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.

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.

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.

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.

The decennial redistribution of federal constituencies in Canada always reveals the House of Commons in an unusual light. Almost alone among major pieces of legislation, the Representation Bill that follows each census is not openly an embodiment of cabinet policy; for statements of policy are confined to declarations that redistribution is the business of the House, not of the government. Party discipline is thus relaxed to the extent that every member of Parliament must look out for himself, and in this self-seeking he can assume that his party colleagues, particularly those from his own province, will stand by him; and they do. A redistribution calls forth not party discipline but party cohesion, and commonly offers many illustrations of the decentralized nature of Canadian political organization. Since every member of Parliament is an expert on at least one clause in the bill and has a vested interest in one constituency, local and personal considerations enter largely into debate, so that the House of Commons during a redistribution presents a somewhat disconcerting picture of what the electorate could expect if cabinet leadership in important legislation were weak or relaxed all the time instead of once in ten years.

The purpose of this paper is to sketch briefly some aspects of Bourassa's political and social thought and to indicate in particular a few of the influences shaping his complex mentality. With the historical detail of his public career, and of the Nationalist movement which he led in the first two decades of this century, the paper is not directly concerned. Nor is any attempt made to reach a final estimate of his influence or significance in Canadian politics.

The difficulties in examining Bourassa's ideas are many and arise not only from his radical temperament and tendency to over-statement. They spring also from his great sensitivity to the intellectual and emotional currents of his day which found expression in innumerable pamphlets, speeches, and editorials in his newspaper of ideas and combat, Le Devoir, founded in 1910. Difficulties are implicit in the complicated nature of the task he sought to perform. For he set out, at the turn of the century, and with a sense of the opening of a new era in the historic development of the French-Canadian people, to re-examine every aspect of his people's situation; political, social, economic, moral, religious, and intellectual. He proposed to expound principles basic to their social thought and action in a new set of circumstances.

Three main elements in the new era were of special concern. First was the impact upon Canada of the new imperialism, opening up prospects of direct involvement in imperial wars in an age of mounting imperial rivalries, and threatening, moreover, so he believed, to undermine toleration of cultural and ethnic difference in Canada. A second major change in circumstance was the rapid development after 1900 of the Canadian West on the basis of a large immigrant population of diverse peoples, posing grave difficulties to the achievement of the ideal of a dual nationality throughout Canada. Finally, he became much concerned with the deeper significance to French-Canadian nationality of the whole complex of adaptations—ideological, moral, economic, and social—being made in response to the coming of North American urban industrialism to the province of Quebec.

Sir Edward Bulwer-Lytton belongs to the group of Benthamite disciples who, in the generation after the publication of Mill's Essay on Government, initiated that programme of legislative and administrative reform which transformed the England of Eldonian Toryism into that of Gladstonian Liberalism. In half a dozen fields of first-class importance—education, law, factory legislation, colonial administration, the reform of the civil service—they applied the Benthamite principles with energy and enthusiasm. The two Mills in the India Office, Southwood Smith in the Poor Law Commission, Cornewall Lewis, whose book on political semantics has been too long neglected, at the War Office, Sir Henry Taylor at the Colonial Office, all combined the Radical application of disinterested intelligence to the art of government with a genius for administration which outraged both aristocratic sinecurist and Cobdenite business man. With a passion for statistics worthy of Dickens' Gradgrind, factory inspectors like Leonard Horner and medical officers like John Simon gathered the material which Marx later employed in his brilliant indictment of industrial capitalism. They married theory to practice; Austin elaborated from his naval experience a theory of sovereignty in which the ability to command became the essence of government, while the younger Mill discovered in the running of the East India Company principles of efficient public administration which the ancient universities were quite incapable of supplying. They obtained a new prestige for the public servant; the growth of the English civil service in the nineteenth century, indeed, is nothing much more than the gradual fulfilment in practice of the major ideas outlined in Bentham's fertile Constitutional Code.

The cold war has resulted in levels of government spending in advanced countries far bigger than the post-war deflationary gaps as estimated by the most pessimistic of the pessimists. Deflationary gaps have been over-filled, and the postwar situation in the advanced countries has been one of chronic inflation rather than chronic under-employment. The high level of demand in the advanced countries has also aggravated the chronic inflationary pressure in the less developed countries. It is natural, therefore, that the attention of economists and laymen alike should have turned from public spending policy to tax policy.

The general tax problem which seems to have aroused most interest is, “What are the limits to taxable capacity?” Among business men, trade union officials, government advisers, and even among professional economists, from Canada to Indonesia, one often hears today the statement that when tax rates reach a certain limit, further increases in tax rates will be inflationary rather than deflationary. It is the present writer's opinion that this statement is based upon a misunderstanding, and that its frequent repetition in high places calls for a restatement of home truths regarding the economic effects of taxation. What follows is certainly not original analysis; but sometimes a simple application of familiar but appropriate tools can help to clarify an economic policy issue. Such clarification is the purpose of this note.