During 1934 three countries of the British Empire established Central Banks. The Reserve Bank of India was established by an Act which received the Governor-General's assent on March 6 of that year; on July 3 assent was given to the Act to incorporate the Bank of Canada which opened for business in March, 1935; and on August 1, 1934, the Reserve Bank of New Zealand opened its doors. The fortunes of these new Central Banks will be keenly watched by those interested in central banking and the influence of monetary policy on economic welfare.

Only one British oversea Dominion has, as yet, any experience of the running of a newly-created Central Bank. In Australia, the Commonwealth Bank is a commercial bank which has acquired the functions of a Central Bank, but the Union of South Africa in 1920 established an entirely new bank, just as Canada has now done, and the fourteen years' experience of the Reserve Bank of South Africa may usefully be studied by those who are taking an interest in the future of the Bank of Canada. Indeed, in several respects there is similarity between Canada and South Africa; in neither country is there a developed money market for short loans, nor is there much scope for open market operations; both countries possess valuable gold fields; both are debtor countries; each is linked closely to a foreign financial centre, South Africa with London, and Canada with New York.

Optional payment bonds are a distinctive feature of the Canadian debt structure and give rise to a set of conditions quite peculiar to the Canadian economy.

As to the facts, it may be said that a very considerable proportion of Canada's federal, provincial, municipal, and corporate indebtedness has been issued with principal and interest payable at the holder's option in either or both London and New York funds as well as in Canadian currency. A smaller amount is payable in London only and in New York only. The proportionate distribution of Canadian public issues according to payment feature is estimated, very approximately, as follows:

Something over 55 per cent, of Canada's bonded indebtedness, therefore, has an external payment feature in some form or other.

These combinations of payment feature are the consequence of several rather clearly defined phases of our economic development. The historical aspects of our capital imports constitute a study in itself beyond the scope of this article. Suffice it to say that most of our “Canada and London” and “London only” debt was acquired in the years from 1900 to 1913, a period in which we were absorbing outside capital at a more rapid rate than any other capital-importing nation and depending for our requirements almost solely on the London money market.

The “correct” approach to the theory of distribution in economics is by way of a theory of productive organization; in fact, a sound distribution theory is hardly more than a corollary or footnote to an exposition of the mechanism by which resources are apportioned among different uses, and organized in each use, under the forces of price competition. The “sense” in economics as a subject for study is derived from the idea of increasing the efficiency of action (i.e., of “economy of resources”) through mutual rendering of services by individuals. Historically, the development of the science may be imputed to the realization that purchase and sale represent and mediate such an exchange of services; with a few individual exceptions, men seem never to have had this realization before the eighteenth century, but to have regarded it as axiomatic that what anyone gains in a pecuniary transaction, someone else must lose. Under analysis, a socially general effort to profit by exchange relations takes the form of a tendency toward a maximum (viewed as a state of equilibrium for the society as a whole) through the attraction of every increment of service capacity into its “best” use for the mutual advantage of both parties, i.e., the owner of the increment of capacity and the consumer of its service (who gets the service in exchange for that of some increment of capacity owned by him). If it is seen that this urge on the part of individuals as owners of service capacity is the organizing force in all price relations, and in the economic life which prices mediate and reflect, it becomes truistical to remark that the distribution of the product of all service capacity, considered as acting jointly, is on the basis of increments of yield.

Environment and heredity affect the development of the nation as much as they affect the development of the individual; and Canadian history is written, for the most part, around the conflicting forces of British inheritance and American propinquity. An excellent example of the latter is found in the low condition of Canadian political morality which was most conspicuous during the first fifty years of responsible government. While this was unmistakably national in many of its manifestations, its rise and continuance were due in no small measure to the proximity of the United States; and the temptation for the Canadian politician to emulate in a modest way the methods of a Tweed, a Croker, or a Philadelphia Gas Ring, proved in a deplorable number of instances to be irresistible. The prevalence of bribery at elections (particularly before the introduction of the ballot in 1874), the strengthening of the party position by the award of contracts and the appointment of supporters to office, the series of questionable “deals” and practices of which the Pacific Scandal was the most notorious—these were evidences of native sins which had received American inspiration and encouragement and which corrupted extensively Canadian political life.

In an earlier paper an attempt was made to isolate certain of the major population movements occurring in Canada during the last intercensal decade and to demonstrate their bearing on the current situation in, and the future outlook for, the country as a whole. Recently available provincial data have made possible the elaboration of the preceding analysis and the addition of many essential details to the picture. A summary of the more important findings from this supplementary study is given in part I. This article also affords an opportunity to make one or two minor revisions, the necessity for which was revealed when the provincial estimates were balanced against the earlier totals derived from figures for the Dominion as a whole.

I have read Professor Jackman's very long criticism of my two articles with the greatest of interest and with some relief. In each I tried to say things which appeared badly in need of expression. If this is the worst criticism I must face, then I feel very much more confident of the soundness of my general position. I can find very little in the above article which is not answered in what I have already written. In the main my answer is to ask those readers who may be interested to refer to my previous articles, but there are one or two points which may be dealt with briefly below.

The main assumptions which seem to underlie Mr. Jackman's criticisms of my article in the University of Toronto Quarterly are: (a) that all political and sectional pressures upon railway management would instantly cease if the Canadian National lines were turned over to the Canadian Pacific for administration; (b) that the continuous decline in gross revenues from 1928 through 1933 is, relatively, a factor of minor importance, the more permanent factor of competition between the two railways completely overshadowing it; (c) that a fruitful discussion of the present situation of the railways can be carried on without reference to the general economic balance of the country. In the light of our past history the first of these assumptions rises to heights of optimism to which I dare not aspire. If the millenium is to arrive after the Canadian Pacific and Canadian National lines are operated as one, far be it from me to stand against it.

There are here presented charts and tables of the prices of seven agricultural commodities, namely wheat, oats, barley, rye, eggs, butter, and cheese, which were assembled in the course of a study of comparative prices in Canada and the United States for the Carnegie Endowment for International Peace. Notes on the major influences determining the general trends of these prices are given by way of preface. It is hoped that the price data will prove of interest and value to other investigators. No discussion of the difficulties of compiling and comparing such price series is included; these difficulties are, of course, very great.

The five years 1850-5 may be taken as the turning point of the long decline in prices after the Napoleonic Wars. From 1840 to 1850 this decline had been particularly severe, the price level in Great Britain falling 28 per cent, and in the United States, 15.5 per cent. From various scattered records we may be certain that a similar drastic decline was experienced in Canada. The panic of 1847, followed by abundant harvests in Great Britain and the United States sent down prices for wheat sharply: in England from 50s. 6d. per quarter in 1848 to 38s. 6d. in 1851; in Canada from $0.875 per bushel in 1848 to $0.737 in 1852; and in the United States, from $0.85 to $0.708 in the same period. Poor harvests in 1852 and 1853, and the outbreak of the Crimean War in March, 1854, sent up the price of all foodstuffs, both in Canada and the United States.