Censorship in war-time seeks to withhold military information from the enemy, and to safeguard public morale from the corrosion of enemy propaganda. To achieve the first aim, press censorship is co-ordinated with censorship of radio, the mails, telephone, telegraph, and cable lines; and with appropriate safeguards against public access to prohibited areas.

The principles of military censorship are simple. The essence of successful warfare is secrecy. “Let us learn what we can from the enemy; let us teach him only what we must,” was the rule laid down by Lord Balfour in the last war. Surprise is still the most valuable “secret weapon” of war; and the ideal state of affairs from the narrow viewpoint of military operations is a complete black-out on all information regarding such matters as the strength of military forces, the disposition of units, the nature of defences, the stocks of war supplies, the rate of growth of the armed forces, the rate of production of war weapons, and so on. In modern wars, these desirable military secrets must be extended to facts concerning the economic, financial, and psychological strength of the nation at war.

The ideal state of affairs from the viewpoint of military operations is, unfortunately, at variance with other vital considerations. It is not practicable to screen all information from the enemy without hiding it quite as effectively from one's own people. Complete acceptance of the military philosophy of censorship would raise grave problems in a democracy, which relies so largely on an informed public, and on voluntary effort.

The shape and content of the paper may be outlined in the beginning. It has three parts. The first suggests that the war economy is essentially distinctive. The transformation of life and purposes in war involves a revaluation of the factors into which we customarily subdivide the consideration of the social organization—the political, the administrative, the technical, and the economic. In its essence the war economy, concerned with victory not individual wants, strengthens the administrative, the technical and political, factors and reduces the importance of the economic as we know it. The ordinary economic criteria no longer apply. This raises the question discussed in the second part of the paper, the place of the price system in a war economy. In the private economy, the price system was the key to the distribution of resources, and in previous wars governments made the transformation to war mainly by acting on the price system via finance, by fiscal policies that expanded taxes, loans, and government expenditures and that thereby secured the re-allocation of resources. But this method and all its implications require reconsideration as a method of transition from peace to war, because the war economy is now so distinctive and because even in recent peace-time the price system was ceasing to be a satisfactory allocator of resources. The third section discusses the inapplicability of certain economic criteria in a war economy. The implications of this are left to the academic economist himself.

Professor bates's paper has set the whole background for a discussion of the price system in war-time, and has raised important theoretical problems. I propose to deal rather with specific measures, of policy and organization which have been undertaken in the present war period, and lead up to some indications of the serious problems which loom ahead.

I shall have little to say here on the broad problems of controlling inflation. These have been attacked mainly by fiscal measures, though the co-ordination of such fiscal measures with other policies of control is of the most vital importance. The foundation of price control has been since September, 1939, and must in large measure continue to be, a fiscal policy which has endeavoured to channel the increase in purchasing power through the Treasury into the procurement of essential supplies. Such specific measures as the Excess Profits Tax have had a very important influence in reducing the incentive of the business, seller to raise prices, though the Excess Profits Tax doubtless has an opposite effect on the business firm as a purchaser.

By luck and good management, fiscal policy has been so far reasonably successful, but it has up to the present not encountered really serious inflationary problems. It is sufficient, however, to say here that without an appropriate fiscal policy no measures for the control of prices or supplies can be fully successful.

For my own purposes I suggest three elements of background for a discussion of this subject.

The basic principles and purposes of the Excess Profits Tax Act 1940 might be said to be twofold. (1) The Moral Aim of Taxing Excess Business Profits, excess being defined as the difference between your war-time profits and your pre-war profits. This aim, in the opinion of some, springs from political soil. Dr. Harley L. Lutz of Princeton University has said of the American Act: “There is only one case for the excess profits tax and that is the political case. There is no real danger of creating war millionaires this time.” Possibly some Canadian economists may agree with him, but I suggest that advance statistics of 1940 profits and taxes from a considerable sample of Canadian companies might indicate striking evidence to the contrary. (2) To Secure Revenue from Business Profits to Finance the War Effort. As indicated in the last budget, the Excess Profits Tax Act is expected to produce $220 million in a full year. The revenue is to be produced only partly out of excess profits since there is a minimum tax now of 22 per cent on total profits if the 75 per cent tax on excess profits does not exceed the 22 per cent tax on total profits. Thus even the business which was highly prosperous during the pre-war period and has not increased (but may even have decreased) its profits since the war began, will pay a very substantial tax under the Excess Profits Tax Act.

In this paper I am going to tr y to present the business man's point of view towards the Excess Profits Tax Act and to discuss some of the problems which confront him as a result of it. By way of introduction I should like to make it quite clear that I do not write here as an apologist of tax evasion or as a critic of the pay-as-you-go policy or as an opponent of taxing those best able to pay. Rather I shall try to explain some of the problems and some of the objections without necessarily expressing an opinion in every case as to whether or not the objections are justifiable.

One of the issues which apparently will be decided by this war is the survival, or otherwise, of capitalism even in modified form; but in this country for the time being a decision on that point has not yet been reached, and the profit motive and individual incentive are still the driving forces of our businesses and industries which the government is depending upon in a large measure to provide the instruments of war and the money with which to pay for them. The government is not yet prepared to underwrite business risks. It shares in the profits without sharing in the losses, and does not even allow the losses of one year to be offset by the profits of another, for tax purposes. In times of high taxes, the result, in many cases, is to convert taxes on income and profits into a confiscation of capital. These circumstances must be kept in mind as the background of what I have to say.

This is the report of an attempt to learn something about the effect of the war on the pattern of consumption in Canada—that is, on the changes caused by the war in the way people spend their money. Everyone knows, of course, that we as a country have had more money to spend since the war started than we had before, and it is possible to estimate the amount of the increase with a fair degree of confidence. The question of how this increased purchasing power has been used is a great deal harder to answer because of the limited statistical evidence. Nevertheless, it is a rather important part of any evaluation of the effect of the war on the economy, and in spite of the limited basis for conclusion, well worth looking into.

Most discussion about the effect of the war on consumer purchases has hinged about the so-called luxury items, and especially about automobiles. There is one school of thought which says that Canadian consumers are tending to defeat the war effort by their insistence on buying more and more of these luxury items instead of putting their money into war savings. Others, seeing somewhat the same ultimate result, place the blame on business men, and say that their pleas for “business as usual” really mean “twice as much business as usual”; these people feel that the makers and sellers of luxury items are guilty of sabotaging the war effort.

War-time Agricultural Exports. The first world war and the present world war were preceded by periods marked by fundamentally opposite trends in international agricultural trade. The period extending roughly from about 1840 to the outbreak of war in 1914 was characterized by a continuous expansion in the volume and range of importation of foodstuffs and agricultural raw materials into the British Isles and later into industrialized continental Europe from overseas countries. While the dominant position in this expanding overseas agricultural export trade was held by the United States, a definitely rising participation developed after the turn of the century by the British Dominions, Latin American countries, British and Netherlands India, and the African possessions of European powers. Despite the rise after 1880 of agricultural protectionism in such European countries as France and Germany, growth of population and industrialization in Europe was reflected in a steadily increasing volume of agricultural imports into that continent, and after 1896 by a gradually rising trend in world prices of most agricultural staples. This was the great era of the international gold standard, of the free export of private capital, and of free world markets.

Although the first world war disrupted this competitive pattern of world agricultural specialization and trade, it greatly stimulated the agricultural export trade of overseas countries, especially of North America, to the allied countries, and this movement to Europe was substantially maintained during the twenties through the twofold influence of American and British foreign lending and investment and of the virtual disappearance of Russia as a significant and dependable agricultural exporter. Between 1925 and 1930 world agricultural trade rose to record levels, but in the later years mounting world stocks and gradually falling gold prices of most staples gave statistical warning of a developing disequilibrium.

A Canadian wheat problem had existed, in one form or another, for ten years prior to the outbreak of war in September, 1939. Economic nationalism and world depression had brought shrinking export markets and ruinously low prices to the wheat economy of the Prairie Provinces; drought and soil drifting had brought complete destitution over wide areas; and crop failures in Western Canada had placed a heavy relief burden on the federal Treasury and redacted sharply on the economic life of every province in the Dominion. Surplus world wheat stocks had accumulated rapidly after 1928 (see Table I) but were reduced between 1934 and 1938 by lower average yields so that by the end of the 1937-8 crop-marketing season both world and Canadian carry-overs were back to normal levels or even lower. As a result, both world and Canadian wheat prices began to rise in 1936 and, although subject to fairly wide swings, were maintained for nearly two years at the highest levels since the fall of 1929. However, in 1938 world wheat production reached an all-time peak with good yields harvested from a record world wheat acreage; the Winnipeg cash price of No. 1 Manitoba Northern wheat, basis in store Fort William-Port Arthur, fell from $1.49 a bushel in January, to an average of 59 cents in November, and governments intervened to support prices paid to growers in each of the four major wheat-exporting countries of Canada, the United States, Argentina, and Australia. A t the end of the 1938-9 crop year, despite a moderate increase in international trade in wheat, the world wheat carry-over was approaching the 1934 peak; world wheat production in 1939 was second only to the large crop of 1938; and world supplies of wheat were the largest on record.

The defence effort, including the aid-to-Britain programme, dominates the economic life of the United States today. Whereas expenditures for defence materials were running at a level of about $2 billion a year during the first half of 1940, they are now running at an annual rate of about $13 billion. This six-fold increase in the level of defence expenditures has already resulted in a net increase in employment of about 2½ million, not counting in this figure an increase in the armed forces of nearly 900,000.

The formulation of any labour policy for the existing emergency must be built around the nature of the problem that is created by the emergency itself. Our problem is to transform the billions of dollars that have been authorized or appropriated into ships and planes, tanks and shells—into the thousands of items that are needed to meet the requirements of our own Army and Navy and Maritime Commission, as well as of the democracies of this and other continents. This means that we must mobilize the human and economic resources of the United States so that these munitions may be made available as efficiently and as quickly as is possible.

The first step in approaching this problem is to determine what resources are going to be needed. I am concerned in this discussion exclusively with our labour resources and the problems that affect labour.

The comment is often made that Canada has no war labour policy. Before dealing with this question, it may be well to consider some of the difficulties that attend any effort to determine and administer a national labour policy, especially in time of war. The problems of geography, uneven distribution of population, depressed areas, concentration of industry, and varying standards of living, together with the many revisions of policy necessitated by an ever-changing war need, can only be mentioned, but they constantly intrude on plan and practice. Inertia, easy assumptions that the ways of peace need not be changed materially and that the methods of the last war are good enough in this crisis, put a brake on the formulation of plans and their prompt execution.

There are Canadians who still do not realize, as Mr. Menzies, the Prime Minister of Australia, said, that the British people are engaged in the deadliest war of their history. Some employers and workers do not appreciate the proportions of the war programme or the necessity for many departures from peace-time procedures. Certain firms still feel that they will be able to secure all the labour they require and respond but slowly to appeals to train more workers, to thin out their skilled staffs, and to up-grade labour. Although the Minister of Labour has received a number of voluntary offers from trade unions to work longer than the usual hours at straight time, there are those who hold that the forty-hour week, urged in depression years as a device for spreading work rather than increasing earnings through higher overtime rates, should be maintained.

Measurement of changes of marriage frequency involves peculiar difficulties. To some extent the trend of crude birth and death rates reflects the trend of more refined indexes. A corresponding statement is not even approximately true of crude marriage rates. The crude rate may be either rising or falling, while the true rate remains constant, and vice versa. Though this fact emphasizes the need for accurate analysis, comparatively few computations of true marriage rates exist. One reason for this is probably that the marriage rate has fluctuated widely in the past from year to year in response to economic changes, without showing any very definite secular trend. So the relation between marriage frequency and reproduction rates has not seemed to be highly significant. However, the position is now changing. On the one hand, marriage is less inevitably followed by reproduction. On the other hand, most marriages are still followed by first births, and first births form an ever-increasing proportion of all births. Hence fluctuation in marriage rates is reflected to an increasing degree in fertility rates.

It is now a generally accepted view that the best method of obtaining true marriage rates is to draw up nuptiality tables in accordance with the principle on which life tables are constructed. The true marriage rate is then given by the proportion of women who marry at least once out of a thousand girls alive at 15 years of age (gross nuptiality), or out of a thousand new-born girls (net nuptiality). The present paper presents nuptiality tables for Canada and each of the nine provinces for 1930-2, and for Saskatchewan for 1926 and 1936. It is hoped that similar tables will be calculated for more recent years, when the data become available.