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For a Bank of Canada at the Service of Canadians

on Wednesday, 01 October 1958. Posted in Social Credit

A brief statement of the Institute of Political Action first submitted to Hon. Edgar Fournier, official representative of the Premier of New Brunswick, at the Congress of the Union of Electors at St. Basile, N. B., Sept. 1, 1958.

On September 23, 1957, the Honorable John Flemming, Premier of New-Brunswick, spoke at the conference of the premiers of the four Atlantic provinces. During the course of his allocution he said:

"'The monetary policy of the nation and of the Bank of Canada was created to serve the people, all the people — wherever they may work and plan — wherever there may be dreams of a greater Canada."

He recalled the preamble of the law which established the Bank of Canada in 1934. The Bank should,

"promote the economic and financial welfare of the Dominion."

And in the opinion of Mr. Flemming, at least where the Maritime provinces were concerned, this aim had not been achieved. In fact, it was questionable whether it had even been pursued. There was no doubt that the Maritime provinces were part of what was called the Dominion of Canada back in 1934. And yet their economic and financial welfare has left a great deal to be desired. This is demonstrated beyond any shadow of doubt by the fact that individuals, families, municipalities and even the four provincial governments themselves — have been involved in a long and losing battle with the financial complexities of their economic problems.

In his address, the Honorable Mr. Flemming made his strongest protest against the restriction of credit:

"What we do not need is restrictive measures which seriously limit our capacity for economic growth."

Mr. Flemming was absolutely right. There could be limitations to economic growth proceeding from the very nature of things: a lack of manpower, barren soil, a hostile climate; a dearth of mineral resources, or of hydraulic power; a want of skill in utilizing existing resources — for example, the lack of know-how in harnessing the energy of rapids and waterfalls for electricity. These are very real obstacles. But it is extremely hard to justify those other obstacles of a purely financial order which have their origin in nothing more concrete than the decisions of men.

And yet these very obstacles exist, not only in the Maritime provinces, not only in the other parts of Canada, but in other advanced countries which find that their inability to cope with financial problems is paralyzing or seriously hampering production and further development. If a community desires to build an aqueduct its main problem is not to find a source of water, or lay hands on material, or find the engineers and workers. Its difficulty, as is always the case, is to find the money with which to pay for the project.

If it cannot raise the necessary funds the aqueduct: remains on the planning board. When the funds are finally available the aqueduct is built. Which shows that there was no question about the capacity to build it. The project was paralyzed by the impossibility of financing it. Which in turn proves that economic realities are subordinated to, and not helped by, finance.

And if the Bank of Canada has been set up to serve the people — all the people — then why have the citizens of this municipality been deprived of an essential service, a service well within their capacity to produce, by the simple lack of money? Of what use is this bank with its power to issue money and credits? Why does it allow the satisfaction of Canadians' needs to be limited by finance instead of only by the physical possibility of producing what is necessary to meet these needs?

Before it can make use of its' manpower and natural resources, a people is thus condemned to wait upon the financier for permission to do so; and if it receives this permission it must then proceed to pay considerably more than the cost of production itself.

In New Brunswick, the Beechwood hydro-electric project, though for long within the capacity of the province to construct, had to be held up for lack of financial means. Its promoters, the very government of New Brunswick, had to approach the financiers numerous times before they could get permission to go ahead with the project... a project to develop a natural treasure belonging to the people of New Brunswick. And when the government finally succeeded in getting 45 million dollars from the Bank of Canada to complete the work, it had to engage itself to repay over some years, not only the 30 million dollars which represent the cost of the work, but the interest as well which represent not a single bag of cement, not a single drop of sweat spent on the project.

The Bank of Canada, which was set up to aid the Canadian people, thus imposes a fine of 3 per cent upon the people for developing the country by exploiting its natural resources. Such procedure it not the characteristic of an institution of service but of an institution of tyranny.

Our judicial system exists for the purpose of dispensing justice, according to our laws and the facts placed before the courts of law. In no way is it intended to realize profits from this task of dealing out justice. In similar fashion, there is no reason why our monetary system should not exist for the express purpose of financing production and distribution according to the fluctuation of the consumer's demand; and not to provide profiteers with the opportunity of trafficking in the issuance of money and credit.

Compared to the great factories of Quebec and Ontario which employ thousands, the industries and businesses of the Maritimes might be considered small enterprises. There is nothing wrong or harmful in that. In fact, small business might be just the antidote to the strong swing in the direction of centralization; provided, of course, that they can be adequately financed. Large industries can raise capital by the sale of long-term securities. But what small enterprises need are the advances of credit from the banking system — advances which would automatically follow the trend of production up or down and which would be retired as products were sold — much in the fashion banks permit overdrafts, but without interest charges and without the restrictions which are not warranted by facts. Such a system would go a long way to solving their problems. They would stop disappearing one after another, leaving the people dependent upon the large businesses of the central provinces. We should no longer be faced with the pathetic spectacle of a multitude of able workers flowing out of New Brunswick and the other Maritime provinces looking for work in the more industrialized areas.

Should this not be the function of the Bank of Canada, set up to serve the people — all the people?

And when we say, "all the people", we mean not only public bodies, not only enterprises engaged in production, but all individuals, all the families making up society. For they too have a right to be served, and not hampered, by the financial system, to the end that they might partake in the production of Canada and its service, according to their needs. This means that finance must be up to the level of consumption; it means that all must have purchasing power, since everyone has need to lay hold of the necessities of life.

Our productive system, when it is producing, does distribute purchasing power to individuals in the form of wages and salaries to employees; profits to owners and dividends to shareholders. But the rate of flow of this purchasing power never comes anywhere near meeting the rate of flow of the goods which reach the market. No right-thinking, honest individual can deny this. And the gap between prices and purchasing power becomes ever wider as production relies more and more on machinery and less and less on salaried employees — that is it becomes greater as more progress is made.

Hence arises the problem, namely, that as machines make production easier, they create the problem of money. Our monetary system is outmoded; it belongs to another age. It has failed to keep step with the easy and abundant production of modern industry.

If production is to continue to supply more and more goods with the use of fewer and fewer hands, the financial system must logically find some other means of distributing purchasing power than through that of employment. Employment can continue to be one means, of course, in as far as the employment of the human element is still required; but it must provide money, by some other means as well, in the same measure that production can work without humans.

This money, distributed without being tied to employment, is called a dividend. And since progress is largely a common good, something which stems from common life in society, something that has been passed on from one generation to another, it follows that all who live in society should receive the dividend, in order that all may share in production, the fruit of this common heritage of progress.

Who should distribute these dividends? Not industry, since the dividend is not a remuneration for work. No, the dividend must come from a financial institution set up to serve the people — which institution is the Bank of Canada.

The problem of our society is not to find work for those liberated from work by the tremendous advances of science. The problem is to force finance to keep pace with production and enable the consumers to obtain this produce. It is to introduce the universal dividend over and above any revenue from wages, as a means of sharing and distributing the fruits of production.

Such a revenue, attached to persons and not to employment in industry, would make it possible for those living in the poorer sections of the country to share in the enormous production of richer provinces, whose produce, under the existing system cannot circulate outside the more fortunate areas. This would only be just. If we are a single, united nation stretching from sea to sea (and up to the present the Maritimes have failed to profit from this arrangement), then normally you would expect that all the members of this nation would profit in some way from whatever enriches the country, regardless of where this wealth is produced. This does not mean that everyone is to be placed on the same standard of living. It means that all should have an adequate share in the wealth produced in common.

Let production be financed by the advance of credits free from interest charges; finance the consumer by the introduction of the dividend for everyone for the sharing and distribution of goods — these are two points of the resolution adopted by the Union of Electors in their congress at St. Basile, N. B.  — A resolution which they are to present to the federal government of Canada and which they are asking each provincial government to press of the central governing body for immediate realization.

The resolution adds a third point; a discount on all retail prices, calculated on the relation of the overall consumption to the overall production. Retailers would be compensated for this discount. In other words, the selling price would be adjusted and then compensated for; thus the retailer's price would be respected, but the consumer, for whom this production is intended, would pay only a price in accord with the purchasing power of the community. This is simply a matter of accounting, determined by the facts of production and consumption; any danger of inflation or deflation, which always threaten our economic life and are not warranted by realities, would disappear.

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