When the founder of the science which has become Economics came to write the title-page of his immortal work, he wrote boldly An Enquiry into the Nature and Causes of the Wealth of Nations. From this it might be thought that Economics was the science of wealth; that it would tell us what are the conditions which make one society wealthy and one poor, or which make for the growth and decline of wealth, in general or in particular. In fact, however, the science has not developed primarily along these lines, in spite of many interesting and important observations on this subject on the part of the standard writers. Especially in these days we seem to be interested not in Plutology—the science of wealth—but in Economy—the science of management, of budgeting, of the distribution of given resources. In other words, our interest has shifted from the study of the Nature and Causes of the Wealth of Nations to the study of equilibrium and disequilibrium.

In many ways this shift of emphasis is regrettable, in spite of the undoubted achievements of equilibrium theory. Part of the loss of prestige from which Economics has suffered is undoubtedly due to this very point. To the general public, equilibrium seems to be a vague and irrelevant ideal. Most governments, and most individuals, would rather be in chronic disequilibrium, and be rich, than be in glorious equilibrium, and be poor. The assumption which frequently underlies economic homiletics—that equilibrium is synonymous with riches and disequilibrium with poverty—is not one which can be long maintained.

Protection as an economic creed has been largely an expression of industrial capitalism in Canada. It is true that Ministers of Finance have endorsed the tariff as a means of providing revenue independently of the interests of manufacturers, that such groups as farmers at various times have favoured the imposition of duties on particular commodities, and that certain newspapers, political parties, and organizations of a reform or patriotic character have advanced the general philosophy of protection. But in none of these cases has the support of tariff increases grown out of any broad economic movement. The tariff system developed with the growth of manufacturing industries, and it was pressed upon the Government as a necessary policy by organizations formed to advance the interests of manufacturers.

The first organized attempt of Canadian manufacturers to secure protection of which we have knowledge was made at a meeting in Toronto, April 14, 1858, called “for the purpose of recommending such a readjustment of the tariff as would place the manufacturers of Canada on a footing of greater equality with those of the United States.” Previous to the meeting, consultations had taken place between a committee in Toronto, the Tariff Reform Association of Montreal, and manufacturers scattered throughout the country, and, as a result of these deliberations, a detailed draft of the necessary tariff changes was drawn up.

Competitive rates for road and rail transport have their origin in an unacknowledged, unintentional, but nevertheless acute competition between three groups of public authorities. Dominion, provincial, and municipal governments, yielding to the varying pressure exerted on each, have provided a framework which enabled or forced every transportation agency in the country to operate at rates below a strict cost-of-service basis. The result might be termed transportation chaos except that, so far, the system has not broken down. Since transportation is an essential economic function, it is inconceivable that it should be allowed to do so. In our wild, unplanned efforts to maintain it, however, there is every indication that a breakdown in public credit may be involved. The results of this policy reach the public through high taxation that is only partially offset by artificially low competitive rates based on uneconomic costs. It cannot continue indefinitely. Pressure of taxation, if nothing else, will eventually force a rationalization of the transportation structure. One might even go so far as to suggest that a discussion of the competitive aspects of rates is essentially a study in applied (or misapplied) public finance.

The underlying assumption of Dr. Rollit's paper is that transportation ought to cover its own costs, and I should like to register my general agreement with it. But the main argument is to the effect that the present difficulties of the railways are the result of unequal subsidies, unequal regulation, and unequal labour costs. By inference, one would expect that when public bodies come to their senses and when the abnormally low wages paid to transport operators are brought to a proper level, then railways would be restored to prosperity. It is a much rosier picture than the available facts appear to justify.

A study of table I would suggest that the relative retrogression of the railways is not at all closely connected with the rise of direct motor competition. The peak in per capita use of rail service would appear to have been reached well before such competition became effective and the persistence of the subsequent decline in railway gross revenues as a percentage of the national income would suggest that even the most sudden and devastating access of sanity on the part of the taxing authorities would not restore the railways to that position in the life of the community which they once held. Humpty-dumpty has fallen off his wall for good and the sooner he learns to get along on a footing of equality with common mortals the better it will be for all of us.

Early in the 1938 session of Parliament the Canadian Senate appointed a Special Committee to “enquire into and report upon the best means of relieving the country from its extremely serious railway condition and financial burden consequent thereto.” After hearing extensive evidence from the officials of both railways and of the labour unions, the Committee stated that through lack of time it was unable to analyse this material in a satisfactory manner and therefore recommended that it be reappointed early in the 1939 session. It is the purpose of this article briefly to review the evidence presented and in particular to suggest lines along which further investigation by the Committee might profitably be undertaken.

The Duff Commission believed that the policy of co-operation which it espoused would lead to annual savings of at least $35,000,000, though it developed that it had never secured, or been given, detailed information on which to base this estimate (1374). The actual joint net economies after five years' trial were only $1,772,000 per annum (121).

While this inquiry arose out of the temporary closing of a mill at Sherbrooke, attributed by the management to the fear of Japanese competition, the Dominion Government called for “an investigation much more searching and extensive than is possible at the present time either by officials of any of the Government departments or by the Tariff Board.” The Honourable W. F. A. Turgeon, a judge of the Court of Appeal of Saskatchewan, was appointed a Royal Commissioner to make this investigation as speedily as possible. The completion of the report was delayed by the Government's decision to requisition the services of the same commissioner for a further study of the wheat problem, which occupied several months and necessitated investigations in England, but after two years' work and the collection of nineteen thousand pages of evidence, the report was laid before the Minister of Finance on January 20, 1938. It is an important document, which will undoubtedly be quoted, especially as a source of factual data, in discussions of the textile industry for years to come.

Conforming with the terms of reference, the Commissioner sought information with respect to tariff protection, volume of production, investment, costs, profits, wages, salaries, and bonuses, and such other matters as might help the Government to arrive at conclusions “regarding the position of this and other branches of the textile industry in relation to British and foreign competition, and in particular, the extent to which the employer can reasonably and properly be expected to maintain employment over periods of temporary difficulty.”