¹ For the expression of this governmental aim and the proposed methods for achievement, see Department of Reconstruction, Employment and Income, with Special Reference to the Initial Period of Reconstruction (Ottawa, 1945)Google Scholar; also Dominion-Provincial Conference on Reconstruction, Proposals of the Government of Canada (Ottawa, 1945).Google Scholar

² By this term is meant no more than (1) the analysis of stabilization problems in terms of the receipts and expenditure components of the “gross national product” and the “national income” (or “net national product at factor cost”), and (2) the maintenance of aggregate demand at a level high enough to absorb full-employment national output. There is no intention to imply either general agreement on the procedural aspects of stabilizing aggregate demand, or lack of appreciation of the theoretical and practical limitations of Keynesian counter-cyclical policy. In the latter connexion, see, for example, MacGregor, D. C., “The Project of Full Employment and Its Implications” (in Canada after the War, Brady, A. and Scott, F. R., eds., Toronto, 1943).Google Scholar

³ Supporting evidence for this generalization can best be gleaned from the House of Commons Debates, the Proceedings of the House of Commons Select Standing Committee on Banking and Commerce, and the annual addresses of Canadian bank officials to shareholders’ meetings.

⁴ See, for example, MacGregor, D. C., Rutherford, J. B., Britnell, G. E., and Deutsch, J. J., National Income, A Study Prepared for the Royal Commission on Dominion-Provincial Relations (Ottawa, 1939).Google Scholar For a historical and analytical account of the development of national income measurement techniques in Canada, see Goldberg, S. A., “The Development of National Accounts in Canada” (Canadian Journal of Economics and Political Science, vol. XV, no. 1, 02, 1949, pp. 34–52).CrossRefGoogle Scholar

⁵ Among the studies alluded to above are the following: Innis, H. A. and Plumptre, A. F. W. (eds.), The Canadian Economy and Its Problems (Toronto, 1934)Google Scholar; Inman, M. K., Experience in Canadian Banking, 1929–1934, unpublished Ph.D. Thesis, Cambridge, Mass., 1938 Google Scholar; Final Report of the National Employment Commission (Ottawa, 1938)Google Scholar; Petrie, J. R., The Tax Systems of Canada, unpublished Ph.D. Thesis, Montreal, 1940 Google Scholar; Report of the Royal Commission on Dominion-Provincial Relations (Ottawa, 1940)Google Scholar; S. Bates, Financial History of Canadian Governments, and Knox, F. A., Dominion Monetary Policy, 1929–1934, studies prepared for the Royal Commission on Dominion-Provincial Relations (Ottawa, 1939)Google Scholar; Plumptre, A. F. W., Central Banking in the British Dominions (Toronto, 1940)Google Scholar; Bryce, R. B., “The Effects on Canada of Industrial Fluctuations in the United States” (Canadian Journal of Economics and Political Science, vol. V, no. 3, 08, 1939, pp. 373–86).CrossRefGoogle Scholar

⁶ Typical of this group of writings are the following: Parkinson, J. F. (ed.), Canadian War Economics (Toronto, 1941)Google Scholar; Plumptre, A. F. W., Mobilizing Canada's Resources for War (Toronto, 1941)Google Scholar; Higgins, B. H., The War and Postwar Cycle in Canada, 1914–1923, Report Submitted to the Advisory Committee on Reconstruction (Ottawa, 1944)Google Scholar; Higgins, B. H., Canada's Financial System in War (National Bureau of Economic Research, Occasional Paper 19, 04, 1944)Google Scholar; Employment and Income, and Proposals of the Government of Canada; Dominion-Provincial Conference on Reconstruction, Public Investment and Capital Formation, and Comparative Statistics of Public Finance (Ottawa, 1945)Google Scholar; MacGregor, “The Project of Full Employment”; Deutsch, J. J., “War Finance and the Canadian Economy, 1914–1920” (Canadian Journal of Economics and Political Science, vol. VI, no. 4, 11, 1940, pp. 525–42)CrossRefGoogle Scholar, and J. R. Beattie, “Some Aspects of the Problem of Full Employment” (ibid., vol. X, no. 3, Aug., 1944, pp. 328–42).

⁷ For purposes of brevity, the term Report will be henceforth used throughout this review.

⁸ On the evolution of federal-governmental research in Canada, see Firestone, O. J., “Government Economic Intelligence in Canada” (Public Affairs, vol. XII, no. 1, Spring, 1949, pp. 5–11).Google Scholar For an interesting discussion on the related problems presented by academic research in the social sciences, see the article by B. S. Keirstead, “Research in the Social Sciences in Canadian Universities” (ibid., pp. 19–22).

⁹ For an interesting and sobering treatment on the problem of the reliability of contemporary techniques for measuring national income, see MacGregor, D. C., “Recent Studies on National Income” (Canadian Journal of Economics and Political Science, vol. XI, no. 1, 02, 1945, pp. 115–29, and vol. XI, no. 2, May, 1945, pp. 270–80).CrossRefGoogle Scholar

¹⁰ “In national accounting, as in any other field, the statistician has a responsibility to ensure that his data reflect, and do not distort, reality. At the same time, he must avoid being perfectionist. Information should not be withheld merely because it is approximate. If it is useful and believed to be reasonably correct, it should be published if there is no chance of better data becoming available in the near future” ( Goldberg, , “Development of National Accounts in Canada,” p. 37 Google Scholar).

¹¹ Appendix A—“Supplementary Statistical Tables”; Appendix B—-“Note on the Steel Shortage in Canada”; Appendix C—“Note on Investment and Prices in the United States—Review and Outlook.” Space does not permit a detailed review of these appendices. It should be mentioned, however, that Appendix B provides the interesting background against which the role of steel in the postwar Canadian investment boom may be appraised; and that Appendix C, by way of emphasizing the similarity of factors operating in the American postwar investment boom, lends further support to the cautious optimism pervading this Report.

¹² For the complete list of these investigations, see Firestone, “Government Economic Intelligence in Canada,” p. 11, n. 4. The quotation is from page 10.

¹³ These include, in addition to the studies referred to above, Public Investment and Capital Formation, and Comparative Statistics of Public Finance; and the Dominion Bureau of Statistics, National Accounts: Income and Expenditure, 1926–1947 (Ottawa, 1948).Google Scholar

¹⁴ As noted in the Report, a more detailed definitional discussion may be found in Public Investment and Capital Formation.

¹⁵ For 1947, gross home investment exceeded domestic gross investment by $172 million (p. 29 of the Report).

¹⁶ Compared with 1929, the current investment programme is more than twice as much in value terms and about one-third more in volume terms; compared with 1939, the increases are fourfold and twofold respectively (p. 9).

¹⁷ “If business investment were to drop only 15% in volume it would mean a public works program double the current size. On the other hand, if government were to exercise full control over public investment by Crown corporations, institutions, and other independent agencies, a 15% drop of business investment would require an increase of about half of all public investment outlay to compensate for the slack created” (p. 36).

¹⁸ The main reasons for this backlog are indicated on page 9 above.

¹⁹ The Report makes no use of the term, “multiplier”. One of its major concerns in Section IV, however, is the fact that “an increase in the volume of investment will be associated with subsequent increases in the volume of consumer expenditure and levels of employment and income” (p. 120).

²⁰ That the long-run analysis in the Report is also defective, is shown later in this review (p. 22).

²¹ On the question of housing development, the writers of the Report are careful to emphasize that, “in spite of the record proportions which the current housing boom has reached—almost twice as many units are being built in 1948 as in 1939—the present rate of house-building is only slightly higher than the number of new families coming into existence. As remarkable an industrial accomplishment as the present housing program is, it has done little to reduce the aggregate pressure for added and improved housing accommodation built up during the depressed thirties and the war period of the forties” (p. 16).

²² Relatively brief reference is made, in this section, to the extremely cautious postwar inventory policy of Canadian businessmen; to the intense postwar consumer demand for housing; to the two opposing consumer views with regard to business investment; and to the almost equal division of the financing of the housing programme as between individuals and government and lending institutions (pp. 147, 148, 153).

²³ This proportion was slightly higher in 1946.

²⁴ The controversy over savings-investment equality is too familiar and too involved to be discussed in this review. One of the shortest and best treatments of the subject may be found in Mansen, A. H., Economic Policy and Full Employment (New York, 1947), chap. III.Google Scholar

²⁵ Cognizance is taken, in the Report, of the qualifications that a government surplus would not have a net deflationary effect if the excess purchasing power siphoned off through taxation were replenished, for example, by individuals and institutions using the proceeds of public-debt retirement to increase private capital expansion; or if a shift occurred in the composition of government expenditure in the direction of goods and service in short supply. Not mentioned in the Report, though equally important, is the deflation-offsetting tendency brought about if idle savings are tapped by taxation; also the corresponding exceptions which must be applied to the general rule that a government deficit is inflationary.

²⁶ “The task ahead is not an easy one. It will require a great deal of fiscal wisdom and adequate consideration of the best allocation of resources to steer a middle course of finding a balance between personal savings and business savings, government surpluses or deficits, and investment, both civilian and preparedness, which would avoid extremes resulting in the one instance in shortages and inflation, or unemployment and low incomes on the other. No fixed formula exists to determine such a course, and a great deal of further experimentation and study is needed. In this effort, initial setbacks tending in the direction of either of the two extremes appear to be unavoidable” (p. 160).

²⁷ The truth is that, by and large, the fiscal policy pursued by the Dominion government during the interwar period was such as to intensify economic fluctuations in Canada. (See for example, Urquhart, M. C., “Public Investment in Canada,” Canadian Journal of Economics and Political Science vol. II, no. 4, 11, 1945, pp. 535–53CrossRefGoogle Scholar; also, Higgins, B. H., Public Investment and Full Employment, International Labour Office, Montreal, 1946, chap. XI.Google Scholar)

²⁸ The Report shows that, in the housing field, the tremendous pressure of postwar demand for accommodation caused social need to take precedence over economic stability as the guiding principle of public policy. The result was an all-out government effort to expand housing facilities. It was inevitable that such policy would have inflationary repercussions. However, judgment on this issue, as pointed out in the Report, must be tempered by the realization that the government was aware of, and tried to soften, these repercussions; and that, in view of the tight demand-supply situation in the whole of the construction industry at war's end, as well as the relatively weak position of consumers’ financing housing, the absence of special government measures would have meant an even greater scarcity of resources needed for housing expansion than actually prevailed, and, consequently, higher housing prices and a lower volume of housing.

²⁹ In this connexion, the Report singles out for treatment the special depreciation provisions used by the government in an attempt “to encourage the rapid expansion of certain industries, particularly manufacturing and some primary industries, in the transition period “(p. 179).

³⁰ As examples of this deflationary policy, the Report cites the following: (1) the budget surpluses of 1947 and 1948; (2) the moderate tightening of the easy-money policy; (3) the discontinuance of the special depreciation provisions; (4) the allocation and export prohibition of scarce materials; (5) the Emergency Exchange Conservation Act of 1948; and (6) appeals for restraint addressed to Canadian businessmen.

³¹ According to the Report, a 10 per cent cut in investment would, at most, have prevented the cost-of-living index from rising by 2 or 3 per cent.

³² These difficulties have been widely discussed in the literature. (See, for example, Kuznets, S., National Income and Its Composition, 1919–1988, New York, 1941, chap. IGoogle Scholar; and Shoup, C. S., Principles of National Income Analysis, Cambridge, Mass., 1947, chap. I.Google Scholar A brief discussion, from the Canadian point of view, may be found in Goldberg, “Development of National Accounts in Canada.”)

³³ Especially great, of course, is the statistical difficulty of isolating the cause-effect variables—for example, assessing the degree of multiplier-accelerator interaction in the relationship between investment and income. (See Plumptre, Central Banking in the British Dominions, chap. XV, for a brief quantitative analysis in Canadian terms; also Munzer, E., “Exports and National Income in Canada,” Canadian Journal of Economics and Political Science, vol. XI, no. 1, 02, 1945, pp. 35–47).CrossRefGoogle Scholar Nevertheless, governmental research apparently is making some headway in the application of econometrics to Canadian income-employment problems (see Firestone, , “Government Economic Intelligence in Canada,” p. 9).Google Scholar

³⁴ Both these problems receive some attention in the Report (pp. 122, 123, 164, 173, 174, 176).

³⁵ An interesting discussion of these changes is contained in Forsey, E. A., “Trade Union Policy Under Full Employment” (Canadian Journal of Economics and Political Science, vol. XII, no. 3, 08, 1946, pp. 343–55).CrossRefGoogle Scholar

³⁶ An encouraging note, in connexion with future governmental attempts at such stabilization, is sounded by the Report in its emphasis upon the strong recuperative powers of, and elements of stability in, Canadian private investment, as evidenced by experience since the end of World War II.

³⁷ By this is meant not the stimulative effects of military-preparedness spending (though that, too, looms large on the world economic horizon) but that the extreme gravity of the current world-trade crisis may make it necessary for the Dominion to adjust itself to a drastically reduced level of international specialization. This would, of course, be a serious development, fraught with danger to Canada's economic well-being. The hard realities of the situation, however, are hardly such as to justify the reluctance of Canadian economists to face up to the problem or to the gap-filling potentialities of domestic investment. (See, for example, the otherwise excellent papers in Gibson, J. D. (ed.), Canada's Role in a Changing World, (Toronto, 1948.Google Scholar)

³⁸ Stated in Robertsonian terms, it may be that “it is not sufficient… that savings of yesterday be invested today, or as it is often expressed, that investment offset saving. Investment of today must always exceed savings of yesterday. A mere absence of hoarding will not do. An injection of new money (or dishoarding) must take place every day. Moreover, this injection must proceed, in absolute term at an accelerated rate. The economy must continuously expand” ( Domar, E. D., “Expansion and Employment,” American Economic Review, vol. XXXVII, no. 1, 03, 1947, p. 42).Google Scholar This contention, ignored by the writers of the Report in their analysis of long-run investment effects, forms the basis of the interesting Domar article, from which the author concludes that “the maintenance of a continuous state of full employment requires that investment and income grow at a constant annual percentage (or compound interest) rate equal to the product of the marginal propensity to save and the average (to put it briefly) productivity of investment” (ibid., p. 41).