²⁴ This has been the clearly expressed view of a number of official inquiries in various countries. See, e.g., Royal Commission on Canada's Economic Prospects, Final Report (Ottawa, 1957), 432–3Google Scholar; Commission on the Organization of the Executive Branch of the Government, Task Force on Regulatory Commissions (Washington, 1949)Google Scholar, chap, xi; Joint Committee on the Economic Report, Monetary Policy and the Management of the Public Debt, Part I (Washington, 1952)Google Scholar; Committee on the Working of the Monetary System, Report (London, 1959), 109–110, 273–4Google Scholar, and passim.

²⁵ Bank of Canada, Annual Report, 1958, 4.Google Scholar In his speech to the Retail Merchants' Association in Saskatoon, March 22, I960, Mr. Coyne said: “We had a very large increase in the quantity of bank money in Canada in 1956, for reasons connected with the management of the public debt and the financing of the large government deficit” (p. 12).

²⁶ On March 31, 1958, the security holdings of the UIF account were as follows, arranged in order of time to maturity: less than 2 years, $41.1 million; 2 to 4 years, $127.1 million; 4 to 10 years, $231.9 million; 10 to 15 years, $106.4 million; 15 years and over, $227.5 million; Total, $734.0 million. (Source: Public Accounts of Canada, 1958, I, K-26. The figures given are book values.) No competent private trustee would have held such long-term assets for a client whose liabilities were short-term. Conservative trustees usually err in the opposite direction.

²⁷ The Annual Report of the Bank for 1959 contains no discussion of the withdrawal of bills beyond the oblique reference that “the upward push on interest rate levels came to a head in late summer” (p. 37). The reason for this remarkable omission of what was undoubtedly the most important act of monetary policy during the year was perhaps an undue scrupulosity on the Bank's part concerning the demarcation of responsibilities between itself and the Department of Finance. It is difficult to tell whether this omission was due to the Bank's desire to accommodate itself to Mr. Fleming's demarcation or whether it had become “more Catholic than the Pope.” At any rate, a reader who depends on the Annual Report of the Bank of Canada to inform him concerning the year's monetary policies will be left singularly uninformed about the most important event of 1959.

²⁸ The following references may be of some value to the reader who wishes to examine some of this literature: J. E. Hodgetts, “The Public Corporation in Canada,” Public Administration, winter, 1950, and “Responsibility of the Government Corporation to the Governing Body” in Institute of Public Administration of Canada, Proceedings, 1953; McLeod, T. H., “Administrative and Constitutional Problems Peculiar to Crown Corporations” in Institute of Public Administration of Canada, Proceedings, 1956 Google Scholar; Musolf, L. D., “Canadian Public Enterprise: A Character Study,” American Political Science Review, 06, 1956 Google Scholar, and Public Ownership and Accountability: The Canadian Experience (Cambridge, Mass., 1959)Google Scholar; Willson, F. M. G., “Ministries and Boards: Some Aspects of Administrative Development since 1832,” Public Administration, spring, 1955 Google Scholar; The Commission on Organization of the Executive Branch of the Government, Task Force Report on Regulatory Commissions (Washington, 1949)Google Scholar; Friedmann, W., ed., The Public Corporation: A Comparative Symposium (Toronto, 1954).Google Scholar

²⁹ I am neglecting here the other practical advantages that are claimed for the independent agency device such as freedom and flexibility in its establishment, its superior advantages in competing for senior personnel with private business, etc. These do not seem to me to be compelling reasons-we would not accept such a distinct deviation from the principles of responsible government on grounds of this sort.

³⁰ Dawson, R. MacG., The Government of Canada (Toronto, 1954), 291.Google Scholar

³¹ Ibid., 289.

³² This was recognized officially in 1949 when the number of the Board was raised from eleven to twelve in order, in the words of the Parliamentary Assistant to the Minister of Finance, “to accommodate one Newfoundland Director ( H. of C. Debates, 1949, p. 646 Google Scholar).

³³ The Act says that the aggregate of fees payable to the Board is limited to $30,000 per annum. 2–3 Eliz. II, c. 33, s. 4.

³⁴ Hodgetts, J. E., “The Public Corporation in Canada” in Friedmann, , ed., The Public Corporation, 77.Google Scholar

³⁵ The government could also, of course, “pack” the Board with men who understand that they are to vote against reappointment of the Bank's officials when the time for reappointment comes. This would take some time, however, and in my view ought not to be regarded as a serious weakness in the position of the Bank's management.

³⁶ In 1958 the Bank's profit was $88.6 million; in 1959 it was $74.0 million.

³⁷ TOne of the reasons that was given for the exclusion of the Bank of Canada from the Financial Administration Act of 1951 was that “it is not expected that it will call upon the government for financial assistance” (H. R. Balls, Special Assistant (Accounting), Dept. of Finance, in his evidence on this legislation at committee stage; House of Commons, Standing Committee on Public Accounts, Proceedings, 12 11, 1951, p. 103).Google Scholar The Bank however is not at all unique in this respect. Of the twenty-nine Crown corporations reported in the Public Accounts of Canada, II (1958)Google Scholar, more than half reported operating profits for the year 1957. The Bank's profit however is much larger than that of other Crown corporations.

³⁸ Of the Crown corporations whose accounts are contained in Public Accounts of Canada, II (1958)Google Scholar, all but four present operating statements, in varying detail. These four are the Park Steamship Co. Ltd., the Canadian National Railways Securities Trust, the St. Lawrence Seaway Authority, and the Bank of Canada. An operating statement is presented for the Industrial Development Bank, which is a wholly owned subsidiary of the Bank of Canada.

³⁹ Its present attitude to the foreign exchange market, for example, is not accurately described by the phrase “to control and protect the external value of the national monetary unit.”

⁴⁰ P. 3.

⁴¹ In its Annual Report for 1959 the Bank noted that “at the present time the central bank is the only agency in Canada which is charged by statute with the duty of conducting its operations in such a way as to promote price stability, rising employment, and economic growth.” However, it went on to remark (p. 5) that this should not be construed to mean that the Bank can accomplish such objectives alone and unaided by means of monetary policy.

⁴² Speech to Retail Merchants' Association, Saskatoon, March 22, 1960, 18.

⁴³ “The Public Corporation in Canada,” Public Administration, winter, 1950.Google Scholar

⁴⁴ Dawson, , The Government of Canada, 288.Google Scholar

⁴⁵ Public Ownership and Accountability.

⁴⁶ The Governor of the Bank of Norway recently pointed out that the existence of an independent central bank might, indeed, contribute to monetary debasement by providing a screen behind which a government can pursue unsound fiscal policies without bearing the full responsibility for the results. Brofoss, Erik, “The Status of the Central Bank in Constitutional and Administrative Law,” Norges Bank Bulletin, 12 15, 1959, 97.Google Scholar

⁴⁷ “Administrative and Constitutional Problems Peculiar to Crown Corporations,” 159.

⁴⁸ Plumptre, A. F. W., Central Banking in the British Dominions (Toronto, 1947), 24.Google Scholar

⁴⁹ Ibid., 28.

⁵⁰ Some students of the question have given this point a very large significance however. Professor Balogh, for example, has argued that there is an “overwhelming” case for maintaining the outward appearance of an independent central bank (while stripping it completely of any real independence) on the ground that the central bank must deal with commercial banks, other private financial institutions and other central banks. See Committee on the Working of the Monetary System, Principal Memoranda of Evidence (London, 1960), III, 33 Google Scholar, and Minutes of Evidence (London, 1960), 747.Google Scholar

⁵¹ Some might question whether this is a proper function for a central bank governor at all. Mr. Hugh Dalton, for example, has argued that the governor should remain always behind the scenes, and that when he or other bank officers make public comments the government should take responsibility for them as it should in the case of (other) civil servants. See Committee on the Working of the Monetary System, Principal Memoranda of Evidence, III, 70.Google Scholar

⁵² This view is, in fact, taken by some students of the question. Professor McLeod regards the existence of Crown corporations and other independent agencies as merely befogging the issue of responsibility. He goes so far as to suggest that their independence serves no useful function and that the whole structure of such institutions should be pulled down in the interests of responsible government. See his “Administrative and Constitutional Problems Peculiar to Crown Corporations.”

⁵³ This principle also requires, of course, that the heads of these agencies be men of moral strength and courage. If they are not, the independent agency becomes a cloak for the minister s power rather than a buffer against it, in which case it is inferior even to the ordinary department in achieving the objective for which it was established.

⁵⁴ This is, of course, a matter of degree. In a sense it may be said that a government uses all its departmental and other powers to create political support and it may and does use certain departments, such as Public Works, to create it in specific places by specific acts. But such a use of power is not dangerously subversive of the democratic process, as a politically controlled Auditor General and Chief Electoral Officer would clearly be.