The unusual stresses and strains of the depression during the last four years have drawn attention more definitely to certain weaknesses in the financial structure of the Canadian federation. The province of Nova Scotia has performed a very valuable service in initiating an economic inquiry into Dominion-provincial relations as affecting that province. An inquiry such as this removes the problem from the realm of speculation and political expediency and relates it to the actual facts of the situation. It would be of great value if similar investigations were made by the other provinces into their own peculiar problems, followed by an examination of the whole question by an impartial body from the point of view of the Dominion as a whole. Investigations along this line have been carried out in the Commonwealth of Australia and a Commission appointed which has reported on the applications made by the states of South Australia, Western Australia, and Tasmania for financial assistance from the Commonwealth, based on certain disabilities affecting these states as a result of Commonwealth policy.

The financial arrangements made between the Dominion and the provinces at the time of Confederation were essentially in the nature of a compromise and designed to meet the situation as it then existed. This appears to have been more or less the situation in the original financial arrangements of practically all existing federations. Apparently, however, it was considered at the time of the Canadian Confederation that these arrangements would be of a somewhat permanent character. This optimistic view was early shown to be wrong when within two years it was necessary to make adjustments. Further, it was not anticipated at that time that there would be any change in the accepted functions of government. The prevailing idea was that the fewer functions surrendered by the individual to the government, the better. John Stuart Mill was still the authority, and his ideas with regard to the limitation of government marked the general line of thought. While there were those who took a wider view of the functions of government and who anticipated the collectivist movement of the last quarter of the century, the echo of this was at that time scarcely heard in Canada. There was no thought that many of the services now rendered to the community by governments would become necessary. Consequently, the division of authority, both political and financial, in the British North America Act, was based on a form of society and an idea of government which no longer exists.