Some brief notes

Submitted by the Institute of Political Action to the representatives of the ten provinces and the federal government meeting at Ottawa, February, 1961

Why and where federal-provincial clashes

There is apparently no quarrel between the federal and provincial governments as to the distribution of legislative powers provided by the British North America Act of 1867.

We do not think that provincial governments meet with any physical difficulty in carrying out programs which come under their jurisdiction. No provincial government seems to complain that the federal government draws so heavily upon the material resources and manpower of Canada that there is too little left of either for provincial services and developments. Contractors, manufacturers, farmers, transportation, the producing system of Canada generally are eagerly looking for orders, whether such orders emanate from the federal government, from some provincial government, from other public bodies or from individuals.

But if the productive power is sufficient to answer readily all public or private orders for goods and services, not so the financial means with which to pay for them.

There is no parity between the physicall possibilities and what is financially available. And this is the source of difficulty for public bodies as well as for individuals.

The conflicts between federal and provincial governments arise where the scarcity occurs not in the field of realities, but in the field of finance.

If whatever is physically possible were made financially possible, there would be no grounds for feuding, since the production system shows no physical difficulty in filling all orders, no matter from where they come.

But, why should an organized community possessed of legislative authority - a sovereign nation or an autonomous province - be compelled to restrict the utilization of its enormous producing power to bounds set by financial decisions? Should it not be the other way around the financial mechanism fitted to physical possibilities?

Finance should reflect facts

Whatever be the accepted nature of the accepted instruments of money or credit, a money system is, fundamentally, a bookkeeping system. Finance is, or should be, a mere reflection in figures of the physical facts of production and consumption.

A financial mechanism thus geared to economic facts would supply new credits at the rate of new production of all kinds, and would recall credits at the rate of consumption of production.

This would eliminate the purely financial problems, collectively speaking, leaving only production problems; but the latter can easily be dealt with by our modern production system, if unhampered by financial considerations.

The end of fiscal disputes

With finance made subservient to physical possibilities, the present taxation set-up could be abrogated, and a new mode of public financing introduced to work smoothly for all parties, federal or provincial.

The same production system is tapped for all demands, whether public or private, whether federal or provincial. And the same citizens have to liquidate the total cost of goods and services supplied in all fields. There is, then, inherently no cause for quarrelling, as long as one government does not invade the jurisdiction of another, if the financial system is made to agree with the production system.

An appropriate financial mechanism which might very well be the Bank of Canada on a national scale, or some institution of the provincial Treasury, on a provincial scale would supply, the credits necessary to finance all new production, whether public or private, at the rate, time and place where such production takes place and the same financial mechanism would act to recall the credits at the rate of consumption or depreciation of wealth of all kinds. This latter operation could be done by a proper adjustment (not pegging) of prices at the retail end.

Sound principles, which should govern a financial system sufficiently flexible to reflect facts and meet economic conditions as they develop, have been enunciated by C.H. Douglas in a system known as "Economic Democracy", better known afterwards under the appelation of "Social Credit". The name, however, matters little. And while the principles are applicable anywhere, the rules and regulations for their application must be designed to the political set-up and the social policy in each country

Federally or provincially?

The Institute of Political Action holds that the representatives of the governments meeting at Ottawa, should insist on the establishment in Canada of an adequate mechanism so ordained that whatever is physically possible would always be made financially possible, without inflation or without debt for any private institution.

Should the federal government refuse, we urge each provincial government to take the intiative for such a step within its own boundaries. We cannot believe that the provinces agreed to enter into a federation, except for common advantage - certainly not to be paralyzed in the face of an unused productive potential, nor to place themselves under the obligation of going into debt as a condition to making use of their natural resources and their manpower.

The provinces are specifically granted the "right to raise loans upon the sole credit of the Province" (B.N.A. Act.). This is recognizing the possession of credit by a province. And the province can, surely, for its own needs, provincial, municipal and educational, design some mechanism to make use of something which belongs to it, without having to pay a license for it to any individual or any private institution.

The proposals for Social Credit supply the outlines of an organism to serve the financial needs of a country without inflation or deflation.