Historically, French Canadians have not really believed in democracy for themselves; and English Canadians have not really wanted it for others. Such are the foundations upon which our two ethnic groups have absurdly pretended to be building democratic forms of government. No wonder the ensuing structure has turned out to be rather flimsy.

The purpose of the present essay is to re-examine some of the unstated premises from which much of our political thinking and behaviour is derived, and to suggest that there exists an urgent need for a critical appraisal of democracy in Canada. No amount of inter-group back-slapping or political bonne-ententisme will change the fact that democracy will continue to be thwarted in Canada so long as one-third of the people hardly believe in it—and that because to no small extent the remaining two-thirds provide them with ample grounds for distrusting it.

When the executive committee of the Canadian Social Science Research Council met in Ottawa on September 6, 1957, concern regarding the future programme and policy of the Council led it to establish a special committee with Professor S. D. Clark as chairman to give consideration to the kind of support for research which Canadian social scientists appeared to need most. To aid the committee in its task, Professor Clark was asked to visit as many of the universities of Canada as possible. Visits were made to the universities of New Brunswick, Mount Allison, Dalhousie, Saint Mary’s, Acadia, Saint Francis Xavier, Memorial, Laval, McGill, Montreal, Queen’s, Ottawa, Carleton, McMaster, Western, Assumption, Manitoba, Saskatchewan, Alberta, and British Columbia, and to United College and Victoria College. In addition, interviews were arranged with two persons from each of the following institutions: Regina College, Brandon College, and Bishop’s University. The report of the committee was presented to the Council at a special meeting on November 30. In view of the interest which the report aroused, Professor Clark was asked at the meeting to prepare for publication a paper setting forth some of the ideas and thoughts which had found expression in his report to the Council. The paper he prepared is now published as a special supplement to the Canadian Journal of Economics and Political Science, the costs of publication being met by a grant from the Canadian Social Science Research Council. To the University of Toronto which kindly released Professor Clark from his teaching duties during the Fall Term, 1957, and to Professor Clark himself, the Council is deeply indebted.

It would not be appropriate for me tonight to say anything at all closely related to the work I have been doing or anything that might be thought to be related to government policy. Accordingly, if you find that my remarks are somewhat lacking in content—as you very well may—I hope you will choose to attribute the deficiency, in part at least, to my high regard for the relevance of economics.

While I was trying to hit upon a topic which was sufficiently non-technical and general for the occasion, it occurred to me that it might be interesting to look once again at some analytical models of the market, developed over the years by a few of the great economists of the past, and at the characteristics with which, in their theoretical works, they endowed their market operators, to see in what ways and in what degrees they made their markets impersonal, as distinct from self-regulating or automatic; and, then, to consider some of the ways in which general attitudes to the market system may have been influenced by the degree to which markets have been impersonal, and by the kind and extent of the changes that the expansion of the market economy tends to bring about. Primarily I will have in mind modern Western economies.

I have called my talk “The Impersonal Market” and I introduce at the outset two quotations which serve to define the sense in which the word “impersonal” is used, and at the same time illustrate two distinct though similar attitudes to the market. One of them comes from a student of law who has extended his interests to include social science generally, and one from an economist of very great distinction.

Ghana is the first truly African state to emerge from colonial status. Her attitude towards and relations with the Western powers and the Communist bloc are, therefore, of considerable importance both in themselves and as indications of the policies other independent African nations are likely to pursue. While Ghana’s foreign policy is still not fully defined, the broad pattern which is emerging is sufficiently discernible to merit discussion.

The present position was defined by Dr. Kwame Nkrumah on the eve of Independence. “We of Ghana feel,” the Prime Minister declared, and has since repeated,

that at this stage our country should not be committed in any aspect of its foreign policy and that it should not be aligned with any particular group of powers or political bloc. At the same time, our new state does not intend to follow a neutralist policy in its foreign policy. It is our intention to preserve our independence and to act as we see best at any particular time.

The same view was expressed more succinctly in June, when it was stated that “Ghana will neither join any power bloc nor maintain a blind policy of neutrality and non-alignment.” These formulations of Ghanaian policy are deliberately vague. They do, however, admirably fulfil the pressing need which every country feels of having a foreign policy of its own, and at the same time they leave the Government free to pursue almost any particular course of action it might later choose.

Central banks are unique institutions. Most of them, including the Bank of Canada, are endowed with powers and charged with responsibilities that are as heavy and as general as those of the most important departments of government. Yet, by contrast, they usually enjoy a legal status which provides them with a degree of autonomy that greatly exceeds that of any department. In a political system based on parliamentary and responsible government, a central bank is, indeed, almost a constitutional anomaly.

A central bank, uniquely constituted or not, is a necessary organ of any monetary system based on an inconvertible paper currency. When money has a marginal cost of zero, it is necessary that the amount of the issue be limited by some means or another if its average market value is not also to become zero. Both logic and history seem to indicate that this limitation is best achieved by placing a monopoly of the note issue in the hands of a central bank or a similar agency. The creation of such a monopoly does not, of course, provide any indisputable answer to the important question of the degree of discretion which such an issuing authority might be permitted to enjoy. There are still some economists extant who advocate that the central bank be bound to a prescription so rigid that its role in the monetary system would be entirely mechanical. However, this view has a rather archaic quality. The dominant current opinion is quite different. Most economists and monetary analysts regard the central bank as, properly, an instrument of monetary management operating in an economy that requires, if it is to be stable and efficient, the continuous discretionary influence of such a management authority.

Every well-bred economist knows that a man named Adam Smith was born at Kirkcaldy in 1723, published a somewhat notable book in 1759 entitled The Theory of Moral Sentiments, and in 1776, when he was fifty-three years old, produced an extraordinary pair of volumes called An Inquiry into the Nature and Causes of the Wealth of Nations. Most young economists nowadays, I fear, do not read either work of the great Scotsman as we all once did—in the days when one could still take time to enjoy also the leisurely pace of Thackeray and Dickens, even Scott. Students who just skim the Wealth of Nations, or parts of it, would surely miss what has attracted my attention; and even scholars interested in Smith's economic principles would hardly perceive what I have in mind, namely, that he was noteworthy for his “unbounded benevolence,” as one near-contemporary described him, and that he was “slow to think evil” as a recent biographer alleges.

Apparently it was out of this abounding good nature that Smith alluded to “the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects”; that he took opportunity to mention “the conveyances of a verbose attorney”; and that, with a more sweeping serenity, he recorded an observation of “the over-weening conceit which the greater part of men have of their own abilities.”

Biographers of Smith have been led to state that perhaps he was not as obviously religious as some of his contemporaries. He was perhaps a deist, even if he was a philosopher and a friend of Hume. John Rae reported that Smiths “opening prayers” at Glasgow were thought to “savour strongly of natural religion,” and occasioned no little shaking of heads. Perhaps, then, one might expect Smith to have been somewhat less charitable toward wearers of the cloth than he was toward other groups.

Most serious students of modern politics in the English-speaking democracies have regarded the two-party system as the norm of the liberal-democratic polity. The arguments for the superiority of such a pattern proceed along the following lines: (a) stability is encouraged when the powers of the political executive are at all times monopolized by members of a single party who are united by mutual adherence to common leaders, traditions, and policies and whose past and future fate at the polls is to a significant degree interdependent; (b) effective accountability of government to electorate is encouraged when power is not shared among parties and when a ruling party is therefore completely responsible for the use of such power; and (c) constructive opposition is encouraged when the party out of office is constantly faced with the challenge of justifying itself to the electorate as an effective alternative to the party in power.

Professor Leslie Lipson has defined the two-party system as one in which: “1. Not more than two parties at any given time have a genuine chance to gain power. 2. One of these is able to win the requisite majority and stay in office without any help from a third party. 3. Over a number of decades two parties alternate in power.”

The constitutional crisis of 1889 in Newfoundland offers an excellent example of what may occur when a governor, in the full belief that he is adhering to the strict observance of his constitutional position, yet manages to defy its limits, bring it into disrepute, and earn the opprobrium of nearly all concerned. That the Governor of Newfoundland did so, as the unsuspecting instrument of a political struggle, points up the dangers of appointing to high office men with little or no appreciation of the duties and responsibilities they are called upon to assume. The crisis of 1889 proves above all the importance that must be attached to the choice of men of good intelligence, even temper, and flexibility. When to insist on the exercise of his prerogatives and when to desist are questions that a governor can only solve by considering as far as possible the results of the choice he makes. A very difficult decision, admittedly, but one which will primarily depend on the governor's tact, influence, articulation, the vital features of his official personality. There is no need to stress the importance of the problem discussed below; the list of constitutional authorities who have studied similar questions is an impressive and well-known one.

The Governor in question was Sir Terence O'Brien, a military man who had qualified as an engineer and surveyor in India, had for some years been Inspector General of Police in Mauritius, and, immediately before coming to Newfoundland in 1889, had served as Governor of Heligoland. His immediate concern in Newfoundland was, as befits a man with military experience, the fortification of St. John's against attack in the event of a global conflict which he saw as imminent; but this project was fated to suffer the indifference of a government that did not share his views. In November, 1889, the Governor's attention was abruptly diverted from his scheme of defence to a situation that appeared quite normal and might have remained so but for a combination of events that he grasped only imperfectly.

Since the appearance of annual estimates of gross national expenditure and its components, their use has dominated the analysis of Canadian business fluctuations. They provide the most comprehensive picture of the value and volume of those goods and services, currently produced and consumed, which have passed through the market place. The national accounts have been adapted to analyses of the relationship between the Canadian economy and the economies of the United Kingdom and the United States, particularly of the latter. Interest in these relationships existed for many years before national income accounting became available, but its development certainly gave the problem new focus.

The use of national accounts for cyclical analysis has given rise to two problems. The first is that attention in Canada has focused on the period since 1926. There has been great emphasis accordingly on the Great Depression, its transmission to and impact on the economy. This cyclical experience has dominated the recent thinking of Canadian economists quite apart from the crises and misery which it brought. After all it is the one cyclical movement which stands out clearly in the national accounts. Furthermore, the experience of 1929-32 presented an unusual combination of circumstances. Nothing like it in duration or extent had occurred since the 1870’s. To base much of the analysis of Canadian business cycles on this one downturn, however major it might have been, and to draw implications for policy therefrom, could easily put public and private decision-making on an inadequate and misleading foundation.

While more than half of the world's population is still confronted by the “Malthusian menace” of poverty, hunger, and disease, Canadians have been able to enjoy a steadily rising level of well-being. The phenomenal expansion of the Canadian economy has not only facilitated improvements in the general standard of living, but has also given impetus to significant demographic changes in this country.

Contrary to the “predictions” made by some demographers, the pre-war downward trend in fertility was reversed in the early years of the Second World War, and a “baby boom” set in, in Canada as elsewhere. Even after the boom had subsided in most other countries and their birth rates had shown a sign of swinging back to the pre-war level, Canada's growth in population continued to gather momentum. Sustained high fertility, steadily declining mortality, and resumption of immigration on a substantial scale following the war have resulted in an impressive enlargement of Canada's human resources. Shifts in vital trends and in immigration in recent years have also modified the structure of the Canadian population. Furthermore, advances in industrial technology and consequent alterations in the utilization of manpower have stimulated a large-scale geographical and occupational redistribution of the population. The trend toward a decrease in population in the farm areas, a heavy influx of migrants into metropolitan centres, and the suburban development of some of the oldest cities of the country are but manifestations of demographic response to social and economic changes occurring in present-day Canada.

There is now an extensive literature on bureaucratic organization in general, and on governmental bureaucracies in particular. Recently there has been a tendency to view social power as being distributed through a set of counter-bureaucracies, each of which is a development within a particular institutional order. Modern corporations, the trade unions, the departments of state, the armed services, the church, and so forth are all bureaucratically organized. In other words they have an intensive division of labour, a hierarchical system of command and co-ordination, and an emphasis in recruitment on expert qualifications. Consequently, as bureaucratic organization pervades the entire social structure, we enter the age of the “managerial society,” the “organization man,” and “government by expert.” Hence bureaucracy takes on its true meaning of rule by officials.

While much of contemporary sociology in the fields of industrial relations and business and public administration is given over to improving the techniques of bureaucratic control, less attention is paid to the relationship of the various bureaucracies to one another within the total system of power. In this paper I have brought together data on the careers and social backgrounds of the top men—the élite—of the Canadian federal public service. The ordering of these data has been guided by models of governmental bureaucracy in relation to other institutional structures. Limitation of space precludes a full exposition here of these models, but a brief outline is necessary to give some meaning to the empirical materials that follow. The significant variables in these models are rationalization, rivalry, and openness.

The purpose of this paper is to consider the implications for Canadians of the recent report of the Franks Committee on administrative justice in England. This is the second English report of its kind to be made in twenty-five years, the first being the famous Report of the Committee on Ministers' Powers in 1932. Both committees made exhaustive inquiries into the actual day-to-day working of English administrative justice and in the light of that knowledge made recommendations for its improvement. In the United States, the Report of the Attorney General's Committee on Administrative Procedure reviewed in 1941 the federal administrative process as it actually operated; in the light of that report, Congress passed in 1946 the Administrative Procedure Act laying down in fairly general terms the minimum standards of procedure to be observed in the administrative exercise of delegated powers of adjudication; and in 1955 a Task Force on Legal Services and Procedure made a year-long study of the entire field of federal administrative law and submitted its conclusions in a 442-page report to the Hoover Commission. In Canada there has never been any offiicial inquiry into such questions.

For this reason—and we should do well to admit it before we begin trying to learn lessons from the Franks Report—we Canadians do not know much about our own situation. We do know that in our country, as in England and in the United States, there is at the federal level and at the provincial level a heterogeneous collection of bodies other than courts—independent commissions, civil service departments, and other statutory authorities—deciding disputes between that mighty engine, the state, and the individual citizen or business corporation; but of what most of them in fact do, how they do it, and to what extent they are supervised, checked, or controlled, we have only hazy and rather general knowledge.

“In politics the thing to do is build yourself an army.” The remark is attributed to the late Jimmy Hines, a successful Tammany Hall politician of the 1930's. In June, 1945, half way between the Regina Manifesto and the Winnipeg Declaration, the Co-operative Commonwealth Federation, at the head of the largest army in its history, prepared for the reward of virtue and patience—power in Ottawa and Ontario. The problems of building that army and then maintaining it under the adverse conditions following June, 1945, constitute the theme of this paper.

In its first decade the C.C.F. had successfully welded a united, national organization out of a federation of parties and groups along a social-democrat and agrarian-protest spectrum. The absence of a New Deal party gave the “movement,” as its members still call it, its opportunity. Its central bond was a common hatred of capitalism, allegedly responsible for the depression and its accompanying hardships. It was, however, less than unanimous about the remedy. The Regina Manifesto of 1933, the party’s initial declaration of faith and intentions, was framed in the social democratic tradition. “No CCF government,” it concluded, “will rest content until it has eradicated capitalism.” But no statement of policy could ever avert the inevitable debate on “how far” and “how fast” socialism should be implemented.

The topography of C.C.F. beliefs can be roughly charted by identifying its closest friends and mentors and its ideological boundaries on the “right” and “left.” Its chief, though not unanimous, favourites have always been the Labour and Social Democratic parties of the Commonwealth, Scandinavia, and especially Great Britain. Its supporters ranged all the way from people who were made uneasy by talk of socialism despite endless assurances, to those drawn enviously to the glamour of revolutionary intrigue and virile, uncompromising militancy which they associated with Communism and Trotskyism. While these ‘left wingers” pressed the leaders constantly to declare themselves on the questions of “how far” and “how fast,” the great majority entrusted these matters to the leaders and concentrated instead on building the organization.

There is little doubt that the Bank of Canada and Canadian monetary policy have been subjected to more public criticism since 1954 than at any other time since the Bank began operations in 1935. The force and the persistence of the criticism may in part be explained by a coincidence of events which included a move toward severe monetary restraint, a change of governor at the Bank of Canada, two national elections, and a change in government. Public criticism has for the most part concerned itself with the degree of monetary restraint or monetary ease in the economy generally and in specific sectors, with the timing of changes in policy and with the appropriateness of policy in the light of economic conditions. This paper will let those matters rest. Rather it will try to determine whether in a more fundamental sense the Bank's operations are in some respects open to criticism.

There would appear to be four important aspects to the Bank of Canada's approach to central banking: the Bank's interpretation of its role in the allocation of capital; its conception of the mechanism by which monetary policy becomes effective and of the bounds within which monetary management must operate; its method of making quantitative monetary controls more effective; and its emphasis on the use of moral suasion. The third section will include an examination of the new Bank Rate.

An earlier paper examined changes in Canadian sensitivity to United States business fluctuations. The evidence suggested that this sensitivity may have declined from the ten years preceding the First World War to the twenties, and that it undoubtedly declined between the twenties, on the one hand, and the thirties and post-war period on the other. Changes in sensitivity were measured by changes in the average percentage amplitude of fluctuations in Canadian output indicators associated with given percentage fluctuations of the corresponding United States indicators. The changes in sensitivity observed in this way were very small, but the decline from the twenties to the thirties and the post-war period was statistically significant.

The present paper attempts an explanation of these findings by examining changes in structural factors that can be assumed to have influenced Canada's cyclical sensitivity. Most of these factors have been frequently discussed by Canadian economists.

Since exports are a major channel for the transmission of cyclical fluctuations (indeed, in the thinking of many economists they appear to be the only channel), and since United States business conditions influence, directly and indirectly, Canadian exports to all countries, the sensitivity of total Canadian exports to United States business fluctuations must be examined. Since the United Kingdom has been a major market for exports, the influence of its business fluctuations on the relation between United States and Canadian fluctuations is also relevant.

Responsible government, as Professor Hodgetts has demonstrated convincingly in his Pioneer Public Service, means more than that the political life of the executive depends on the support of a majority of the members of the elected legislature. Behind the executive, government departments must be so organized that the ministers can exercise a control for which they can be held responsible. The issuance of public money to pay for departmental activities must be under a central authority, and so must a thorough audit of expenditures. The public accounts must be intelligible to the laymen who sit in Parliament, and a system of estimating in advance the needs of government for each ensuing year is indispensable. “Each of these aspects of internal financial control,” in Professor Hodgetts' words, “… had to be satisfactorily developed if Parliament was to become the watchdog of the executive.” They were satisfactorily developed between 1840 and Confederation, some of them as late as the middle sixties.

Partly because several of the political and administrative practices involved were still in their infancy, and partly because Confederation meant the destruction of old lines of authority and the creation of new ones, a severe strain was put on several essential elements in responsible government in 1867. The administrative side of the story, as it concerned governmental financial control, has already been told by Herbert Balls, but the legislative side has hitherto been neglected. The legislative story, not only in its financial aspect but also in the wider context of the whole parliamentary scene, is worth recounting.

Most discussions of the control of investment during the late 1930's and the Second World War had their origin, for obvious reasons, in the desire to regulate the aggregate level of economic activity. An unfortunate consequence of this preoccupation was that insufficient consideration was given to another problem of great importance: the determination of the uses to which investment resources are put.

It was precisely this problem of the allocation of investment resources which became a matter of major concern to the Labour Government in Great Britain in the years after the Second World War. This paper will examine the manner in which the problem was handled with respect to investment in building, investment in plant and equipment will be ignored since no serious attempt was made to regulate it. The Government did not go much beyond entering into “gentlemen's agreements” with engineering firms respecting the percentage of their output which they planned to devote to export purposes-agreements of the sort which D. H. Robertson has delightfully described as “… the characteristic English processes of jollying along—of encouragements which are not quite promises, frowns which are not quite prohibitions, understandings which are not quite agreements.”

The control of investment in building, by contrast, was a very ambitious venture. The Labour Government's experience in operating these controls is interesting for the light it sheds on problems of government planning for a major private industry. Moreover, this experience is particularly important since the industry concerned is one which is likely to play a crucial role in the programmes for development and welfare undertaken by many governments. The central focus of this paper, therefore, will be on the problems which arose in the attempt to control the pattern, as well as the volume, of activity in construction.

Modern legislation, in Canada as elsewhere, has entrusted important functions to boards or commissions and has conferred very wide powers upon them. The basic purpose of such legislation is to supplement legislatures, courts of law, and ministers of the Crown by providing these venerable institutions with subordinate agencies which, within a strictly limited sphere, can act more effectively.

The legislative functions of a board consist in making regulations with the force of law. These regulations often require the approval of the supreme executive authority. They provide a necessary type of legislation which our legislatures, let us say it quite brutally, are not competent to consider in detail.

A second function of boards is to decide disputes. Not only do they supplement the action of the legislatures in cases in which it is likely to be cumbersome or ineffective, but they also replace judicial action in cases in which it is disliked or distrusted. Although control by courts of law may remain formally unimpaired, boards acting within the scope of the law which creates them are able to interfere, ostensibly in the public interest as they themselves define it, with many established or traditional rights.

A third function of boards is administrative. They are in principle able to act with complete immunity from the political pressures to which a minister of the Crown may quite properly be exposed. Their administrative work is facilitated by their legislative and judicial powers and part of their usefulness derives from their ability to combine three functions which cannot be conveniently—and perhaps cannot be safely—combined at higher levels.

The subject of this paper is the economic analysis of the alienation of natural resources, by which is meant not only the disposal of a resource by outright sale but also the disposal of rights, perhaps for a limited period, to exploit, perhaps in a limited fashion, one or more of the natural resources of a specified area. In order to illustrate current procedures and their trends, I begin by describing very briefly the methods by which enterprises obtain rights from the province of British Columbia to exploit resources. (Readers interested only in analysis may wish to skip this first section.) In the next sections I discuss the contribution economic theory can make to an appraisal of methods of alienation; then, in the light of this discussion, I suggest a few desiderata in policy.

Since provinces are fairly free to make their own policies on alienation, procedures differ from region to region. Before the procedures followed in British Columbia are outlined, it should be emphasized that the more complete and absolute alienation to private ownership, the more the rights of the province shrink to the regulation of industry, collection of taxes, and other general powers enumerated in the British North America Act. It should also be kept in mind that the administration of natural gas and petroleum carried across provincial boundaries, of fisheries, and of rivers that cross the international boundary may be affected by both federal and American regulations and laws.

Agricultural land. Some land is alienated by pre-emption but in most cases it is sold on a first-come-first-served basis after survey and some development work by the government. On alienation, the land generally passes into private ownership, though mineral and water rights are reserved.

Fisheries. Anyone may fish, on conditions imposed mainly by the federal government.