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.

A preliminary report is by definition an unsatisfying document, though it may be an exciting one. The Gordon Commission's Preliminary Report qualifies for the former description, without quite coming up to the latter; for while the prospects of economic growth which it holds out are gratifying in the extreme, its discussion of policy problems is narrowly empirical and pragmatic, uninspired by any consistent philosophy of resource-orientated growth or even of economic policy, and interesting mainly as a reflection of trends in Canadian political opinion and the balance of pressure groups at the end of the second Liberal era.

This paper is concerned with the political theory developed by Major C. H. Douglas, the English founder and leader of the Social Credit movement, and not specifically with the ideas of the Canadian Social Credit movement, although the English theory has had a continuous, if not always a decisive, influence on the Canadian movement. Since the Douglas political theory stems from the Douglas social critique we shall begin with the latter.

The frustration of the engineer by the business control of industry may be seen as the starting point of Major Douglas's social thinking. Deeply impressed by the waste of industrial capacity and potential, Major Douglas developed a sweeping critique of industrial civilization. A man of broad sympathies and with a professional view of his engineering calling, he saw that whatever held back the progress of science in industry made it impossible for the technologist to serve the people and give them the benefit of their heritage. He saw further that the concentration of power in the control of industrial production was only a part of a trend toward concentration of power in government, in trade unions, and in every institution which affected the life and opportunity of every individual both as worker and consumer. In his earliest writings his main concern was to expose this trend toward the submergence of the individual, to establish its pervasive nature, and to warn that it must be defeated if the human quality of civilization was not to be destroyed. His case was presented with restraint and with telling effect. His recommendation of a monetary device, which later became commonly identified with social credit, as the most probable direction in which a solution might be found for freeing men from the tyranny of concentrated power, was also presented with restraint in the writings of the first few years, and was subordinated to the main analysis. His point was that men could not be free in any other way until they had secured a freedom of choice, both as producers and consumers, and a level of material well-being which the existing system of production and distribution denied them. The economic system must therefore first be reformed. Socialism was not the answer, since it would mean still further centralization of economic and political power. Monetary reform was the answer because it could destroy the mechanism by which economic power was being increased and by which the material well-being and the freedom of the individual were being diminished. Always Major Douglas presented monetary reform merely as a means toward the end of establishing a new society in which human beings would be free to develop their individuality in a way that had never been possible before.

Prior to 1930 discussion of public investment was conducted largely on the basis of an assumption of full employment within a closed economy. Consequently it centred around the productiveness of public investment as opposed to that undertaken in the privately-operated sector of the economy, the appropriate methods of financing the projects undertaken, and the legitimate spheres of operation of public bodies. The usefulness of public investment projects was believed, in the main, to be confined to their long term contribution to the productiveness of the economy. In practice, even well into the nineteen-thirties, governments, with exceptions, undertook public projects when finances were buoyant and borrowing relatively easy, and curtailed them, in attempts to balance budgets, when depression became serious.

After 1930 both in the thought and practices of some central governments and in economic writing the pendulum swung the other way. Main emphasis was laid on the current employment and income giving effects of public investment. This change in emphasis received additional impetus after the advent of The General Theory of Employment, Interest and Money when economic discussion became much more concerned with the level of employment than the distribution of the factors of production among alternative uses.

The transfer of attention from the long term aspects of public projects to their effect on current employment and income maintenance was accompanied by the shortcomings of practice and thought which are inevitable in an undeveloped field. While a good deal was written and spoken about the desirability of well thought out and well planned investment, insufficient attention was given to its attainment and in practice resort was had to many undertakings whose value, from either a short or long term viewpoint, was dubious. The shortcomings were largely associated with failure to cope adequately with the institutional and administrative problem involved. Further, there was a penchant for fastening on single devices to meet the overall employment problem.

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.

In this paper it is proposed to discuss the post-war economic problems of New Zealand, not so much because of their intrinsic importance, as because they raise questions of some general interest and fairly widespread application. It is not intended to pursue an elaborate statistical enquiry and as far as possible the facts selected will be confined to those having a direct bearing on problems and policies.

As elsewhere, the nature of these problems will be determined by the “fundamental” characteristics of the economy, the changes which have occurred during the war, and the nature and intensity of the forces which impinge on it from the world at large. The nature of the response to those forces will be greatly influenced, of course, by the prevailing political attitudes and the sort of administrative machinery and techniques to which the country has been accustomed.

Production and Trade. Since New Zealand is a small country with a population of less than 1,700,000 people, and with a comparatively simple economic organization, its problems tend to be sharp in outline, and readily amenable to analysis. Production is highly specialized. On the average of the ten years prior to the war somewhat over 60 per cent of the value of physical production was provided by farm products (when processed). About 53 per cent of the value of all production consisted of grass land products, in respect of which New Zealand has enjoyed unique comparative advantages.

By sociology Pareto means a synthesis of all the particular researches and disciplines dealing with human society—law, economics, political history, the history of religion, and so on—in a search for the relationships between social facts (1, 2). Sociology is to provide a framework into which will fit the results of these specialized studies; it is to be a comprehensive study which aims at discovering the principles underlying the form and changes of society in general.

Such is Pareto's own formulation. It is apparent that he believes both that there are general principles underlying the form and changes of society, and that these can be discovered by a new discipline, sociology, working on the results of the specialized studies. The primary concern of the new discipline must therefore be methodology, and Pareto devotes much more attention to the problem of method in the social sciences than he does to the construction of his own theory of society. His justification for this is his belief that the methods of all previous sociologists have been basically faulty and can lead only to invalid conclusions. In this paper it is proposed to follow Pareto's emphasis, and to deal with his analysis of social facts and his general theory of society primarily with a view to bringing out those aspects which raise the problem of method in the social sciences.

The unusual stresses and strains of the depression during the last four years have drawn attention more definitely to certain weaknesses in the financial structure of the Canadian federation. The province of Nova Scotia has performed a very valuable service in initiating an economic inquiry into Dominion-provincial relations as affecting that province. An inquiry such as this removes the problem from the realm of speculation and political expediency and relates it to the actual facts of the situation. It would be of great value if similar investigations were made by the other provinces into their own peculiar problems, followed by an examination of the whole question by an impartial body from the point of view of the Dominion as a whole. Investigations along this line have been carried out in the Commonwealth of Australia and a Commission appointed which has reported on the applications made by the states of South Australia, Western Australia, and Tasmania for financial assistance from the Commonwealth, based on certain disabilities affecting these states as a result of Commonwealth policy.

The financial arrangements made between the Dominion and the provinces at the time of Confederation were essentially in the nature of a compromise and designed to meet the situation as it then existed. This appears to have been more or less the situation in the original financial arrangements of practically all existing federations. Apparently, however, it was considered at the time of the Canadian Confederation that these arrangements would be of a somewhat permanent character. This optimistic view was early shown to be wrong when within two years it was necessary to make adjustments. Further, it was not anticipated at that time that there would be any change in the accepted functions of government. The prevailing idea was that the fewer functions surrendered by the individual to the government, the better. John Stuart Mill was still the authority, and his ideas with regard to the limitation of government marked the general line of thought. While there were those who took a wider view of the functions of government and who anticipated the collectivist movement of the last quarter of the century, the echo of this was at that time scarcely heard in Canada. There was no thought that many of the services now rendered to the community by governments would become necessary. Consequently, the division of authority, both political and financial, in the British North America Act, was based on a form of society and an idea of government which no longer exists.

It would be presumptuous for a Canadian to comment critically on the affairs, of Newfoundland—particularly as a native of a country which has done its share of bullying a small neighbour and of a country which can scarcely point the finger of scorn on grounds of bad government. Charges of corruption heard in Newfoundland fall on attuned Canadian ears—and it would probably not be difficult to find specific instances of scandal in the history of government in Canada which would match those of Newfoundland.

Nevertheless a student of the economic history of both countries may be forgiven for reflections suggested by comparisons and contrasts. In common with other maritime regions, Newfoundland throughout her history has faced the sea, and she has been the last to feel the effects of the pull of the North American continent. The railroad from St. John's to Port aux Basques brought her in direct touch with North America viá Sydney. Canadian bankers assumed control in the island after the crash in 1894. With the turn of the century the steel mills of Nova Scotia began to draw on the iron mines of Wabana. While British industrialism penetrated Newfoundland in the construction of paper mills, it was significant that Cornerbrook on the west coast was sold to International. Industrialism, particularly as evident in transportation, linked Newfoundland more closely to the continent, to mention only the demands for coal and oil.

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.

The purpose of this paper is to examine the effects of international movements of labour and capital upon the commodity terms of trade. The development of the modern theory of international trade, initiated by E. Heckscher and B. Ohlin has enabled us to relax the classical assumption of complete immobility of factors among different countries, and to analyse the international movements of goods and factors within the same theoretical framework. Thus, both Heckscher and Ohlin emphasized the substitutive relationship between international trade and factor movements. But the effects of international factor movements upon the international terms of trade seem to have attracted comparatively less attention. Although the question known as the “transfer problem” was subject to detailed investigation, it is not concerned with the movement of factors of production per se.

Professors J. E. Meade and H. G. Johnson independently considered international factor movements from the long-run point of view, and presented rigorous analyses of their effects upon the commodity terms of trade. Meade dealt with the international migration of labour in order to give a theoretical basis to the regulation of migration, whereas Johnson made an ingenious use of Rybczynski's theorem to analyse the effects of international transmissions of productive power upon the terms of trade. The present paper attempts to push their analyses a little further by developing a general formulation of the problem within a neo-Heckscher-Ohlin trade model.

It is one of the truisms of Canadian politics that stable federal power cannot be achieved without support from the province of Quebec. Until 1896 the dominant political party, the Conservatives, was the one which held Quebec. Since that period, Liberal ascendancy has been based on solid strength in French Canada. The problem of creating sufficient inter-cultural agreement to make possible the formulation of federal policy has been the most important single factor in determining the character of national party competition. This difficulty has set a premium on those skills of negotiation and conciliation which have in fact distinguished most successful Canadian statesmen, and has, more than anything else, inhibited the formation of national parties with consistent principles and policies.

Political parties, as a condition of national success, have had to unite French and English elements; but thus far they have done so only on the most tenuous basis. For many purposes, a minimal consensus was sufficient, but it seems to have been inadequate to achieve the full measure of power and influence which the Fathers of Confederation envisaged for central government. Although judicial decisions, and economic and geographic forces, may have accentuated the trend to a decentralization far greater than that contemplated in 1867, the basic reason for this development has been the impossibility of creating national parties which would unite both French and English Canadians behind alternative programmes. In the words of a French-Canadian historian: “Les principaux auteurs de la Confédération n'avaient pas caché leur intention d'organiser un gouvernement central très puissant.” It must be concluded that they either seriously overestimated the range of shared assumptions between the two cultures, or badly underestimated the degree of unity on fundamentals which was necessary to run the centralized state they had tried to create. The only type of national political party which Canada has been able to construct successfully has not proved capable of fulfilling their intentions.