James John Harpell.

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I




Canadian
National Economy

The Cause of High Prices
and their Effect upon the Country



BY
JAMES J. HARPELL




TORONTO
THE MACMILLAN CO., OF CANADA, LTD.

1911



LIBRARY

OF THE



University of California.



Class



Canadian
National Economy



The Cause of High Prices
and their Effect upon the Country



•a*

james j rarpext 1




TORONTO
THE MACMILLAN CO., OF CANADA, LTD.

1911



:; COPYRIGHT.. CANADA 1911
'•" BY'JX\l£9;Jj\AbPS±L



PREFACE



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TABLE OF CONTENTS



INTRODUCTION
CHAPTER I.

The Manufacturing Industry.

The fiscal policy of political parties previous to the middle nineties —
The general election of 1S96 — Preferential policy — Formation
of combines — The centralization of industry — Effect upon in-
dustry — Effect upon the country — Effect upon labour — Eff-: I
upon production — Some points raised 28

CHAPTER II.

The Preferential Tariff.

Combine* defeat intentions of preferential policy — An instance —
Combines and free trade — Attitude of people toward? prefer-
ential tariff — Insincerity of advocates of preference 34

CHAPTER III.

The Formation. Workings and Profits of Combines.

The formation of combines — Their control— Capitalization of com-
1 dnes — Profits of combire- — Cost of manufacturing foreign
raw material by protective tariffs — Tendency of manufactur-
ers to import semi-finishe — Tendency to manufacture a
poor elass of article — Assistance which the branch banking
- stem has been to combines 47

CHAPTER IT.

Canada 'sJ : ."Ral Pi - - nd Foreign Trade.

r £a 's wealth of natural resources — HeT proximity to the world 's
markers — Her climate — Her credit — Her exports — Heavy in-
crease in imports — Adverse balance of trade — Foreign trade
of other new countries — Some points raised 62



:



. . . • 'C 1 1 A I ' I V. I J \ .

. • • •

... . . .

• • - . • . •

The Farm i ixdi stry.

Effect of centralisation of industry on rural distrii tralization
not specialization— Protection of no value to primary pro
dncers- — Advantage taken of tariff by mannfaeturing indus-
tries ; t n < i middlemen — Fanners receive low prices for what
they sell. but pay high pricee for what they buy — Som«
amples — Agricultural industry unprofitable, which results in
decreased production — Loss of foreign markets Decline of
farming industry in Eastern Canada and Manitoba s i



CHAPTEK VI.

The Mining [ndustry.

Tariff increases cost of raining — Home market of no value to min-
ing industry— Gold — Silver — Copper— Asbestos — Iron — Lead —
Nickel — Miscellaneous ores and minerals — Value of free trade
to mining industry 106



CHAPTEB VII.

The Fishing Industry.

Production of fish in Canada has decreased — Number employed in
industry has decreased — Wretched conditions in many parts
of industry— Prices paid to fishermen for fish are too low.
and prices of necessities too high to make industry profitable. . Ill



CHAPTER VIII.

Tin Effect Upo; the Political and social Life of hie

Country.

Protection lias enabled a few to grow exceedingly wealthy at the

expense of the masses — Class legislation — Agents of large cor-
porations choke and corrupt legislative channels— Effect upon
I profession — Effect upon educational institutions — Effect
upon civil service — Protection the cause 120



CHAPTER IX.

The Need for National Economy.

Conditions will not rectify themselves — The people must be aroused
— Rapid increase in public expenditure — High cost of develop-
ment and improvement — The need for a movement in the
direction of economy in production — Co-operation and why
it is not successful in Canada — Co-operation increases produc-
tion, Denmark an example — The value of co-operative stores
as instanced by Great Britain — The value of co-operative
banks as instanced by Germany — Co-operative peoples' banks
in Canada 155



CHAPTER X.

Reciprocity With United States.

Various attempts to procure reciprocity from 1866 to 1896 — Dif-
ference in the methods of both parties in their attempts to
gain it — History of McKinley tariff — The Payne-Aldrich
tariff — President Taf t 's invitation to Canadian Government
— Albany conference — General election in United States —
Second invitation from Washington and resulting reciprocity
agreement — Value of agreement to Canada and reasons for
Canadian opposition to it — Reasons for the absence of
greater opposition in the United States — Canada and United
States are living on their capital — Canada buying supplies
from United States and borrowing money from England to
pay for them — The need for informing the Canadian people
on national questions 181



INTRODUCTION

During the last ten or fifteen years political
parties have shown a marked indifference toward
keeping the electors of Canada informed on the ques-
tions of the day. The old educative campaigns, which
were carried on throughout the country almost con-
tinuously from parliament to parliament, have been
abandoned. Nothing has arisen to take their place
and as a result the great body of electors are not sup-
plied with the information and data on which correct
judgments concerning national issues may be formed.
Canadian electors see little or nothing of politicians
and other interested parties until a few days before it
is necessary to submit these issues to the people and
during these few days the appeal is not so much to
reason and judgment as it is to prejudice, sentiment
and other considerations of even less worthy char-
acter.

In the discussion which the proposed trade nego-
tiations with the United States has aroused, it is
noticeable how religiously protectionists avoid discuss-
ing the economic phases of the question and how assid-
uously they confine themselves to its sentimental
aspects. For instance, they ask, "Why should we dis-
turb financial and other interests by tinkering with
our tariff to please the United States!" Or they say
that any disposition on our part to negotiate a trade
arrangement with the United States will affect the
workings of our preferential tariff with Great Britain
and injure Imperial unity. In such sentimental
phases of the subject the masses of the people have
little interest and hence it would appear that public



10 [NTBODUCTTOS

opinion is nol 30 pronounced on the tariff question as
might be expected under existing conditions. But it

<-.-mnot be denied that among the ma— <•- <>f Canadian
producers and consumers there is a very general and
growing suspicion that something is wrong which
could be set righl by a change in the Canadian Fiscal
Policy.

The people arc beginning to realize that the price
received by the primary producers of natural pro-
ducts, such as those of farming, mining and fishing arc
lower in Canada than in the United States, while the
prices of the articles which these producers require to
buy, such as clothing, machinery and other supplies,
are higher in Canada than in the United States. This
being so, the profits of the Canadian farmer, miner and
fisherman must necessarily be smaller than those of
his co-worker in the neighbouring Republic.

Canadian producers and consumers are beginning
to discover that the conditions under which they are
labouring appear even less favourable, when com-
pared with conditions in countries other than the
United States. According to the evidence submitted
before the Royal Commission of South Australia on
the Marketing of Wheat, the market price of wheat in
Melbourne, Australia, on August 7th, 1908, was 4s.
1 ' ■<!. ($1.00 1/3) a bushel. On the same day the whole-
sale price of flour in Melbourne was £9 5s. ($45.02) a
ton. During the same month the average price of
Ontario wheat in Toronto was from 82 to 83 cents a
Imshel The price of western wheat at Winnipeg ranged
from 60 cents a bushel for the poorer grades to $1.05' ' 2
a bushel for the best grade. It should be explained
here thai wheat in Australia is bought on the f. a. q.
or fair average quality plan. There is, therefore,
only one grade in Australia, while in Canada there are
many grades. On the whole, the average price of
wheal in Canada during August, 1908, was very much



INTBODTJOTION 1 1

below the average price of wheat in Australia. But
the price of flour in Toronto during the same month
was from $65.00 to $70.00 per ton, or from $20.00
to $25.00 per ton more than in Australia. From
data such as these the Canadian farmers are beginning
to discover that while the average price which they
receive for their wheat is about the lowest received by
farmers in any wheat growing country of the world,
yet the prices which they and other Canadian con-
sumers pay for flour, bran, and shorts are about the
highest. The freight on wheat from New Liskeard, a
station on the Government road in the clay belt of
Northern Ontario, to Montreal, a distance of 500 miles,
is $4.48 per long ton. For the same distance in New
South Wales, Australia, the freight on wheat is 12s.
($2.92) a long ton. Coexistent with this condition is
the fact that steel rails made in Canada are being sold
to the builders of New South Wales railways at a much
lower price than the same class of rails from the same
Canadian foundry, on which the Canadian people, in-
cluding the growers of wheat, have paid a bounty of
from $2.75 to $3.75 a ton, can be bought by the builders
of Canadian railroads. The cash price of a Canadian
made harvester in the Province of Alberta is $155, in
Ontario the price is $132. But the same binder can
be bought in Great Britain for £25 10s. ' ' delivered any
station and subject to 2y 2 % for cash or three months."
That is, the cash price of the Canadian-made harvester
in Great Britain is $121.00. The freight on agricul-
tural machinery from Liverpool, England, to Calgary,
Alberta, is 118s. ($28.84) per long ton, carload lots.
A harvester weighs from seventeen to nineteen hun-
dred weight, so that it would pay the farmer in Alberta
to buy his Canadian-made machinery in Liverpool and
ship it back into Canada, if it could be imported free
of duty.



L2 OANADIAM NATIONAL ECONOMY

Another discovery that is arousing the suspicion
of the ( lanadian people is that there are few commodi-
ties produced in Canada which cannot be bought by
the consumers of other countries much cheaper than
they are being sold to the consumers in Canada. For
instance, bacon made from the Canadian hog in the
pa<-king-houses of Toronto, and for which the people
of Toronto pay from 22 to 28 cents a pound, is sold
in Great Britain for from 15 to 20 cents a pound.
Canadian flour is cheaper in England than it is in
Canada and bread in Canada is about double the price
it is in England. The same is true of fish, lumber or,
as a matter of fact, any commodity that is the product
of the natural industries of this country. None of this
extra price which the Canadian consumers pay goes to
the primary producers. The prices which they receive
for their products is the same whether for export or
for home consumption, and is always based upon the
ruling prices in the English markets. Thus the price
paid to the Canadian producers of wheat, live stock,
cheese, fish, etc., is governed by the current prices of
these products in England. The Englishman may call
this dumping, but the Canadian consumer is beginning
to realize that the explanation lies in the fact that the
I ) rices of these commodities have remained stationary
in Great Britain or have advanced slightly, while the
prices to Canadian consumers have been very consid-
erably and rapidly increased during recent years. On
the other hand, the prices which the Canadian con-
sumers pay for commodities imported from Great
Britain are much higher than the prices paid by the
English consumers. Concurrent with the rapid in-
crease in prices of commodities there has been an
abnormal increase in every other item, such as rents,
taxes, etc., that goes to make up the total cost of living,
until at the present time it is a demonstrated fact that a
family can live better in England on about one-half



INTRODUCTION 13

the outlay that is necessary to keep the same family in
Toronto or Montreal.

The purpose of this volume is to review the causes
that have produced the present high cost of living and
production in Canada, and to examine the effects
which it is having upon the country.



CHAPTER I.

THE CANADIAN MANUFACTURING INDUSTRY.

Previous to 1878 the duty on Canadian imports
was intended only to produce a revenue sufficient to
meet the national expenditure ; or. in other words, the
tariff was one for revenue only. But in that year the
Conservative party, under the leadership of the late
Sir John A. Macdonald, came into power on a policy
of protective tariff ; that is a tariff, which, in addition
to raising the required revenue is so adjusted as to
protect the Canadian manufacturer from outside com-
petition.

The Liberal party, which by the election of 1878
was thrown into opposition, continued to advocate a
tariff for revenue only, or as it was designated by
many and understood by the general public, "Free
Trade." Few, if any, countries have ever adopted
absolute free trade, though we have come to speak of
countries which have not a protective tariff as "Free
Trade" countries. Thus we speak of Great Britain
as a "Free Trade" country although much of her reve-
nue is provided by import duties which are imposed
on certain articles for revenue only. The term "Free
Trade," therefore, as it is generally used, is a mis-
nomer. It should be "Tariff for Revenue Only."

According as the economic conditions of the coun-
try become readjusted by the protective policy, or by
the "National Policy" as it was generally called, and
the burdens of the great body of the people corre-
spondingly increased, the arguments of the Liberal
party became more and more effective and no doubt
would have triumphed much sooner than they did were
it not for the fact that the protected interests made



If) CANADIAN NATIONAL BCONOM1

greater and greater efforts to keep the Conservative
party in power. By the early nineties the farmers
throughout the country were beginning to i'eel keenly
their new burdens and a movement known as the
"Patrons of Industry," which was started about this
time, spread rapidly. Primarily, this was a co-opera-
tive movement and. being such, readily exposed, in a
very convincing manner, the fact that the hardships
Prom which the people were suffering- emanated from
the protective tariff. In districts where this move-
ment was properly managed it brought much relief
and its educative force had the immediate effect of
converting Tory agriculturists into "Free Trade"
supporters.

As in the case of all elections, there were many
quest ions involved in the general election of 1896. But
the mosl important one and the one which more than
any other differentiated the two parties, was the ques-
tion of " Free Trade" and "Protection." The "Free
Trade'* party won and the Liberals came into power
pledged as firmly as any party could be to those who
elected them to banish "Protection."

The campaign of the protected interests was at once
shifted from the electorate and concentrated upon the
new government. In an incredibly short time it was
announced that the government had decided to inaug-
urate what is now known as the preferential policy,
by which the British manufacturer was to be given a
substantia] advantage over other importers in the
Canadian markets. This policy was evidently intend-
ed by the Liberal government to take the place of the
Free Trade policy on which they had been elected and
much was made of it in the protectionist and party
organs. There were not a few, however, who recog-
nized the sham of the substitution; but the idea of
closer trade relations with the mother country appeal-
ed to the loyalty of the majority of Canadians and



MANUFACTOBIXG INDL'STRY 17

they were easily persuaded to give the new policy a
trial. Moreover, any loss which the Liberal party
suffered by the withdrawal of those who were dissatis-
fied, was more than made up by the support of, or at
any rate, the lark of opposition from the protected
manufacturers, who were now satisfied that the protec-
tive tariff of the Conservative party was to be main-
tained by the new government.

By this action of the Liberal government all orga-
nized opposition to protection was removed and there
remained no effective force to restrain or expose man-
ufacturers and others who took undue advantage of
the protection which the tariff gave them to raise
prices to Canadian consumers. The Patrons of Indus-
try had supported the Liberal candidates ; discredited
politically by the tariff policy of the new government,
and exposed to the disabilities which manufacturers
were able to impose upon their co-operative movement,
they soon went to pieces.

No sooner had the government been converted,
than the various protected interests began to take
advantage of the protection which the tariff gave
them. ■ Allied interests came together and combina-
tions were formed. Prices to Canadian consumers
were raised and in order to maintain these prices
efforts were made to control production. One after
another the smaller manufacturers were forced either
to close or to sell out to the larger ones. The extent
to which this elimination and amalgamation has been
carried on and the effect it has had upon Canada is
apparent to anyone who has traveled much about the
country.

According to the census returns of , 1891 there
were in Canada in that year 75.964 manufacturing
establishments of all kinds, large and small. In the
census of 1901 the statistics of manufacturers were
collected only for establishments having five employees



18 CAXAUAN NATIONAL ECONOMY

and over. Bui in 1906 a special census of all manu-
factories was taken. In the government report pre-
senting the results of this 1906 census the following
note appears: "Statistics were collected from all man-
ufactnring establishments, irrespective of the number
of persons employed, although many of the smaller
ones were nol used in the compilation." Nothing is
said in the reporl as to how many were excluded. But
it is significant that all subsequent republications of
the census by the government omit the above explana-
tory note. A.ceording to these two censuses the num-
ber of manufacturing establishments decreased from
75,964 in 1891 to about 15,796 in 1905. When the
Liberal party were in opposition, in their fierce
denunciation of the protective tariff, they repeatedly
accused the Conservative government of padding the
census returns of 1891. No such charge, however, has
been brought against the census takers of 1881 or 1S71,
and in order that the reader may have all the facts to
judge for himself the following figures taken from each
of the census returns since 1871 are given: —

No. of m * -i x-

m „„ Total No.

Census Population factory -, X7

Establish- ™***

ments Earners

1871 3,485,761 41,259 187,942

1881 4,324,810 49,928 254,935

1 891 4,833,239 75,964 369,595

1901 5,371,315 not given not given

L905 not given 15,79b 356,034

P>ut if there is any doubt about the validity of the
figures just quoted, there surely can be no question
whatever about the following. As already stated the
census of 1901 gives only the number of establishments
with t\\-a employees and over. In the census of 1906
this information is also given, as well as returns for



MANUFACTURING INDUSTRY 19

ail manufacturing establishments. According to these
two censuses, both of which were taken by the Liberal
government, we find that the number of manufactur-
ing establishments with five employees and over de-
creased from 14,650 in 1901 to 12,547 in 1906 or almost
fifteen per cent, in five years. Now, as is generally
known, for the one establishment with five employees
and over, that has been driven to the wall, there are
many smaller ones that have been forced to close for
the same reason.

Since 1906 this eliminating and concentrating pro-
cess has been going on with even greater vigour than
at any time before that date, and to-day it is not un-
common to find a whole industry administered from
one office. In 1909, according to the " Monetary
Times" of Toronto, 52 large Canadian manufacturing
companies were merged into ten combines with an
aggregate capital of $195,000,000.

The people of this and other countries have heard
a great deal of the aid which Canada's protective tar-
iff has been in compelling foreign manufacturers to
build branches in Canada. But for the one new estab-
lishment that has been erected fully fifty have disap-
peared. For the purpose of a more detailed examina-
tion of this surprising decrease in the number of man-
ufacturing establishments the following extracts giv-
ing (1) the number of factories in each industry men-
tioned, (2) the number of wage-earners to whom these
give work, and (3) the value of the total output of
each, have been taken from the census returns of 1891
and 1906. Anyone desiring more complete informa-
tion may obtain it from the "Canada Year Book" for
1908, published by the Dominion government. The in-
dustries mentioned have been selected from those
enjoying the greatest amount of protection.



20



CANADIAN NATIONAL ECONOMY



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MANTJFACTORING INDUSTRY 21

In order to understand the effect which this pro-
cess of elimination has had upon the country one
requires to visit the thousands of villages and towns,
which but a few years ago, were thriving places, pos-
sessing many promising young industries that at least
supplied local requirements and by the labour they
employed provided an important market for the agri-
cultural products of the community. To-day many of
these places are dilapidated and half deserted. The
machinery in the plants lies rusting. The neighbour-
ing farmers, instead of butchering their cattle, hogs
and sheep for the local market, are compelled to sell
on the hoof for what they can get from the large
slaughtering houses and packers. Their grain is also
exported as it comes from the thresher, instead of be-
ing ground, as it used to be, for home consumption, at
the local grist mill, which has also been closed up in
many cases. Thus the farmers' products are shipped
out of the community in the rawest condition while the
finished articles they require are shipped back to them.
Such a system of waste coupled with the opportunity it
gives the middleman for fixing both buying and selling
prices could produce only one result — a serious de-
crease in profits. This, together with the loneliness of
the changed social conditions brought about by the
decrease in the population of the adjoining town or


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Online LibraryJames John HarpellCanadian national economy; the cause of high prices and their effect upon the country → online text (page 1 of 13)