Two years ago the chairman of this evening's meeting stood in my place and delivered a scintillating address on “Statistics Comes of Age”. A year ago Professor Mackintosh gave his presidential address on “An Economist Looks at Economics”. I propose, therefore, to follow them in these subjects and to pursue an inquiry which occupied the time and energies of the first important Canadian economist, Adam Shortt. Economics is an older subject than statistics but I shall confine myself in this paper to the period since statistics began to leave its impression on economics and reached that stage, fatal to economics, when it came of age. Professor G. N. Clark in Science and Social Welfare in the Age of Newton (Oxford, 1937) has traced the background of statistics, in the growing importance of mathematics through astronomy, surveying, and book-keeping which followed the discovery of the new world, prior to its beginnings with the publication of John Graunt's Observations upon the Bills of Mortality in 1662, or four years before the census of Talon in Canada. An important statistical department was set up in England under an inspector-general to collect statistics on imports and exports about 1695. The effects of the imports of treasure from North America were becoming increasingly evident and William Fleetwood with a strong vested interest in stability in the value of fellowships published his Chronicon Preciosum in 1706, a first book on prices. And so the snake entered the paradise of academic interest in economics. Under the stimulus of treasure from the new world the price system ate its way more rapidly into the economy of Europe and into economic thought.

Business history is at once very old and very young. Objectively, it is as old as town economy in the ancient and medieval periods. By this, I mean that business began in the town, ancient and medieval. Subjectively, it is hardly more than a decade old. That is, as a subject for study, business history is just getting under way. Since this is the case, we may fittingly stop to consider what we are to understand by the subject.

Business history is the study of the development of business administration. Roughly, it deals with the historical background of subjects taught in schools of business.

Perhaps we may divide the subject, that is, the history of business administration, into two main parts. The first is the history of policy-formulation. We may think that there is little policy in business and has been less in the past. The fault lies in us: there is a long story and an interesting one at this point. Much of the development in policy, conscious or unconscious, is embedded in these five stages—petty capitalism, mercantile capitalism, industrial capitalism, financial capitalism, and national capitalism. Woven into these are many ingredients, but the degree of specialization and control is uppermost in the change of patterns. We shall come back to this subject later.

This paper will describe the functional relationship of the growth of industry to the traditional system of rural life prevailing in Quebec. The general course of this growth is familiar enough. Quebec has always had industries which exploited the native resources of forest, sea, and lately, of the mines. In the present phase new major industries, which make little use of native materials except water and man-power, have invaded the province. Industries of this type are generally not on the frontiers of settlement, but in the very heart of the province. In the course of the last two decades, Quebec has become more urban than rural. It is now only slightly less industrial than Ontario.

Modern capitalistic industry grew up in a few centres, coincident with an enormous expansion of sources of raw materials and markets. Its spread has taken two forms: the first, still proceeding at a slackening rate, is the extension of its far-flung frontiers; the second is an inner expansion in which industry moves from its most intensely developed older centres to nearby less industrialized regions, where it finds a population accustomed to the main features of Western capitalistic civilization but not sophisticated with respect to its more extreme manifestations. Quebec and the southern United States are among the outstanding regions in which this inner expansion or “mopping up” is taking place.

Resale price maintenance raises not only economic problems but also legal ones. Indeed, much of the material on the subject is legal in origin. These legal aspects are, of course, important in showing the nature of the arguments—economic and other—involved, but their importance is mainly with respect to the technique of maintaining the system. For the immediate purpose one can assume that the economic aspects of resale price maintenance are the same, irrespective of the actual technique of enforcement and therefore the legal aspects, as such, can be ignored here.

It may be pointed out, however, that the methods used to enforce compliance with the system are various. In Great Britain, for example, the trade association with contracts for its members and dealers is common. These may be enforced by legal action or economic action such as refusal to sell. In other cases it may be handled by contracts between the manufacturer and the jobber and then jobber and dealer. The actual technique used is usually dependent upon what the law permits; accordingly it varies from jurisdiction to jurisdiction. Of course, the effectiveness of the scheme depends upon enforcement. Paradoxically enough, the better the system is maintained, the greater are the gains to any one dealer in evading it. Thus success tempts the very forces which if not checked will break it.

In this paper certain statistical and theoretical problems connected with changes in the level of real wages will be examined. In the first place, information is presented which deals with recent trends in real wages in the United States and in Great Britain. Next, there follows a more or less sketchy treatment of the conventional theory of distribution—this, to provide the analytical tools for the interpretation of these movements. Finally, the significance of these various determinants of the level of real wages is discussed, in the light of statistical and descriptive material to be presented in this paper.

It must be noted at the outset that no very careful treatment is accorded the British material. For the purposes of this survey, the British experience—which was perhaps “normal” in some vague sense—is used as a basis for comparison and contrast with the distinctly “abnormal” American experience. The statistical data presented deal only with the six-year period beginning with 1932 and ending in January, 1938. Prior to the earlier date (1932) adequate information about wages and hours of work in the United States was not available. In any case, even six years, if studied by months, provide quite a wealth of statistical data—enough at least for a preliminary survey such as this.

The subject of the investigation has been the changes in real hourly earnings. This was decided upon for reasons of convenience and not because it was supposed that such an index offered the most significant measure of change in the workers' income. Very probably, most of us would feel that changes in the purchasing power of weekly or annual earnings, or even of working-life earnings, would more satisfactorily measure such alterations. But it is difficult to establish such indices, and the concepts they measure are not so amenable to theoretical treatment.

To administer the Canadian Income Tax Law, Canada is divided into nineteen districts. The districts are irregular in shape and of different areas. Their shape was influenced by the desire to have a district follow the railway lines. Recognition was given also to the main centres and provinces. In the beginning, sub-offices were required to serve the people, but experience has shown that they are not a necessity and most of them have been closed. The districts have remained unchanged for about ten years. Each is in charge of an inspector directly responsible to Ottawa.

The amount of the revenue collected in each district is not a true criterion of the wealth of the particular district. Some small districts have the head office of a few large corporations in them. The district of London, Ontario, for instance, has in it such companies as the Ford Motor Car and Imperial Oil. Their income is derived from world-wide sources. Consequently on a revenue collection basis the district appears to have more wealth in it than it really has. It is the same with Toronto and Montreal.

Usually a company files and pays its tax in the district where it has its head office, although the business of the company may be located in some other district. For example, the mines of northern Ontario are located in the Ottawa district but their corporate head offices are in Toronto, so they file and pay their taxes there. There is not any compulsion to pay in any particular district. Districts are established for the convenience of the public and returns can be filed in the district most convenient for the taxpayer.

The Dominion Government is by long odds the most complicated, and in most respects the largest, administrative enterprise in this country. Its activities cover a wider scope and show a greater variety than those of any other Canadian business or organization. Its employees, including regular and fluctuating staffs, number about 65,000 persons, of whom 53,000 are scattered throughout the country in various centres outside the seat of government. Its pay-roll exceeds $77,000,000 annually. Its annual revenue now aggregates over half a billion dollars and its total cash turnover amounts to over one and a half billion dollars. Unfortunately in these hard years its expenditures may exceed the first-named figure of revenue receipts by a comfortable—or rather uncomfortable—margin. In collecting these revenues and making these expenditures it receives and deposits some 675,000 bank drafts for a total of $700,000,000; issues three and a half to four million cheques each year, totalling around one and a half billion dollars; pays $45,000,000 in pensions direct to 95,000 individual pensioners; and redeems 4,300,000 interest coupons. On the average, each working day it sells 70,000 money orders and postal notes. It buys, refines, and sells in the world's markets practically all the new output of our gold mines and this, as well as other factors, necessitates important operations in foreign exchange. Its financing activities constitute the most important factor in the investment markets. During the last five years it has floated for new cash requirements and for refunding purposes, in Canada, London, and New York, securities aggregating over two and a quarter billion dollars—not including guaranteed Canadian National Railways obligations which would add another $235,000,000 to the total, or Dominion Treasury bills which are sold in the amount of 25 or 30 million dollars every fortnight to redeem maturing issues of a similar amount.

The first part of this paper is given over to a discussion of definitions, terminology, and objectives in income analysis. The second part deals with methods and sources of material in the study of cash income. The third part describes some results obtained to date in this work. “Agricultural income” is defined as the value of goods and services produced on farms which become available during a given period for consumption or investment, after providing for the maintenance and replacement of goods and services employed in production. Since the national income is the final test of the state of economic activity, it is essential that the national income data be as complete and accurate as possible. The completeness and accuracy of the national income estimate are dependent upon the completeness and accuracy of the estimates for the various industries. The income from agriculture should, therefore, be carefully appraised. The second main objective in measuring agricultural income is to enable a comparison of changes in the well-being of those engaged in farming with changes in the well-being of those engaged in other industries. These objectives constitute the important reasons for undertaking income analysis. The measurements of individual farm returns, such as labour income, labour earnings, or variations of gross or net income, are commonly used in studying the efficiency of management in the farm business. For this purpose they are very useful, but their field of service is definitely limited.

Structurally, one of the principal contrasts in Canadian banking between 1914 and 1938 is to be found in the accessibility of cash. In 1914 cash was available to a bank only in the same way that it was available to any other business concern which wished to avoid borrowing. A bank had access to cash only by disposal of its own assets and a change in the cash position of the system was almost wholly represented by a corresponding change in metallic reserves. Both an individual bank and the banking system had to be self-reliant as far as the maintenance of an adequate cash position was concerned, and for this purpose nest eggs were maintained at home or abroad. In 1938 cash is available to a bank, not only by the orthodox redistribution of its assets, but also by its access to the lending and rediscount facilities of the Bank of Canada. Moreover, cash may be forced on the banking system by definite action of the central bank, and changes in the cash reserves no longer correspond to changes in the gold holdings of the financial organization. In brief, the passing years have brought Canadian banks around to a point where an individual bank need no longer be wholly dependent upon its own resources for an adequate cash reserve and where the aggregate reserves of the system are not dependent upon the accessibility of metallic reserves.