The significance of navigation in the economic development of a region penetrated by the St. Lawrence to the south and by Hudson Bay to the north has been evident in concentration on production of raw materials for consumption in the highly industrialized area of Europe, and in problems which have arisen with intense specialization, such as unused capacity in terms of vessel space as a result of inability to secure a balanced two-way cargo. The green fishery as conducted from French ports on the banks and along the coast required heavy outbound cargoes of salt to balance return cargoes of fish, but the dry fishery, which became important with the development of Spanish trade at the beginning of the seventeenth century, required smaller quantities of salt and equipment on the outgoing voyage and made necessary the carrying of ballast. The English dry fishery in Newfoundland involved a further lack of balance in that crews necessary to carry on the industry were larger than those necessary to man the vessels, and, because of the seasonal fluctuations and agricultural limitations of that area, men were carried back at the end of the season. Sale of fish in the markets of Spain and the Mediterranean necessitated the dispatch of vessels to England with the men necessary to carry on the fishery, and additional larger vessels (sack ships) with cargoes of fish to market. The addition of sack ships lowered the cost of provisions and facilitated the beginnings of a settlement in which men remained over the winter. Consequently, competition between sack ships and fishing ships for cargoes of fish and for profitable return cargoes of salt, tropical products, and specie from Spain and the Mediterranean to England, contributed to the long severe struggle which dominated the history of Newfoundland and placed severe restrictions on the introduction of political institutions. New England, with a winter fishery and a favourable area for the development of agriculture, lumbering, and shipbuilding, offered possibilities of all-year-round operation. Settlers rather than ballast, therefore, were brought to New England. Expansion of settlement contributed to more effective exploitation of the fishery, shipbuilding, and trade and to the decline of control of fishing ships from England. Numerous small New England vessels extended the fishery to the banks and the shores of Nova Scotia, participated in the coastal trade to Newfoundland in spring and summer, and carried products to the West Indies to exchange for sugar and molasses in winter when these products came on the market and there was freedom from hurricanes. Relative absence of unused capacity in New England shipping meant low costs and contributed to rapid economic development which facilitated control over Nova Scotia after the expulsion of the French in the Treaty of Utrecht in 1713. The expansion of New England involved a continued drain of labour from Newfoundland and weakened the position of settlement in that area.

The economic problems of a new country have, of course, a general as well as a particular interest because new countries are a distinct and important class among the countries of the world. But there are two reasons for an even broader scientific interest in such problems. It is here that problems of economic development can be studied; here are the clearest cases. Economic history continues to suffer because economists know too little history and historians too little economics. It can be said in defence of the historians that the scant attention given by economists to the economics of development has left them with but poor equipment. In criticism it might be said that historians have been over-ready to make economic generalizations. Generalizations in economic history are more attractive and more dangerous than in any other field except historical geography. It is, then, in the history of new countries that the economics of development can best be studied.

There is a second reason for our interest. Economists are prone to think in terms of closed systems, i.e., hypothetical economies, isolated and sufficient unto themselves. Studies in international trade and finance have been directed in the main toward the mechanism of adjustment. It is an important problem and a neat, tidy problem, but in most countries policies must rest on an analysis of the operation of open systems—economies functioning in full relation with other countries. I suggest that the fully operating open economic system is best exemplified in new, pioneer countries.

I who am about to address you, salute you as the seventh President of our Association—and the first statistician in that honourable office. Our Association is called “The Canadian Political Science Association”. I well remember how we boggled over that name, when the Association was a-borning twenty-odd years ago (characteristically in Boston); it was meant to designate the polyglot omnium gatherum which we remain—economists, sociologists, political scientists proper, publicists, statisticians. As to the last, it is the fact that in countries which can afford to organize their social sciences by species (which Canada cannot), the statisticians have always shown the way. The Royal Statistical Society of Great Britain celebrated her centenary the other day, and the American Statistical is celebrating hers to-morrow, years and years before their sisters. Even in Canada, a statistical association was born, gasped, and died before our own got on its feet. Thus, in all delicacy, speaking for my statistical confrères, we feel that after six political economists for president all in a row, it is fitting we were called up higher. In the twitter of the moment, we might even wonder if we are Cinderella, who from her ashes was once invited into the parlour. She came, you remember, in all meekness, with nothing of the kitchen fire in her eye, yet I feel sure in some consciousness of merit, for it was Cinderella who finally married the prince.

As time goes on the full scope of the National Socialist movement in Germany becomes apparent to the outside world. The abolition of democratic institutions and the assumption of supreme power by the Führer were not surprising in principle to observers in foreign countries, though they were startling to many in their completeness and ferocity. Similarly, we were more or less prepared for the withdrawal from the League of Nations, and the changes in foreign policy associated with it. But I do not think it was generally expected that the movement would include a reform of education, not in such matters as methods of teaching but in regard to the content of the subjects taught. To those who are accustomed to regard the truth or falsity of the subject-matter of education as independent of the political character of the government this comes as something of a shock. A remarkable series of pamphlets under the general title Der Deutsche Staat der Gegenwart deals with some of these “reforms”, particularly as applied to the subjects of law and economics. Volume XV of the series is entitled Das Studium der Wirtschaftswissenschaft and describes the new curriculum of economic studies. It gives the new curriculum itself, in some detail, and contains, as well, addresses by Professors Dr. Eckhart, Gottl-Ottlilienfeld, and Wiskemann which reveal, sometimes as through a glass darkly, the ideas underlying the “reform”.

Modern civilization and modern science are in constant interplay and the relation of the state to medicine is simply one aspect of a much broader relationship—the changing sphere of government in the lives of the people. Industrialism has meant a large increase in population and the concentration of this population in huge cities. Factories and machine processes play a dominant role. Education has become almost universal. Research, inventions, still more research, and new applications of this research change industrial technology overnight. And the habits of living of the people through the development of apartment houses, radio, automobiles, aeroplanes, are also revolutionized. The pace quickens.

The myriad problems of post-War international relations and national security, of currency and tariffs, of economic adversity and unemployment, the mounting public debt—all have thrust upon national and local governments a huge weight of responsibility. The depression has forced governments to assume control of basic economic activities, and, according to present indications, the trend will continue in the direction of more rather than less state activity.

Governments have shown an increasing tendency to assume responsibility for the individual's general welfare. Modern industrialism and modern science have produced insecurity for a large section of the population—an uncertainty of life and limb and of employment, a risk of poverty in old age—that labour legislation and social insurance attempt to meet. Almost every type of social legislation has a direct or indirect effect upon the public health. Factory Inspection Acts, minimum wage legislation, control of the hours of work, housing schemes, health insurance, and workmen's compensation laws, illustrate the range of state activity in the field of public health. Legislation affecting medical care and public health agencies is simply a part of a much larger whole—the vast system of state activities and laws which has for its objective the greatest welfare of the people.

The purpose of observation is to discover laws. The word “law” I use in Hegel's sense of a generalization, a determination of categories, which enables experience to be classified and rationally interpreted. We can never arrive at a complete knowledge of laws in this sense. If we could, the future would be known to us with as much certainty as the past. Hegel said that forecasting is not the province of the philosopher, and some of his own attempts in that direction, such as the subjugation of Asia by Europe and a monarchy for the United States, do not appear fortunate. The difficulties, however, are two: that laws are not truly or completely known; and that experience is not assigned to the proper categories. These conceptions, however, point the way. It would seem that economics has as much need as any other branch of knowledge for seeking laws in this sense. Although its steps may be faltering, they will be in the right direction if truth is sought by observation conceived as a quest for the laws which experience obeys.

I propose in this paper to present a short attempt along these lines, my data being taken from Canadian and United States economic statistics since the War. The following, therefore, is intended primarily as an illustration of method. It is hoped, however, that the conceptions which will emerge are also worth notice for their own sakes.

The Dominion civil service has had a more troubled history than any other part of our government, and it bears on its body the marks of many campaigns. It has been constantly under attack from all quarters; it has been the subject of almost innumerable investigations by Royal Commissions and Select Committees; and it has been exposed to three complete reorganizations since 1867, each of which has involved fundamental changes of a sweeping character. Nor can one say with any assurance that the general principles and organization of the service are as yet permanently fixed. Reactionary forces which threaten to undermine the merit system seem to be increasing in recent years, and many of the fundamental ideas on which the existing service is built are proving to be unsatisfactory. It is this phase of the problem that I would like to discuss in this paper—the civil service of to-day and the developments which may be hoped for, or guarded against, to-morrow. Much of what I shall say is old and has been stated many times before; but re-statements along these lines are imperative if the public service is to occupy its proper place in the future government of the Dominion.

The term “sterling area”, which came into existence immediately after Great Britain's departure from gold on September 21, 1931, has become increasingly current, so that at the present time it is generally accepted in the terminology of international economics. The term sterling area, or sterling bloc, is necessarily extremely loose. In no sense are the countries contained in this group bound together in a formal monetary union. Nor can the boundaries of the area be defined precisely. As generally understood, however, the sterling area includes those countries both within and outside the British Empire whose currencies are closely linked to the British pound and whose monetary policies are governed more or less directly by those which may be followed from time to time by the British Exchequer and the Bank of England. It includes, in addition to the Dominions and colonies, Argentina, the Scandinavian countries (whose currencies were more promptly and more closely linked to sterling in the 1931 crisis than even those of the Dominions), Finland, Portugal, Egypt, Palestine, and some smaller countries.

In contrast to the gold bloc, whose scope is limited strictly to currency problems, the sterling bloc is also to a certain degree an economic bloc. That is, trade within the sterling area represents a fairly large proportion of the total foreign trade of the countries included in that group. The attempt to forge closer links of currency and trade with the countries of this group has now become a well recognized principle of British foreign policy. The instruments which Great Britain has used in forging these closer links are represented by the Ottawa Agreements of 1932, by the reciprocal trade pacts with non-Empire countries, by the maintenance of stable exchange rates with these countries, by securing favourable treatment in exchange allotment, by the development of central banks in the Dominions, and by giving preferential treatment in the matter of international loans, which are, or at least may be, of vital importance in maintaining stability of exchanges in relation to sterling.

In this article an attempt is made to present in summary form a description of the impact of drought and depression on Saskatchewan. Important problems of public policy and difficult problems of economic analysis arise in the course of the description, but a full treatment of these problems has been postponed. It seemed that the intelligent discussion of national problems could best be promoted at the present time by making available an account of the facts relating to this one province.

Seven years of depression and the rising cost of medical care, which has been taking place for more than twenty-five years, have forced a reconsideration of the relation of the state to the practice of medicine. The public is worried and the political opportunist is ready, as always, to capitalize this worry by providing a panacea in a hurry. There is little doubt in the minds of most thinking people that some form of health insurance must be provided; but the attempt to create a very complicated piece of machinery, and set it working at once, will lead to serious difficulties and hardships. The experience of European countries is not of much assistance to Canada. None can claim perfection, and most of them have to be satisfied with the best makeshift that circumstances will allow. England provides only such service in the home or office as a general practitioner can give. For ten years she has had, on paper, the provision of a complete but expensive medical service. Russia provides such a service at a cost which has been estimated at 20 to 25 per cent. of the employees' income.

Seventy years ago Bagehot composed his epitaph on the Poor Law Commissioners of 1834. To his own generation, it must have sounded like the last word on attempts to administer any aspect of public affairs by independent authorities without a responsible parliamentary head. The dethronement of the “three kings of Somerset House” demonstrated the prime condition of parliamentary government. The lesson they taught was obvious and the more thoroughgoing of Bagehot's contemporaries were all for denying to bureaucratic irresponsibility the solace even of a last sanctuary at the British Museum.

Even fools, we are told, will learn the lessons of experience but it seems that some still more elementary form of education will have to be devised for political democracies. Parliamentary government has been adopted all over the world but it has always been accompanied by some defiance of basic principle. Some branch of government activity has always been wrongly sheltered from parliamentary discipline and guidance. With the twentieth century, these occasional infractions have become chronic. In England itself, affairs of the gravest national import are being entrusted to bodies without any direct responsibility to Parliament. To the democracy, the story of the “three kings of Somerset House” is a political fairy tale. It laughs and then runs off to play at trains with the London Transport Board. In some such fashion, we may surmise, Bagehot might have reasoned on the facts of to-day.

From 1905, when Saskatchewan was made a province, to 1911, the Liberal party in Saskatchewan controlled both the federal and the provincial patronage. These six years gave it an enviable opportunity for laying firm foundations for a political organization. During the next ten years the federal patronage was in the hands of a Conservative or a Union party but the more important provincial patronage remained with the Liberals. Then in their last eight years of uninterrupted power, the Saskatchewan Liberals once more had the support of a federal Liberal government. Thus for twenty-four years after the formation of the province the Liberal rule over Saskatchewan was uninterrupted, and for fourteen of those years the Liberals also ruled over the Dominion. Until a few years before its defeat in 1929, it seemed as if the longer the party remained in power the stronger grew the party organization. It is this long period of development under favourable conditions which makes the Liberal organization in Saskatchewan worthy of close study.

The Liberal party in Saskatchewan, like Liberal and Conservative parties in the other provinces, had two sides to its organization—one formal and ineffective, the other informal and effective. In its formal aspect it resembled party organization elsewhere. The Liberals in each polling sub-division elected one or two representatives. These met to elect a constituency executive. Each constituency executive had one representative on the central council of the provincial party, on which there also sat the executive elected at a party convention. This formal organization, which paid so strict a homage to democratic theory in its pyramidical structure based upon the people's will, was unimportant. The constituency organization, for example, did very little; it met, perhaps, once a year. The formal organization constituted a democratic façade which hid from the common gaze the naked autocracy of effective party management. In the effective party organization which did the work, won the elections, and consequently possessed the reality of political power, appointments were from the top down.

In the recent English literature of international trade theory, one element in the adjustment of the balance of international payments has been brought once more into prominence, especially with regard to unilateral payments. It is described by various writers as the transfer of “purchasing power”, or of “buying power”, or of “means of payment”, or as a “shift in demand schedules”, which induces the receiving country to buy more goods and services and the paying country to buy less goods and services “in the absence of price changes”. This factor in the adjustment of the balance of payments was implied by Adam Smith, Ricardo, and Wheatley. Longfield referred to it explicitly. Bastable mentioned it in a journal article and Nicholson placed considerable emphasis on it. Mill, however, omitted it from his analysis. After 1900 it dropped from sight until 1918 when it cropped up again in a controversy in which Taussig, Wicksell, and Hollander took part. It was noticed in Viner's Canada's Balance and by 1931 had been developed considerably by Wilson, Ohlin, and Robertson. Since that time it has appeared in the published works of a large number of economists.

Many of the earlier proponents of the theory denied that unilateral transfers could change the terms of trade. To them it seemed obvious that the payment would by itself increase the purchases of the receivers and diminish the purchases of the payers by the amount of the payment. Thus the commodity balance would become unfavourable to the receiving country by the amount of the payment without price changes. Mill, on the other hand, and those who accepted his analysis in its entirety, claimed that the familiar specie-flow-price mechanism would necessarily lead to a change in the terms of trade in a direction favourable to the receiving country.

The slowness of the industrial recovery is gradually disclosing unmanageable situations in public finance. From the standpoint of public debt, countries engaged in the export of staples fall into three classes: (1) those where widespread default occurred in 1931 or 1932 on both public and private debt and where little or no resumption of debt service has occurred, such as most of the South American republics; (2) those where a critical position appeared early in the depression, followed by collective adjustment of internal debts and measures designed to maintain the level of prices, such as Australia and New Zealand; and (3) those where little or no public default or manipulation of debts, foreign exchange, or price levels has hitherto occurred, such as the Union of South Africa and Canada. Newfoundland occupies a curious position, more like that of European countries, having undergone a political as well as a financial reorganization. The Argentine occupies a position intermediate between groups (1) and (2).

While the net effects of the Reciprocity Treaty, 1855-1866, are difficult to estimate, it has been generally held that the Maritime Provinces gained more than did the province of Canada. The rapid development of central Canada and the painful readjustments of the Maritime Provinces since the abrogation of the treaty and the consummation of Confederation may seem to justify this conclusion, but the following analysis of the trade statistics of the period suggests grave doubts as to the validity of this interpretation. It appears that it was the province of Canada that had most to gain from free access to the American market.

The simplest and most general test of the efficacy of any trade policy is the measure of increase or decrease in those branches of commerce that it was designed to influence. In order to apply this test, a table has been prepared (table I) showing for the province of Canada and the Maritime Provinces the percentage changes in exports to, and imports from, the United States. In each case the imports and exports for the years 1854 to 1866 are shown as percentages of those for the year 1853. Had 1854 been chosen as the base year a slight advantage would have been gained for the thesis of this paper, but the results would not have been materially different.

The question discussed in this paper is, How can the state, in the collective facilities which it supplies to the community, best ensure the maximum service in efficiency. Involved in the issue is the question of the functions of the state itself.

Upon this question there is a controversy of steadily-deepening vigour covering a very wide range. At the one extreme are those who hold that the state has no duties towards the citizens except to “keep the ring”. There must be such people in the world, for I hear them constantly denounced; but I have never met any of them. So far as I know, no one now questions the necessity of the state playing a great and ever-increasing part in the functioning of the community. Or, as Lord Salisbury said. “We are all socialists now”. At the other extreme is the hundred per cent. socialist who regards the state not as a functioning agency of the community but as embodying in itself the total activities of the state. In the words of G. D. H. Cole:

The physical features controlling the economic development of a region can be classified under the two main headings of geological and climatic controls. All pastoral, agricultural, mining, or industrial life depends essentially on the distribution of minerals, soils, water supply, temperature, and rainfall. There is, however, another geological feature which exercises great influence on human interests, and that is the topography, i.e., the arrangement of mountain and plain, of rivers and lakes, and all the elements which in more precise language build up the science of geomorphology. The present study attempts to show, first of all, what are the main features in southern Ontario, more particularly within a couple of hundred miles of Toronto, which have necessarily greatly affected the settlement of the region. Secondly the evolution of the city of Toronto as determined by the minor topographic features is described in somewhat general terms. It is hoped that this will pave the way to a more complete study of the city in the near future.

It is the purpose of this article to do for the evidence presented to the Royal Commission to Inquire into Railways and Transportation in Canada, 1931-32, what Mr. Plumptre did in a preceding number for the Canadian Macmillan Commission. In this case the need is even greater. To the writer's knowledge the only copy of these Proceedings which is available to the general public is the one in the Parliamentary Library in Ottawa. The current press affords only a fitful light upon the evidence; and from some of the hearings it was excluded altogether. If, therefore, any part of this material is to be made generally available, it must be through some such report as is here attempted. The difficulties in the way of condensation are clear to anyone who has attempted it; and in this case some 2136 pages, a large part of it closely argued, must be reduced to some 12 to 15 pages.

The evidence presented to the Royal Commission on Banking and Currency in Canada, 1933, is preserved in some three thousand five hundred multigraphed foolscap pages. There are fifty or sixty copies in existence. A number of these are in the possession of those who were attached to the Commission and of the Canadian banks: others are to be found in certain Canadian libraries: and that is about all. There is only one other avenue of access to the material. During the course of the proceedings the Financial Post of Toronto published a weekly summary of the more important submissions; and the daily papers throughout the country printed extracts irregularly. It is, therefore, clear that few people have had, or will ever have, the opportunity to become familiar with the evidence. And even those who have access to the copies available in libraries will be confronted by a vast, undigested, poorly indexed mass of material.

Hence this article. It has two objects. It attempts, in the first place, simply to describe the evidence to those readers who either have not the inclination or the ability to consult it. In the second place, it attempts to guide those who may in the future wish to consult it away from the more arid patches and towards the oases. In what follows, I find myself between two fires. Since I was fortunate enough to be attached to the Commission in a minor capacity, and the only economist so attached, I am tempted to give a critical review from the standpoint of an economist. On the other hand, my connection with it imposes some restraint upon my remarks both regarding the Commission itself and those appearing before it. Indeed, as I write, I feel acutely conscious that I am compassed about by a great cloud of witnesses. To those who, reading this article, feel that I have done them any injustice, I apologize, asking them to bear with me, remembering the magnitude of the task of condensation which I am undertaking.

The development of a form of collective management of hydro power in Ontario must be viewed as a part of the National Policy; Ontario's own positive part; her peculiar sector of the line wherein she attempts through collective action to further the use of her major and almost sole source of power in order to ensure a stable industrialism and a healthy urban life. This development was begun by the municipalities and the government of Ontario in the first quarter of the present century when the federal government was pursuing the main lines of the National Policy—constructing railways, subsidizing the rails of private corporations, providing tariff protection or bonuses to manufacturers.

At the outset the drive for collective action in providing power came from the same class which supported the National Policy of the federal government; viz., the small manufacturers and traders in Toronto and those congregated in the Boards of Trade or represented in the Municipal Councils of Western Ontario. The inland towns were specially interested in power because they paid higher prices for coal than those on the lakes. But all the major municipalities soon became concerned in the collective action, and their initial activity determined in part certain salient features of the Ontario hydro as an administrative system. At first it was assumed, as is reflected in the Ross Act of 1903, that the enterprise might be entirely municipal; an organization whereby any group of municipalities through a Commission, without the financial aid of the government, might generate, transmit, and distribute electrical energy, meeting the cost through the issue of bonds secured by a mortgage on the works. But serious difficulties arose, and the overwhelming advantages of obtaining the financial support of the provincial government led to the scrapping of the scheme. A collective experiment designed to affect greatly the whole economy of Ontario obviously required the backing of provincial credit and provincial supervision. Hence the statute of 1906 which laid the legal foundation for the Ontario Hydro-Electric System.