In a period of sudden and fairly rapid change it sometimes requires a conscious effort to retain proportion and perspective. I have therefore resisted the obvious temptation to call my paper “New Resources and Their Effect on the Prairie Economy.” Such a title might suggest fundamental and far-reaching changes that could not be verified by an examination of current economic realities. Even more important perhaps it would tend to obscure great differences in the discovery and exploitation of new resources in the three Prairie Provinces, differences which are sharply reflected in varying rates of economic diversification and growth. Finally, it is important to perspective that the continuing contributions of older resources be accorded appropriate recognition. It would seem that proportion would be best ensured by starting with an evaluation of the older resources, moving on to an appraisal of the new, and concluding with an attempt to interpret present and possible future trends for the prairie economy as a whole. In such an approach, and at the risk of wearying my listeners, much of the analysis must be essentially quantitative in its nature.

Among the several inductive studies of the international transfer mechanism, Professor Viner's investigation of Canada's foreign borrowings in the period 1900–13 has provided the most convincing substantiation of the classical price-specie-flow mechanism. Yet, on the theoretical level, the neo-Keynesian theory of international trade now makes it difficult to accept the classical view of the transfer process as a complete explanation. And, on the empirical level, the availability of more comprehensive statistics and further research in Canada's economic history now allow us to understand in greater detail the forces of economic growth which were particularly strong in Canada during the years of foreign borrowing. Should we not therefore attempt to supplement Professor Viner's study by recognizing the relevance of income analysis and the historical context of economic development?

To place Professor Viner's study in this wider frame of analysis is the objective of this paper. Section one briefly recalls the conclusions of Professor Viner's investigation. The second section establishes some significant features of Canada's economic development, while the final section relates these features to the operation of the transfer mechanism and revises Professor Viner's interpretation.

This paper owes its origin to pure curiosity on the part of the writer about the construction placed upon the National Emergency Transitional Powers Act, 1945, by the Judicial Committee of the Privy Council. It is somewhat remarkable that eleven eminent Canadian jurists out of thirteen should agree substantially in their interpretation of this Canadian statute and that their opinions should be decisively, one might say emphatically, rejected by the Committee.

The Nolan Case, as it is commonly known, came before the Chief Justice of the Trial Division of the Court of King's Bench of Manitoba in March, 1948. The question to be determined was whether the Canadian Government, acting through the Wheat Board, could legally appropriate 40,000 bushels of western barley belonging to a grain merchant named Nolan under the powers conferred upon it by the National Emergency Transitional Powers Act. The trial judge in a closely argued opinion held that the federal administration had exceeded its powers. This decision was appealed by the Government in the Manitoba Court of Appeal where the five justices, unanimously and in strong terms, upheld the verdict of the trial court. On a further appeal to the Supreme Court of Canada five Supreme Court justices, including the Chief Justice, out of seven who sat on the appeal, rejected the contentions of the Government.

Contemporary industry and society have brought major changes to the economic and social life of the Indians of British Columbia. Most tribal cultures were built upon a simple small-scale base. The tribal band was typically small and closely knit with personal relationships; the individual's status and role were clearly defined, and his activities regulated by tradition. Hunting, fishing, and gathering supplied a livelihood. Equipment and techniques were generally simple and static. Most of the output was for the local community's own use: only a small fraction was bartered for the products of other groups.

The new economic system and the way of life associated with it is almost the direct antithesis of the tribal system outlined above. Today the Indian is involved in a large-scale and increasingly complex system of production and distribution, characterized by dynamic, rapidly changing techniques, a steadily increasing use of automatic power-driven machinery, and a growing production for national or international markets rather than for local use. As worker or producer he has, with few exceptions, lost his direct ownership of, or control over, his means of production. Relationships, defined increasingly by the market rather than by custom, have become more impersonal.

Comparatively few Indians have managed to derive full advantage from the new way of life. Tribal cultures have been disorganized or destroyed, and with them has gone the whole structure of role and status that made life meaningful for individuals. Indians have faced formidable difficulties in acquiring the economic incentives of the white man's culture, and the equipment and techniques with which to meet them. The result has been, in all too many cases, deterioration of morale, apathy, and economic dependency. Indians have become a marginal labour group in many areas: living on reservations, depending upon the government for a large part of their subsistence, and employed only casually in unskilled or menial jobs of a type that other workers avoid.

R. F. Kahn's recent review article on the literature of “full-cost pricing” brings out the fact that the controversy which began with the article by Hall and Hitch in 1939 remains unresolved. Because the actual pricing of manufactured products takes place within a very restricted range of plant capacity, and under dynamic conditions which limit the entrepreneur's horizon, some writers have argued that the pricing process is necessarily arbitrary and based on rule of thumb. Most theorists, on the other hand, maintain that, however restrictive the data from which business-men form their decisions, the pricing process may be interpreted by marginalist concepts of profit maximization.

The gap between these points of view has been substantially narrowed in recent years. Extended subdivision of the theory of imperfect competition into individual market situations has brought that theory close to the methodology of “industry studies,” at least of those studies which have included some attempt at generalization. There remain, however, several obstacles to closing the gap between the deductive and the inductive analysis of the price mechanism. In particular, the available data are usually so unrefined that appeals to empirical cost and revenue schedules are misleading, or inconclusive, or contradictory. Joint costs, indeterminate demand schedules, and the natural reluctance of producers to reveal their private information all hinder the theorist searching for empirical support. In the face of these formidable difficulties some economists (notably the exponents of full-cost pricing) have turned to the technique of the questionnaire. This procedure is open to a serious methodological criticism: information derived from questionnaires is more likely to reveal the entrepreneur's idealized conception of his own behaviour than to show what his behaviour actually is. The phrases “usually full cost,” “cost is the normal guide,” or “the initial guide” recur throughout the replies to the Hall-Hitch questionnaire. These qualified answers are unrevealing for the same reason that the Marshallian long run (when all the various forces have had time to work themselves out) is a poor guide to real-world price determination. Normative statements such as those obtained in the studies mentioned above cannot be regarded as empirical data.

Over the three decades of teaching and research allotted Harold Innis, no subject concerned him more than, the state of economics. He looked to economic history to enrich and broaden economic thought, and he sought to explain fashions in economics and to make economists intelligible to themselves. Although Veblen's influence left its mark on his work, Innis remained throughout a disciple of Adam Smith and no name appears more frequently in his observations on economics past and present. His plea was, as he put it, for “a general emphasis on a universal approach” and in his unfinished paper he writes, “The economic historian must test the tools of economic analysis by applying them to a broad canvas and by suggesting their possibilities and limitations when applied to other language or cultural groups.”

Apart from this search for perspective in economic thought there were other elements of continuity in Innis's thinking which give his life's work a coherence and a unity whether his interest centred on Canadian economic history or the duration powers of empires. It is scarcely necessary here to refer to his dislike of concentrations of power in any form or to his uncompromising belief in the free and creative powers of the individual, attitudes which stamp his research from beginning to untimely end. In his writings on economic history, technological change, free or controlled, links past and present. In his more specific references to economics, the pricing system provides the key to his reflections on the state of the subject. Early in his work there is present the same price-technology dichotomy that is to be found throughout Veblen's writings; later Innis sought to resolve this dichotomy in his studies of communication in which he saw technology and pricing as elements interacting with politics, law, and religion in a larger network of human relationships.

This paper is to be considered as a prelude to the trip which the writer plans to make to the Labrador in July and August of this year (1953), with the help of the Fisheries Board and other friends. The trip is a continuation of one made around the coast of Newfoundland in 1952, including visits to Corner Brook, Grand Falls, and Buchans.

The present status of Dominion-provincial arrangements is the consequence of the constitutional and administrative decisions made in 1867 as developed over subsequent decades and the course of economic, social, and political developments and the correlative budgetary changes in both federal and provincial fields. The purpose of this paper is to set out the historical objectives of Dominion-provincial financial policies, to examine the shifts which have occurred in these objectives from time to time, and to attempt a statement of the appropriate objectives in the Canadian system. Much of the subsequent argument has to do with the fiscal consequences of federalism in Canada and with the fact that changing circumstances have imposed on the junior levels of government, and to some extent on the federal Government also, financial responsibilities which it was not originally contemplated they would have to bear.

The allocation of functions between the Dominion and the provinces by the Act of 1867 was clearly intended to place on the Dominion those which financially were the most onerous. The heavy costs of development, including the public debt, national defence, and national government were to be borne by the Dominion, while the supposedly lighter costs of public welfare, education, provincial development, and provincial administration were given to the provinces. On the revenue side, the lucrative taxes—customs and excise—were given exclusively to the Dominion and the direct taxes also were given to the Dominion, though not exclusively, to use if it so desired. The provinces were limited to direct taxes, which, with the exception of real property taxes, it was supposed they would be reluctant to use, and to the relatively unproductive licences, fees, and fines. While the federal Government was to pay annual grants to the provinces, the Act of 1867 stipulated that “such grants shall be in full settlement of all future demands on Canada.” This interpretation of intention at Confederation is accepted generally by the historians of the period and is supported by many statements of participants in the Confederation debates. In the period immediately following Confederation these objectives were realized.

Shortly after the outbreak of war in 1939 foreign exchange control was imposed to maintain exchange stability and to conserve Canada's reserves and prospective receipts of foreign exchange so that they might be used in the first instance for purposes deemed to be in the national interest. An ancillary objective related to war financing was to prevent the demoralization of Canadian securities markets through panic sales by non-residents in moments of crisis. While the control was directed essentially against exports of capital by residents and non-residents, the instruments of control applied equally to current and capital transactions and the power given to the Board of regulating current transactions was exercised restrictively on occasion, notably in the case of travel. Of necessity the machinery of control was elaborate because it had to be all-embracing but it rested on five basic rules: (1) Permits were required for payments by residents to non-residents. (2) Permits were required for the export of funds by travellers. (3) Permits were required for change of status from resident to non-resident. (4) Residents were required to sell to an authorized dealer all foreign exchange accruing to them. (5) Payment in an appropriate manner and in a currency designated by the Board was required for exports of goods, services, and securities, and for anything of value transferred from a resident to a non-resident whether in Canada or abroad.

Few today would deny the necessity for subordinate legislation. The true business of Parliament remains the debate over the major principles of policy, but Parliament has neither the technical skill nor the time to process the mass of detailed regulation. Nevertheless, even with a sound division of function between Parliament and the departmental sources of delegated legislation, a serious problem remains. The initiative in the framing of public policy has passed to the bureaucracy, and machinery is required to ensure that bureaucratic legislation may receive the same debate, criticism, and review as ordinary legislation. The objective of administrative reform has been to safeguard the public against bureaucratic tyranny by three devices: (a) systematic publication of subordinate legislation; (b) opportunity for parliamentary review; and (c) continuance of judicial review of the scope of delegated authority.

In the United Kingdom, where these matters are more highly developed than under any other parliamentary system, the first two of these requirements are met by the Statutory Instruments Act, 1946, by various Statutory Instruments Regulations made thereunder, by the activity of the House of Commons Select Committee on Statutory Instruments, and through various techniques of parliamentary review.

Exchange control can be considered as an extension of the principle of war-time rationing. There is a scarcity of the means available for making payments and therefore purchases abroad are limited. As a result the central authority allocates these resources according to its own list of priorities, instead of leaving the selection of the needs to be satisfied to be determined by competitive bidding in the market. This requires the control of imports and may also be taken to include restrictions on transfers of capital and other foreign payments. Another feature of exchange control—the requisitioning of assets which can be realized for foreign exchange—can similarly be regarded as part of the general policy of commandeering resources necessary for the purposes of war. But a comprehensive system of exchange control involves a further essential feature—the pegging of exchange rates. Theoretically it would still be possible for the central authority to leave exchange rates to be freely determined in the market, although the quantities demanded and supplied were controlled by such methods; for the possible dangers of inflationary increases in domestic prices could be overcome by the use of subsidies to offset exchange depreciation.

However, several important reasons can be given for a country at war maintaining fixed exchange rates. Bear speculators might have a bad effect on the country's prestige especially when the fortunes of war were adverse. Secondly, it is easier to requisition international assets on terms which do not give large windfall profits to the sellers, if extensive depreciation of the currency can be avoided. Thirdly, consideration of the “terms of trade” offers the most substantial ground for maintaining exchange stability. In conditions of total war the resources that are used to produce exports must be reduced to the minimum. For this reason the object of policy must be to achieve the best possible price for a restricted quantity of exports rather than to expand the volume of exports by offering them as cheaply as possible.

Everyone expects the statistician to be the foe of easy generalization and glib phrases. Hardheadedness and a sceptical approach are occupational characteristics of those who spend their days measuring the world objectively. In talking to you about statistics of the balance of payments I am therefore going to stay on firm ground by discussing several recent developments in Canada's balance of payments and in the statistical tools which have been devised for observing them.

Balance of payments developments have close interrelationships with the internal economy, which, I feel, have never been satisfactorily elucidated. For those interested in studying them further there are two new statistical sources which will facilitate closer analysis. These are new reports soon to be published by the Dominion Bureau of Statistics showing quarterly statements of the national accounts and quarterly statements of the balance of payments in the post-war period. Quarterly statistics of this kind are comparatively new tools and consequently must be used with care, particularly when relationships between internal and external factors are being explored. A thorough knowledge of concepts, definitions, and sources is indispensable before even the obvious steps in comparison may be taken with confidence. Knowledge must also be acquired of the seasonal behaviour of the various series entering into these statistics, in order to distinguish the special and non-recurring from the seasonal. Frequent data on the monetary background published by the Bank of Canada also throw new light on related transactions.

“If we introduce overmuch idealism into explaining the formation of either of the North American polities, the record of mankind is against us. So is our own history. The thirteen colonies came together not primarily because of the joy in making a great free American community, but because disintegration stared them in the face and men of substance saw in union salvation for their fortunes. It is no reflection on British North Americans that they too made their union under duresse.”

The establishment of a wider Canadian union had been discussed for a number of decades before Confederation but the motivation in a common allegiance to Great Britain and in intermittent flashes of national sentiment had proven wholly inadequate to overcome the obstacles of provincial particularism and cultural differences, of paucity of communication and contact among the colonies, and of the contrasting economic orientation of central Canada and the Maritime region. In the years immediately prior to Confederation these divisive elements were finally outweighed by the mounting pressures of political dead-lock, economic uncertainty, and fear and jealousy of the United States. The leaders of the Confederation movement variously gave expression to these pressures. National sentiment was still a distinctly secondary factor, however, and only a few of the leaders betrayed in their speeches evidence of a broad vision of Canadian nationhood.

This paper presents the conclusions of observation, not research, and is therefore expressed as personal opinion. It seems to me that much that has been said about “social security” has been subject to two influences tending to hallucination. First, it is a matter in which young men have seen visions, and old men have dreamed dreams and nightmares. Secondly, the machinery of legislative and administrative procedures, and the very magnitudes of money involved, encourage preoccupation with apparatus. Between rhetoric and jargon there has been too little room for matter-of-fact appreciation of what these arrangements in our national housekeeping really amount to. I thought I might therefore take this opportunity of discussing these arrangements as I see them in plain functional terms.

As to economic consequences, I have no discoveries to offer. There is indeed a very large field of research here, inviting work that will have to proceed by gradual and piecemeal results. Very little is yet known, for example, about the distribution of incomes below the income tax exemption limits, or about the families that depend on them, although such families comprise a large proportion of the population. On such questions as these one can only speculate. But speculation will perhaps be nearer the mark if it starts from a view of our present policies that is reasonably free from emotional or institutional obstructions.

In the United States the chief concern of unionists has been the conduct of industrial negotiations, but in New Zealand and Australia the significant achievements of workers, almost without exception, have been gained through political action. Around the turn of the century, students of labour movements were led by the successes of Australasian workers to speculate about the different roads which workers had taken there and in the United States. As its general political and economic features became familiar, particularly such prominent ones as factory codes and arbitration procedures, political unionism ceased to be a curious phenomenon, and students turned their eyes elsewhere. In so doing, they lost sight of the subterranean forces and directing currents which have turned the energies of workers toward politics.

Historically, the similarity between the United States and New Zealand is arresting. Both were frontier countries with fluid institutions and expanding economies, although New Zealand had no moving frontier as had the United States. Both were settled from England and inherited English legal and cultural traditions. Both early developed democratic political processes, and both were characterized by a high standard of living for workingmen as a result of the natural scarcity of labour typical of inaccessible and virgin countries. In both countries, the land offered an alternative to wage-earning which favoured social as well as occupational mobility. Both countries lacked the stratification of a traditional aristocracy. In both countries, extension of the franchise placed the political weapon in the hands of the people. The analogy is more than historical: today New Zealand and the United States are generally acknowledged to be among the leading nations of the world in terms of plane of living. What, then, explains the development in the United States of a system of collective bargaining by workers with their employers, and the growth in New Zealand of a system of bargaining vis-à-vis the state?

A comparison of international capital flows which are occurring today to economically undeveloped areas, with similar international investment in economic development which occurred prior to World War I is almost inevitable and indeed has often been made more or less explicitly. The obvious differences between the two periods lie in the proportion of private capital in the total of international investment in undeveloped areas, and in the pace of economic development then and now. Capital flowing to undeveloped areas today is preponderantly from public bodies: various agencies of the United States Government, the International Bank for Reconstruction and Development, or the United Nations. By contrast, international capital invested in economic development prior to World War I was exclusively from private sources. Then, too, the areas which were developed prior to 1914 experienced within a decade tremendous increases in population of 30 to 50 per cent and increases in the output of their major industries of 200 to 400 per cent. The purpose of this paper is to examine the role of private enterprise and initiative in the international investment in undeveloped areas in the period from 1875 to 1914 and the reasons for the relatively unimportant position of private international capital in economic development today.

An interesting analysis of productivity in Canada from 1931 to 1949 has recently been published by Mr. A. Maddison in the Economic Journal. Mr. Maddison admits, however, that his choice of dates, which was limited by the lack of official estimates of the employed labour force prior to 1931, is unfortunate in that a strong cyclical influence colours the results. To overcome this difficulty calculations have been made of the employed labour force prior to 1931 (see Table III), thus extending the period that can be covered back to 1926. In addition this paper makes use of revised and more complete data published by the Dominion Bureau of Statistics. No attempt is made to duplicate Maddison's excellent summary of the diverse factors contributing to productivity, or his brief look at inter-industry shifts, except for the very important shift of labour from agricultural to non-agricultural employment. But more emphasis is placed on aggregate movements during particular periods and on the comparison of productivity in Canada with that in the United States. In brief, the two papers are complementary, and should be so considered.

Productivity is, of course, an elusive concept when applied to operations of more than one industry, or even to more than one line of production. Is an automobile, for example, really worth 1,000 bushels of wheat in terms of economic value, and is the productivity of a farmer low because he can produce only 2,600 bushels of wheat in a year on 100 acres, whereas the average automobile worker turns out perhaps 10 cars a year, worth 10,000 bushels of wheat or more? Yet the only way in which products can be compared is through the exchange values attached to them in the market. Any attempt to evaluate productivity on a national scale must therefore involve the weighting of goods produced according to the prices at which they were sold. The most that can be done to place production figures on a real basis is to attempt to eliminate variation in prices; and thus determine the extent to which the total volume of production of all goods in the economy, weighted according to their price relationships at some specific point of time, has grown over a period of years. In the discussion that follows, therefore, the gross national product in 1935–9 dollars is used as output. It would perhaps be better to use national income, but this is difficult to deflate in view of the inclusion of indirect taxes in price indices.

In recent years Keynesian theory has been extended to the analysis of economic growth by the introduction of a relation between investment and productive capacity to supplement the Keynesian relation between investment and effective demand. Combination of the two relations permits the specification of an equilibrium rate of growth, defined as that rate of growth which maintains full employment of capacity. So far, however, except for some rather brief compients by Mr. Harrod, the development of this model has been largely confined to a closed economy. It is the purpose of this article to extend the model to a two-country international economy, and to deduce certain conclusions about equilibrium growth in such an economy. The analysis proceeds from consideration of an open economy, the rate of expansion of demand for whose exports is given, to consideration of a two-country closed system; and from the assumption that balance-of-payments equilibrium is preserved by international lending and borrowing (Part I) to the assumption that it is preserved by exchange rate adjustment (Part II). No attempt is made to deal with the stability of growth equilibrium and the results of departures from it; because of this, and because of the extremely simple assumptions on which the analysis is conducted, the conclusions derived are of limited practical application. Nevertheless, it is hoped that they may have some usefulness as a logical frame of reference for discussion of international growth problems.

The growth phenomenon is found in practically all the sciences and even in most of the arts, because almost all the objects of human study grow—crystals, molecules, cells, plants, animals, children, personalities, knowledge, ideas, cities, cultures, organizations, nations, wealth, and economic systems. It does not follow, of course, from the mere universality of the growth phenomenon that there must be a single unified theory of growth which will cover everything from the growth of a crystal to the growth of an empire. Growth itself is not a simple or a unified phenomenon, and we cannot expect all the many forms of growth to come under the umbrella of a single theory. Nevertheless all growth phenomena have something in common, and what is more important, the classifications of forms of growth and hence of theories of growth seem to cut across most of the conventional boundaries of the sciences. In addition there are a great many problems which are common to many apparently diverse growth phenomena.