M 1 15 6r8 UC-NRLF $B 2fll S3M 0^ LO CO >- GIFT OF ^'^7/^/y /r-r^vj ^ Canada Economic Position and Plans for Development Guaranty Trust Company of New York Canada Economic Position and Plans for Development Guaranty Trust Company of New York 140 Broadway FIFTH AVENUE OFFICE L ON D O N O F FI CES Fifth Avenue and 43rd Street ?2 Lombard Street E. C. 5 Lower Orosvenor Jrl., b. W. MADISON AVENUE OFFICE PARIS OFFICE Madiflon Avenue and 60th Street Rue des Italiens, 1 and 3 u^ COPYRIGHT, 1919 GUARANTY TRUST COMPANY OF NEW YORK Canada ^^^^-^^^^^ Economic Position and Plans for Development OF those portions of the globe to which its in- habitants are now turning to obtain, through development of natural resources and expansion of economic life, reparation for the damages of war, and restoration of world-wide prosperity, none holds larger promise than Canada. It is a land of tre- mendous possibilities, not only for those who live there and the people of the Western Hemisphere generally, but also for the world at large, stricken in many quarters as it is and oppressed everywhere by the magnitude of burdens accumulated during the last four years. Canada enters upon the period of readjustment to a peace basis with the consciousness of having ac- complished extraordinary things during the war, not the least of which was a swift passage to that stage of economic life where the basic industry of agri- culture is enlarged by intensive efifort, and manu- factures have advanced to an extent indicative of ability to provide beyond domestic needs. Such a result was obtained under the pressure of a demand calculated to enlist to the uttermost the skill and energy of the Dominion. With equal enthusiasm her people are turning now to the exercise of those [1] 5?Cli&TrrC'7 ;qualijbfe3 iit tlieir pr4>blem of holding to the benefits that have accrueci to them and reahzing the impUca- tions of their achievements. There is ample justification for their belief that they have not set themselves an impossible task. Sparse as is the Canadian population just now in comparison with the extent of territory; inadequate as is their industrial organization compared with that of the United States^ or Great Britain, or France, or Japan; difficult as it may be under the conditions likely to prevail for some years to come to finance the multifarious operations incident to a general and simultaneous development of agriculture, mining, manufacturing, and commerce, both domestic and foreign; the attitude of the Canadians themselves and the estimation in which they are held by the United Kingdom and the United States give assurance that their aspirations will be encouraged in a very sub- stantial way both at home and abroad. Already there are under consideration plans by which Canada will conserve her labor supply and, by her intelligent treatment of the immigrant, foster its increase. Every effort is being made to readjust the industrial organization, which war conditions called forth, to a peace basis, without loss of time or efficiency. As for the problems of finance the Canadian banks are establishing additional branches in sections where their services are likely to be required, foreign offices are being set up to handle export and import trans- [2] actions, and foreign institutions are establishing branches in Canada. Altogether there is well under way the construction of the necessary machinery for business on such a scale as Canada contemplates. Agricultural Productions The natural resources which it is proposed to develop are immense in extent and variety. Agri- culture is, and will long continue to be, the chief industry of the country, whatever progress may be made in manufactures. It has been greatly stimu- lated during the war both in the direction of a diversity of crops and in the manner of their cultiva- tion. As the labor supply diminished with the con- tinuance of the war, intensive methods of farming became necessary. During the year 1918 there was a marked tendency toward mixed farming, which was reflected in a reduced production of wheat and oats. The estimated yield in bushels of crops for 1918 as compared with 1917 is as follows: CROPS 1917 1918 Wheat 233,742,850 189,301,350 Oats . . . 403,009,800 380,273,500 Barley . . 55,057,750 77,290,240 Rye ... 3,857,200 8,496,700 Peas . . . 3,026,340 3,110,100 Beans . . 1,274,000 3,568,380 Buckwheat 7,149,400 11,428,500 Flax .... 5,934,900 5,972,200 Mix Grains 16,157,080 35,730,300 Corn for husk inj ? 7,762,700 14,214,200 [3] CROPS 1917 1918 Potatoes . . . 79,892,000 104,512,700 Turnips, etc. . . 63,451,000 130,989,600 Hay and Clover 13,684,700 (tons) 14,681,400 Fodder com . . 2,690,370 (tons) 4,776,000 Sugar beets . . 117,600 180,000 Alfalfa 262,400 (tons) 446,400 The production of crops is likely to be stimulated by the plans now being made to settle soldiers return- ing from Europe and war workers at home as farmers on the vast stretches of land hitherto undeveloped. A census taken at the front in 1917 showed that of 230,000 Canadian soldiers interviewed, 105,000 ex- pressed a desire to become farmers after the war. Of these, 78,000 had had previous experience. Canada feels that the returning soldiers have a special claim upon her and that by treating them liberally in the matter of land grants she will not only meet an obligation, but also will contribute to the general prosperity, on the theory that when agriculture is prosperous the other industries will be also. Forest Resources The forest products of Canada rank next to those of agriculture in value of production, the total for the last year being estimated at $175,000,000. In value of forest resources Canada is surpassed only by Russia and the United States. The forest belt ex- tends across the country a distance of nearly 4,000 miles, with an average breadth of^about 700 miles, [4] giving an approximate area of 2,500,000 square miles. The nominal forest area has been estimated at 1,000,000,000 acres and the actual available area of merchantable timber at 200,000,000 acres. The sup- ply of merchantable timber is about one-fourth of the supply available in the United States. There are forty-five principal commercial woods produced. More than one-half of the standing timber of the Dominion is in British Columbia, where is the largest and most compact area of merchantable standing timber left in the world today. The area covers more than 180,000,000 acres and the amount of timber is estimated at nearly 400,000,000,000 feet. The value of forest products exported during 1918 is estimated at $65,436,204 as compared with $52,280,875 in 1917. The manufacture of wood pulp has become an important industry, having increased more than 250 per cent, during the last ten years. The output of wood for pulp manufacture in 1908 was 482,777 cords, with a value of $2,931,653. In 1917 the output was 2,101,356 cords, and the value $18,788,333. The pulp wood resources of the country are estimated at 1,033,370,000 cords. Metals and Minerals Canada is well supplied with important metals and minerals and the studies which have been made during the war by the Imperial Munitions Board are expected to result in a Urge exploitation of them. [5] The Dominion Government has appropriated $200,- 000 for making the experiments with lignite as a substitute for anthracite recommended by the Coun- cil for Scientific and Industrial Research, and a similar sum has been provided by Manitoba and Saskatchewan. Canada is largely dependent upon other countries for oils but an eflFort is now being made to develop deposits in Western Canada. The quantity and value of some of the important mineral productions during 1917 follow: MINERAL QUANTITY VALUE Cobalt . . . 1,089,134 pounds $1,742,614 Copper . . . 108,860,358 pounds 29,588,254 Gold .... 747,366 ounces 15,449,426 Lead .... 32,072,269 pounds 3,571,889 Molybdinite . 271,530 pounds 271,530 Nickel . . . 84,470,970 pounds 33,778,388 Platinum . . 49 Ji ounces 5,090 Silver .... 22,150,680 ounces 18,034,419 Zinc .... 31,227,351 pounds 2,779,547 Asbestos . . 144,185 tons 7,215,389 Chromite . . 36,352 tons 490,001 Coal .... 14,015,588 tons 47,643,646 Graphite . . 3,714 tons 402,892 Gypsum . . . 339,418 tons 887,170 Magnesite . . 58,090 tons 728,275 Mica .... 2,401,629 pounds 366,587 Natural Gas . . 26,465,686 cubic feet 5,003,342 Pyrilis . . . 403,243 tons 1,586,091 Salt 138,909 tons 1,047,792 Portland Cemen t 4,768,488 tons 7,669,521 Lime .... 6,338,212 bushels 1,517,918 [6] The total value of Canada's mineral productions in 1917 was nearly $193,000,000. There are many minerals not included in the above compilation which are known to exist in large amount, but which have not yet been developed in commercial quantities. The output of the principal mining industries in 1918 was about the same as during 1917 because of a shortage in labor supply, but the value increased considerably, being estimated at $220,000,000. The production of coal during 1918 is estimated at 15,180,000 short tons. The estimated production of the more important metals during 1918 is estimated as follows: Gold, $14,750,000 in value; silver, 20,800,000 ounces; copper, 117,000,000 pounds; nickel, 91,500,- 000 pounds; zinc, 36,000,000 pounds; pig-iron, 1,182,000 short tons. The Fisheries During the war much more attention than formerly was given by the Canadians to their fisheries, because of the reahzation that in them the country possessed an offset to the world shortage of food. The sugges- tion is now made that the Government turn to them as a debt paying source, and under the direction of the Dominion Fish Committee plans are being made to exploit both the Atlantic and Pacific coasts and the lakes in Alberta, Saskatchewan, and Manitoba. There are 5,000 miles of coast-line on the Atlantic and 7,000 miles on the Pacific. The inland fisheries [7] cover 200,000 square miles of fresh water, or half the fresh water area of the world. Not including the vast quantity of fish caught of which no record is kept, the value of fish marketed by Canadians in 1917 was $52,352,044, of which the sea fisheries con- tributed $47,052,605 and the inland fisheries, $5,299,- 439. Nearly 100,000 men were employed in the in- dustry and the value of the equipment used was estimated at $33,520,748. The Council for Scientific and Industrial Research has been studying the utili- zation of the great quantities of fish waste. It is estimated that 300,000 tons of fish offal and non- marketable fish are annually allowed to go to waste and that the fish oil which could be obtained from this waste would be worth nearly $6,000,000 at cur- rent market prices, while other by-products would reach a value of several hundred thousand dollars more. Railroads There are eighty-three steam railroads in Canada with a total mileage of 5 1 , 35 9 . 74 . Their capi tal stock is valued at $1,089,114,875 and their funded debt at $896,005,116, a total investment of $1,985,119,991. Their gross earnings, as of June 30, 1917, the latest available, were $310,771,479; operating expenses totalled $222,890,637; and net operating revenue, $89,892,502. In 1917 the number of passengers car- ried was 53,749,680 and the number of tons of freight, 121,916,272. [8] Under the title of the Canadian Government Rail- ways there are now operated 13,364 miles of steam railroads, the larger part of this comprising the Canadian Northern Railway, which was taken over by an Act of the Dominion Parliament last year at an award price of $10,800,000, but which is still being operated by the organization built up by those who formerly owned the road. The highly successful Canadian Pacific Railway is still privately owned and operated, but suggestions have been made that it be acquired by the Government. In this connection consideration has also been given to the possibility of bringing all the railroads under Government owner- ship, but with the operation in the hands either of the Canadian Northern or the Canadian Pacific organi- zation. The chief railroads of Canada are indexes of the extent of that country and a glance at a map will show that they still fall far short of reaching into every section of the country where commercial possibilities exist. The Canadian Northern Railway system comprises more than 9,296 miles, distributed as follows : Nova Scotia 369.9 miles Quebec 626.77 miles Ontario 2,219.1 miles Manitoba 1,989.1 miles Saskatchewan .... 2,178.1 miles Alberta 1,181.21 miles British Columbia . . . 516.4 miles State of Minnesota . . 215.42 miles [9] The Canadian Pacific System has in operation 13,772.1 miles and in addition controls the Minne- apoHs, St. Paul, and Saulte Ste. Marie Railroad, with a mileage of 4,227.8, and the Duluth, South Shore, and Atlantic Railroad, with a mileage of 625.8, giving a total of 4,853.6 miles. The Grand Trunk system, exclusive of the Grand Trunk Pacific Railway, com- prises 8,107 miles. It has 1,083 miles of double track, including the longest continuous stretch of double track railway under one management in the world. The Grand Trunk Pacific Railway operates 2,804 miles. There are 2,277.9 miles of electric railway in Canada, with a total capital of $161,234,739, of which $70,606,520 is in stocks and $90,628,219 in bonds. Gross earnings as of June 30, 1917 were $30,237,663. The total income from operation was $12,431,229 and the net earnings from operation were $10,196,985. Manufactures Canadian manufacturing developed rapidly during the progress of the war. There was an enormous de- mand for all products and the building of new plants or the extension of old ones proceeded rapidly. Now the country finds itself impelled toward a continuance of this development in order to reduce the necessary importations of a new and growing country, to pay ofif war debts, and to provide employment for her retiuming soldiers or those whose services as munition [10] workers are no longer required. A diflSculty in the way is the necessity that basic industries shall be able to put forth diversified products. The ability to concentrate on specialized products, which permits of quantity production at low cost in more indus- trially advanced countries, is denied to Canada for the present. Her builders must be able, for example, to obtain at one and the same plant structural steel, boiler plates, wire nails, or any other steel product which they may require. In an undeveloped country, where communities are widely separated and where population is not congested, the general manuf-actur- ing plant is as necessary as the general store. No other kind will serve the community, and no other kind can support itself. A handicap is therefore placed upon Canadian manufactures by the very nature of the country and the sparseness of its popu- lation. To meet this condition, as to meet many others, there is foreign trade, and a great deal of attention is accordingly being given to it. Manufac- tures will grow with the assurance that surplus pro- duction can be marketed abroad. The Dominion Bureau of Statistics recently com- pleted its census of the manufactures of Canada for the year 1917. The returns cover 34,380 establish- ments and show how remarkable has been the development in this branch of Canadian industry since 1915. The following table sets forth these contrasts : [11] 1917 1915 Capital invested $2,772,517,680 $1,994,103,272 Employes on salaries . . . 73,598 52,683 Salaries paid $95,983,506 $60,308,293 Employes on wages (includ- ing piece workers) . . . . 619,473 462,200 Wages paid $457,245,456 $229,456,210 Cost of Materials $1,602,820,631 $802,133,862 Value of Products .... $3,015,506,869 $1,407,137,140 The gross value of goods made in Canada in 1917 amounted to $3,015,506,869 and the cost of material was $1,602,820,631, leaving a net value added by the process of manufacture of $1,412,686,238, or $5,449,- 098 more than the gross value of production in 1915. The twenty leading industries with the gross and net values of their production are given below in order of precedence : Value gross net Flour and grist mill products . . $224,191,735 $40,604,799 Steel furnaces and rolling mills . 170,679,000 62,040,044 Slaughtering and meat packing . 153,279,252 36,082,497 Log products 115,884,905 75,159,877 Munitions 112,866,838 70,240,233 Pulp and paper 96,340,324 61,627,462 Butter and cheese 85,731,339 13,710,662 Cars and car works 78,564,527 39,884,077 Bread, biscuits, and confectionery 77,223,581 33,022,111 Sugar refined 73,139,260 20,149,349 Smelting 69,262,167 33,591,253 Foundry and machine shop pro- duction 66,945,483 43,322,382 [12] Value gross net Iron and steel production . . . 59,797,766 26,777,534 Building and contracting. . . . 54,668,255 32,927,335 Automobiles 54,466,273 18,880,453 Slaughtering, not including meat packing 53,441,466 14,771,901 Boots and shoes 49,170,062 22,389,519 Electric light and power .... 44,536,848 44,536,848 Leather — tanned, curried, and finished 41,117,128 14,492,651 Electric apparatus-and supplies . 40,204,245 20,046,238 The totals of the twenty leading industries in gross and net value of production were $1,720,700,960 and $724,266,227, and they represent respectively 57 per cent, and 51 per cent, of the grand totals for the Dominion. The total capital invested in Canadian industrial plants in 1917 was $2,772,517,680, of which (a) Land, buildings, and fixtures amounted to $998,351,070, (b) Machinery and tools to $567,262,538, (c) Materials on hand, stocks in process, finished products, fuel, and miscellaneous supplies to $745,546,310, and, (d) Cash, accounts, and bills receivable to $461,357,762. The amount of capital invested in the leading in- dustries was: (1) Electric light and power, $356,004,168; (2) Pulp and paper, $186,787,405; (3) Log products, $149,266,019; (4) Cars and car works, $98,274,585; (5) Steel furnaces and rolling mills, $91,894,777; (6) Flour and grist mill products, $72,573,982; (7) Agricultural implements, $70,493,801; [13] (8) Foundry and machine shop products, $69,915,032; (9) Car repair shops, $68,763,298; (10) Slaughtering and meat packing, $68,145,347. Foreign Trade For the last four years Canada has had a favorable trade balance, due largely, of course, to her ship- ments of foodstuffs and munitions. In respect of the latter it may be said that Canadian steel manufac- tures increased 125 per cent, during the war and that whereas at the beginning of the war no Canadian manufacturer had ever made a shell, or a cartridge case, or a fuse, the country was furnishing, during the latter part of 1917, no less than 55 per cent, of all shrapnel shells and 42 per cent, of all 4.5 shells used by the British Army. From the time the Imperial Munitions Board was established as the agent for the Imperial Government in December, 1915, orders for upward of 65,000,000 shells, of a value of $937,456,826, were placed in the country. With the signing of the armistice the great exporta- tion of munitions was stopped and also, to a large extent, that of foodstuffs. This was due to the fact that with the elimination of the submarine menace the European countries found it no longer necessary to keep immense reserves on hand to provide against some possible submarine disaster. Now, however, these countries can use up their reserves without fear, since both supplies and tonnage will be available when they are wanted. This means a temporary curtailment of the exportation of Canadian food [14] products, and stores in Canada are accumulating rapidly. Exports in December, 1918, were the small- est in three years. There was also in that month an expansion of imports, so that Canada's favorable trade balance was reduced for the month to $34,- 000,000, against $86,000,000 in 1917, $62,000,000 in 1916, and $46,000,000 in 1915. Exports of domestic produce and imports entered for consumption for the full twelve months of each of the past seven years, with the balance for or against Canada, are given in the following table: YEAR 1918 . . EXPORTS IMPORTS $906,670,404 BALANCE $1,229,208,244 + $322,537,840 1917 . . 1,547,430,855 1,005,071,716 +542,359,139 1916 . 1,091,706,403 766,501,512 +325,204,891 1915 . 614,129,845 450,517,774 + 163,612,071 1914 . 379,291,000 481,214,000 -101,923,000 1913 . 436,213,000 659,061,000 -222,848,000 1912 . 341,978,000 635,585,000 -293,607,000 A report of the Dominion Bureau of Statistics gives the following tabular analysis of the character and value of the export s from Canada during the year 1918 and 1917: 1918 1917 The mine $75,708,425 $77,389,963 The fisheries 33,577,772 28,323,877 The forest 65,436,204 52,280,875 Animal produce 176,407,332 170,561,884 Agricultural products . . . 320,524,859 531,300,259 Manufactures 552,683,692 682,431,692 Miscellaneous 5,369,960 5,052,305 Total export, mdse. . . . $1,229,708,244 $1,547,340,855 [15] The source and distribution and the values of Canadian imports and exports for the years 1918 and 1917 are shown in the following tables: IMPORTS BY COUNTRIES 1918 1917 United Kingdom . . . $72,879,109 $91,136,728 Australia 6,084,963 979,018 British East Indies . . 17,026,095 13,311,740 British Guiana .... 5,088,972 8,120,098 British South Africa . . 1,331,842 510,765 British West Indies . . 8,930,109 11,117,883 Hongkong 2,343,958 1,712,920 Newfoundland .... 3,287,340 2,743,597 New Zealand 7,014,313 3,351,394 Other British Empire. . 1,371,069 1,591,579 Argentine Republic . . 1,726,489 1,761,799 Brazil 1,128,616 1,036,788 China 1,867,405 1,268,662 Cuba 2,034,654 1,047,062 France 3,754,761 5,715,770 Italy 642,071 855,900 Japan 13,184,893 11,100,455 Netherlands 582,507 1,130,855 United States 738,142,064 828,886,594 Other foreign countries . 18,533,670 17,692,109 EXPORTS BY COUNTRIES 1918 1917 United Kingdom Australia British East Indies British Guiana . . British South Africa British West Indies] ' $594,250,690 $873,706,892 11,169,474 8,145,426 2,814,378 4,131,651 2,216,001 2,070,809 9,704,215 4,881,526 8,352,253 6,319,644 [16] EXPORTS BY COUNTRIES 1918 1917 Hongkong 968,766 1,000,475 Newfoundland .... 10,877,766 8,723,489 New Zealand 4,605,115 4,181,290 Other British Empire . 2,505,588 1,519,281 Argentme Republic . . 2,683,179 1,516,914 Brazil 3,825,859 1,088,269 China 2,934,663 1,471,803 Cuba 4,879,779 3,640,784 France 101,501,396 200,289,282 Italy 9,516,642 2,318,838 Japan 10,624,274 3,766,267 Netherlands 1,026,052 2,102,428 United States 433,232,149 401,479,287 Other foreign countries . 12,020,005 14,986,500 A comparison of Canadian imports from and ex- ports to the United States in the last three years follows : 1918 1917 1916 Imports .... $738,142,064 $828,886,594 $592,088,039 Exports 433,232,149 401,479,287 260,924,864 Excess of Imports $304,909,915 $427,407,307 $331,163,175 Despite the eflforts made by Canada to curtail buying from the United States during 1918 in the hope of reducing or eliminating the premium on American dollars in Canada, due to Canada's heavy purchases here and her inability to offset an un- favorable balance with the United States with favor- able balances elsewhere, there was little change pro- [17] portionately . Of every $100 worth of goods imported by Canada during the year, about $81 worth came from the United States, against $82 in 1917 and $77 in 1916. On the other hand the proportion of Canadian exports to the United States to total ex- ports rose to 35 per cent, against 26 per cent, in 1917, the expansion taking place in lines such as pulp, paper, asbestos products, nickel, etc. Shipbuilding Canada is very proud of her war record in ship- building and the policy now being carried out will not only absorb many hundreds of munition workers and soldiers from Europe, but will also be of great assistance to the export business of the country. In 1914 shipbuilding in Canada was of no importance, the production for the year being only 43,346 tons. With the outbreak of the war the industry was re- juvenated and no less than 381 vessels of various types were constructed during the war. The fourteen yards of the country were kept busy at first with contracts made by the Imperial Munitions Board; later on the Department of Marine and Fisheries arranged a program of building for the Dominion Government. This provides for the construction of forty-three steel ships of a tonnage of 211,300 dead- weight and forty-six wooden ships of 128,800 tons deadweight, the former costing $40,000,000 and the latter almost $25,000,000. Since the signing of the [18] armistice the abandonment of the wooden ship part of the program has been under discussion. Contracts have also been made for ships for the account of Nor- way and France. The first vessel for Canadian Gov- ernment account was launched early in December, 1918. It is hoped that before June 1 fifteen ships will have been launched and that before the end of the year 1919 at least thirty will be in the water. Hydro-Electric Power Because Canada has had to import so much coal to maintain her railroads and industries, attention has been more and more directed during the war years to the possibility of developing electrical energy through utilization of water power. A table prepared recently by A. M. Beale, Administration Engineer and Dominion Land Surveyor, shows the available water power of the Dominion to be 18,803,000 horse- power. There has been developed so far only 1,735,- 598 horse-power, which he figures is the equivalent under average conditions to an annual coal consump- tion of 53,213,000 short tons. This is nearly twice as great as the annual coal consumption of the Dominion. The Dominion Bureau of Statistics recently com- pleted a survey of central electric power stations, that is, stations developing electrical power for sale. The capital invested in power stations totals 5,004,168, of which 79.5 per cent is invested in [19] commercial stations and W.5 per cent in municipal or public-owned stations. Total employes number 8,840, receiving wages and salaries totalling $7,777,715 per annum. The total revenue received from the sale of elec- trical energy was $44,536,848, of which $29,135,399 was secured by commercial and $15,401,449 by municipal plants. The primary power installation in central stations totals 1,844,571 horse-power, of which 78.3 per cent., or 1,444,314 horse-power, is installed in commercial stations, and 21.7 per cent., or 400,257 horse-power, in municipal stations. Of the total primary horse-power installed, 1,652,661 horse-power is derived from water, 180,800 from steam, and 11,710 from gas and oil. Of special interest is the actual cost of construction of hydro-electric power stations per installed horse- power. Omitting all real estate, transmission, and distribution equipment, seventy representative hydro- electric stations throughout the Dominion, with an aggregate turbine installation of 745,797 horse-power, and a total construction cost of $50,740,458, show an average cost of $69.11 per installed turbine horse- power. One of the most important facts disclosed by the survey is the outstanding position which water power takes in the central station field. Out of a total installed primary capacity of 1,844,571 horse- power,|j,652,661, or 89.6 per cent., — practically [20] 90 per cent., — is derived from water. This figure is indicative of the extent and availability of the water power resources of the Dominion and of the remark- able' degree to which their adaptability for central station work has been appreciated in principle and realized in practice. Development of electric energy by water power is being urged by many Canadians not only as a means of reducing the country's enormous coal bill, but also as a labor saving measure which will enable the laborer to increase his net output. Mr. Beale says that in Great Britain a great deal of attention has been given to the subject and figures have been sub- mitted to prove that the continuance of the upward trend of wages is dependent upon the greater per capita use of mechanical energy. He adds: "The old idea of restricted output in order to keep up prices and wages seems about to give way to the new one of stimulated output, the greater production of marketable manufactures per capita by the intro- duction of labor-saving devices, automatic machinery, etc., and it seems probable that labor will accept the new regime and share in the rewards of enhanced output." Canada's Financial Record No estimate of Canada's resources would be com- plete without an account of that country's remark- able accomplishments in finance, or without some indication of their bearing upon the future relations [21] between Canada and the United States. Canada borrowed heavily abroad in the years before the war. E. R. Wood, president of the Dominion Securities Corporation, estimates sales of Canadian bonds for the five years 1910-1914 at $1,417,481,922, of which total Canada absorbed 14.35 per cent., the United States 10.50 per cent., and Great Britain 75.10 per cent. He places the total sales for the war years, 1915-1918, at $2,207,140,715, of which Canada ab- sorbed 61.74 per cent., the United States, 34.06 per cent., and Great Britain, 4.20 per cent. The entrance of the United States into the war threw Canada upon her own financial resources entirely and the manner in which her people accepted the added burden is shown by the fact that the amounts of her war loans and the number of subscribers increased steadily. In November, 1915, the Government asked for $50,000,000. The amount subscribed was $113,729,- 500 and the number of subscribers was 24,862. In September, 1916, the amount asked for was $100,- 000,000. Including conversions, the total subscrip- tion was $195,371,000, and the number of subscribers, 34,526. In March, 1917, a loan of $150,000,000 was asked for, and, including conversions, a subscription of $236,654,000 was registered, while the number of subscribers went up to 41,000. Another $150,000,000 was asked for in November, 1917. This loan was offered at par with an interest bonus on the first coupon, the rate being 5}/^ per cent. The subscrip- [22] tions totalled $419,289,000 and the number of sub- scribers, increased to 820,035. The amount allotted on these four issues, not including conversions in the second and third loans, was $764,187,800; the aver- age subscription was $4,128; and the subscription per capita rose from $14 in the first loan to $52 in the loan of November, 1917. The Canadian Victory Loan of November, 1918, begun five days after the signing of the armistice, eclipsed all previous records. The amount asked for was $300,000,000. While the results have not been fully tabulated a statement compiled in January shows a total subscription of $695,389,227. One per- son in every seven subscribed and the average per capita subscription for the Dominion as a whole was $88.91. The number of subscribers was well over 1,064,000. To float this loan it was necessary to take from past as well as current savings. Savings deposits in the Canadian chartered banks dropped from $1,076,- 000,000 in October, the highest level ever reached in Canadian banking, to $939,000,000 in November, but by the end of January they were up to $990,000,000, a recovery of $19,000,000 in December having been followed by one of $31,000,000 in January. Adding to savings deposits the deposits subject to withdrawal on demand, the total to the credit of the Canadian people on February 1 was $1,613,000,000, as compared with $1,720,000,000 [231 just prior to the last loan. These figures are the more astonishing, considering that the working population of the Dominion, estimated at 8,075,000 in 1914, was decreased by a very large overseas army, when the fact is disclosed that the banks of the country did not take the loan. During the war period the banks subscribed to a total of only $50,000,000 and these bonds were sold to the public in the course of a few months. With such a record Canada faces the future without any fear. Her war debts will be paid quickly, and while interest charges, pensions, and huge sums for reconstruction work and development of her re- sources will entail heavy burdens upon her, the number of her workers is expected to increase rapidly and there is no voice of pessimism raised within her borders. America's Interest in Canada What has been the part hitherto played by the United States in Canada's development, and what is it likely to be in the future? In spite of the fact that the United States in the past has been chiefly pre-occupied with its own internal development, she has contributed a fair share toward Canada's eco- nomic expansion. While Great Britain has been largely responsible for the extension of the Canadian railroad system, the United States played the great- est part in Canada's industrial development. It was United States capital that developed the water power [24] and industries around Sault Ste. Marie. The coal industry of Nova Scotia and the great steel works of Sydney have been built through American enterprise. American promoters have obtained franchises to de- velop the Canadian side of the Niagara Falls. It was American eflFort that accomplished the greater part of the development of the Klondike. Half of the great mining industry of British Columbia may be said to belong to United States capital. Two of Canada's leading industries — ^timber and lumber — are considered to be pre-eminently the development of United States capital. A considerable number of agricultural plants and warehouses have been estab- lished by American capital throughout the agricul- tural areas of Canada. Generally it may be said that as investors the people of the United States have had a great deal to do with the remarkable development of natural resources, agricultural pro- duction and production of minerals which has taken place in Canada. Mr. H. P. Willis, formerly secretary of the Federal Reserve Board, is authority for the statement that the total American investments in Canada prior to the war amounted to more than $600,000,000. The war greatly stimulated American investments in Canada which, according to the best estimates, have nearly doubled during the last four years, reaching the prodigious sum of $1,272,850,000, and distributed as follows: 125] 500 branch firms (average invest- i merit $300,000) ^ $150,000,000 Government, municipal, and corpo- ration bonds (1905-13) 123,743,000 Government, municipal, and corpo- ration bonds (1913-17) 590,506,000 Insurance compapy investments . . 94,276,000 British Columbia mills and timber . 75,000,000 British Columbia mines 62,000,000 British Columbia Land transactions 60,000,000 Prairie provinces land transactions . 41,000,000 City and town properties 20,000,000 Maritime provinces investments . . 13,125,000 Industrial investments, miscellaneous 12,200,000 Prairie provinces lumber and mines. 10,500,000 Agricultural implement firms . . . 9,250,000 Packing plants 6,750,000 Theatrical enterprises 3,500,000 Fox Farms (Prince Edward Island) . 1,000,000 $1,272,850,000 There are jfive hundred branch firms of American industries located in Canada. These branches are usually well provided with working capital and will undoubtedly continue to contribute much to the development and strengthening of industry in Canada. One of the most effective ways in which the United States has contributed to the economic development of Canada has been through the movement to western and northwestern Canada of agricultural set- tlers who have been very influential in the development of the great wheat growing section of the Dominion. During the fifteen years before the war the total [26] number of persons entering Canada from the United States was 1,014,000, while the number of people entering the United States from Canada was 431,000, indicating a net gain to Canada of 583,000 immi- grants. Besides being an economic asset to the coun- try as producers of wealth, these immigrants brought with them a considerable amount of wealth, amount- ing to $192 per immigrant, or a total of $195,000,000 for this fifteen-year period. Canada's Investments in the United States United States investment in Canada brought as a natural consequence some Canadian investment in the United States ; but this never grew to any great proportions, as Canadian capital was lured away from foreign fields by the attractive opportunities naturally offered by a country so young and unde- veloped. For the most part, Canadians showed in- terest in private corporation holdings, as, for instance. United States Steel Corporation stock, of which the total Canadian holdings in 1914 were $7,892,000. It seems hardly likely that there has been any marked accumulation of American securities in Canada of late, for the need of conserving capital in that country has compelled the Minister of Finance to discourage foreign investment. After the declaration of war by the United States, and the Government's entrance upon a policy to conserve capital for war purposes, it was not so easy [27] for other countries to borrow in our open market. This naturally had its bearing on the financial situa- tion in Canada and it seemed as if the United States market was practically closed to Canadian offerings. It appears, however, that the United States Govern- ment had placed contracts amounting to $125,000,000 with Canadian munition concerns, and that Great Britain has utilized $400,000,000 of the credit ad- vanced by the United States Government to Great Britain since April, 1917, for the payment of goods that Great Britain has purchased from Canada. It will be seen that these sums have practically approximated the annual borrowings of Canada from other countries, except for the abnormal year 1917. Increase in Financial Relations As has been indicated, the increase in financial relations between Canada and the United States has been an outgrowth of conditions concomitant with the war, and the question may be raised whether in the future there will be a tendency for these finan- cial relations to become permanent. In this connec- tion there are certain considerations which would indicate that after the declaration of peace the financial relations between the two countries should become more important than they were before the outbreak of the present war. As has been pointed out, one of the important factors in the relations between Canada and the [28] United States has been the movement of peoples between the two countries. Such movements always tend to bring nations closer together in trade and financial relationship. One of the important eco- nomic results of the present world war will probably be an increase in the movement of peoples between countries, and it is not unhkely that the great Canadian northwest will be further developed by the sturdy men of our great Middle West who have had their spirit of adventure quickened, and natur- ally the opportunities of this region will make an appeal to them. The Spirit of Adventure In 1914 the combination of economic forces of the world was preparing for the development of new areas. With the world war quickening the spirit of adventure in man and tending to break down the barriers that had tended to prevent the free move- ment of peoples between countries, and with the pressure to increase the world's supply of foodstuffs and raw materials, it is probable that in the long term jswing, after the declaration of peace, the undeveloped areas of the world will experience a development the magnitude of which we are not able today to gauge. Canada, with her abundance of raw materials, her large forest wealth, her large areas of agricultural land awaiting development, will undoubtedly attract men and capital. [29] The last quarter of a century has seen a gradual change in the economic Ufe of the United States. Previously we had been in the position of a new country with a frontier constantly being developed and expanded, which was absorbing people and capital of various countries of the world. We have largely developed this frontier area and have built up an industrial capacity to such an extent that be- fore the outbreak of the war we were reaching the point where as a nation there would be surplus funds available for investment. During the European war the industrial capacity of the country has been mate- rially increased, and the United States as a country is in a position to be a lender of capital to other countries. Because we know Canada better than perhaps any other country, and because of the Dominion's great opportunities, our country ought to play a part in the development of the natural resources of Canada which will be beneficial to the industry and enterprise of both countries. [30] 398587 V-i \ 1 UNIVERSITY OF CALIFORNIA LIBRARY UNIVEKSITY OF CALIFORNIA LIBRARY BERKELEY THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW Books not returned on time are subject to a fine of 50c per volume after the third day overdue, increasing to $1.00 per volume after the sixth day. Books not in demand may be renewed if application is made before expiration of loan period. f?; 20 1920 I*AR3 \«7 -^J^RoT^-HT