Canada, Australia, New Zealand, and South Africa have two attributes which, taken together, distinguish them from all other countries: they are new countries and they are British Dominions. Economically, their outstanding feature is the relative abundance of their resources in relation to their population and supplies of capital. Politically, it is the fairly recent emergence of self-government under institutions modelled upon those of Great Britain and erected within the loose and conveniently ambiguous constitution of the British Empire. Culturally, too, they are predominantly British; although special reservations must be made in the cases of Canada and South Africa. As a result of their similarities it is possible to draw a number of general conclusions regarding the nature and direction of their growth.

The nature of development in new countries should be a matter of interest to all students of economics and political science because (as Professor Mackintosh has recently pointed out in this Journal) it is in such countries that the impact of development may be most clearly seen and the problems of open, internationally exposed economies most effectively studied. Moreover, the subject is one of great practical importance. It should be familiar to “the Legislators of the Empire, and all who are set in authority over us; that all things may be … ordered and settled by their endeavours upon the best and surest foundations”. Indeed, this paper has been prepared as the background for a larger work on the administrative problems of central banking in the Dominions. This may account for special emphasis on some points, and relatively little on others (such as immigration) which might have been treated rather differently had a more general object been in view.

Few public men in Canadian history have so represented the spirit of their age as did William Lyon Mackenzie, and particularly during the pre-Rebellion stage of his career. This was the age of Catholic Emancipation and the Great Reform Bill, the age of Bentham and Byron, of Cobbett and Edinburgh Reviewers, of O'Connell and Huskisson; the age when the bourgeois monarchy of Louis Philippe triumphed over the last of the Bourbons at Paris, and when “King” Andrew Jackson succeeded the Adams dynasty at Washington. On both sides of the Atlantic the new wine of liberty and democracy was bursting the old bottles of restriction and privilege. Across the Atlantic the new stocks were of the vintage of the French Revolution or from the vineyards of Adam Smith and Jeremy Bentham; on this side it was largely “home brew” of the frontier. But there was still on hand much of the vintages of 1688 and 1776, neither of which had lost its power to stimulate men. In the 1820's and 1830's William Lyon Mackenzie was the principal purveyor of these various wines of liberty to the backwoods colony of Upper Canada.

The great extensions of government activities in all industrialized countries since the War have not been balanced by an equivalent development of the theory of public finance. The need for analysis of the relation of large government expenditures and taxes to the system of individualist enterprise is urgent.

It is true that many specific inquiries have been made into the repercussions of taxes and tariffs, into the inequalities of incidence as between industries and regions, into government financing, government investment in depression, and so on, but a survey of these attacks reveals the lack of a method adequate to cope with the questions. The existent theoretical structure, established by the classical writers, was evolved to handle a system of public finance and a system of individualist enterprise, which have been greatly modified in the twentieth century. Consequently many of the modern questions confronting economists are really outside the assumptions of classical theory, and are therefore unable to be grasped by the weapons of the classical analysis. Apart from this practical difficulty, it is to be expected that the post-war developments in economic science itself—the new knowledge of monetary systems, of business cycles, of imperfect competition, and of short-time analysis—necessitate a reconsideration of the theory of public finance. In the future the subject-matter of public finance will probably be systematized along these lines, but meanwhile the need is for a sifting of the materials.

Last year you heard my distinguished predecessor, Dr. Coats, set forth a by-no-means modest claim for statistics in his brilliant address “Statistics Comes of Age”. Sweeping as his claim was, Dr. Coats, by his great organizing and administrative abilities, has established it in this country. That he has through the shifting experiences of more than thirty years of public administration retained his vision and resourcefulness, is evidence of a high courage.

It is now more than a hundred and sixty years since Adam Smith's Wealth of Nations, popularly conceived to be the beginning of specialized study of economics, was launched into the world of letters and affairs, and it is about fifty since Economics became a subject of specialized study in Canadian universities. One has only to scan university examination papers of the late eighties, based mainly on John Stuart Mill and Fawcett's little manual, to realize that in form at least the subject has changed profoundly. But what has been accomplished? Is it an instrument or a game that has been fashioned? If an instrument, what are its limitations?

These and related questions have often been asked and answered, and the answers are not always to the economist's liking. Three years ago the then president of this Association asked, “What is left of Adam Smith?” and answered in substance, nothing except the economic man. Avoiding discussion of his exception, and adding one or two of our own, we can accept his answer as broadly not untrue. The implication, however, that modern economics even in rudimentary form is set forth in the Wealth of Nations, needs emphatic denial. As Professor Schumpeter has justly said: “Classical theory has no other claim to its epithet than pristine simplicity.” And yet, the economics of the Wealth of Nations is of a type which the economist's critics would have him adopt—the espousal of a doctrine, the initiation of a movement, propagandizing a policy. Any body of doctrine limited and attached to a policy is necessarily tied to a particular era; most of the Wealth of Nations is now of historical interest only.

Standards of living in the prairie wheat economy have been depressed by overhead costs, recurring cycles of drought, specialization in wheat, and dependence on prices determined in world markets. The record of the last eight or nine years has brought suggestions that the greater part of the area should be abandoned or allowed to revert to range use, although a more general assumption has been that drought would give way to years of greater precipitation and that wheat prices would show a measure of recovery. Drought and depression have indicated that throughout the region emphasis has shifted from problems of exploitation to problems of conservation and that, accordingly, an attempt must be made to re-establish the economy on a basis which will reduce the waste of human and economic resources in the future. Individual initiative and local group action will undoubtedly continue to play an important part in the adaptation of agricultural techniques to climatic and soil conditions, but correction of the most glaring mistakes in settlement and land utilization policies demands careful planning and constructive action on a fairly large scale by federal and provincial governments. From the national or social point of view, more is at stake than relief budgets and rehabilitation expenditures, onerous as the financial burden of these charges may be. Successive years of extreme poverty in a depressing environment have begun to sap the morale of all but the most fortunate or the most determined members of the prairie community, and continuance or recurrence of such conditions must ultimately produce a demoralized agricultural population.

The decision to hold a meeting of the Imperial Conference in 1937 while its members are attending the king's coronation, is strictly in accordance with precedent, for in the past these conferences have been frequently associated with Empire ceremonies on a grandiose scale. The first Conference, indeed, owed its very existence to a gathering of this kind, when the colonial premiers who had assembled to honour Queen Victoria at her Jubilee in 1887, met together to discuss informally topics of general imperial interest. The Conference of 1937 will thus celebrate not only the coronation of the new king, but its own golden jubilee as well.

The somewhat haphazard venture of 1887 proved to be so successful that it was followed by another meeting at the time of Queen Victoria's Diamond Jubilee ten years later, and a third Conference met when King Edward VII was crowned in 1902. Whether the pomp and panoply of Empire on these occasions were calculated to stir the emotions and give the colonial delegates an increased sense of solidarity and power, or whether the lavish hospitality was supposed to generate a conciliatory spirit and a willingness to forget inter-imperial differences, is not known; but such things have been suspected and frequently alleged. The real reason was doubtless much more simple and not nearly so sinister, namely, the prosaic one of convenience, combined with the British readiness to exalt accidental occurrences into useful precedents. At any rate, the Imperial (it was originally called Colonial) Conference was speedily adopted as a useful device to secure discussion and co-operation in an Empire where the centrifugal fofces were gaining in strength at an alarming rate.

The history of Quebec as a province since Confederation has not received the attention it merits. This is the more surprising when one considers the study which has been devoted to the history of Lower Canada, to the old province of Quebec, and to New France. Political disputes at once violent and petty are supposed to constitute the history of Quebec since Confederation. It is unfortunate that this view is so widely held, because along with factional struggles went important and interesting economic, social, and political experiments all more or less closely connected with French-Canadian nationalist aspirations. While many of these experiments were local in origin, their growth had an influence far beyond the boundaries of the province. In this paper I propose to consider only one of these developments: some early French-Canadian views on protection.

In 1837, the Canadian economy was subjected both to the stresses inherent in its own unstable organization and to the strains of a temporary financial and commercial panic. The last crucial stages of economic change and social conflict within the Canadas coincided unhappily with a general financial collapse in the English-speaking world; and the coincidence of these two crises produced a violent exaggeration of all the weaknesses to which the Canadas had been subject. From the very beginning the trades of the St. Lawrence had suffered from persistent fluctuations and shared a common instability; but to these chronic infirmities were now added all the special difficulties of the shift from the trades in fur and timber to the production of wheat and flour. The discord between trade and agriculture, the disagreement between the organization of the commercial system and the demands of the rural communities, had reached the last stages of their development. While the old trading system of the St. Lawrence was expressed politically in the commercial state, the agricultural interest had become vociferously articulate in the reform parties of both provinces. And these economic contradictions and social conflicts were evidently nearing their climax at the very moment when the financial panic broke in England and the United States.

During the last fifteen years carefully prepared population forecasts have appeared for nearly every important country possessed of reasonably adequate vital statistics and census records. With the general recognition of essential differences between the behaviour of bugs in a bottle and homo sapiens “in leaky national containers”, the usual procedure in the more recent studies has been to isolate the principal component factors in population growth, predict the future trend in each, and thus estimate the probable population ten, twenty, fifty, or more years hence. Already the majority of even the more conservative forecasts are proving too high and almost invariably because of over-estimation of the birth-rate.

Errors of this sort are not unexpected in view of the inherent difficulties of the problem. Their number is legion; it will suffice to note three. First, there is the difficulty of foreseeing changes in the social and particularly in the economic environment. Even in so-called normal times, each year brings unanticipated and sometimes substantial modifications in the complex of social forces making for greater or smaller rates of population increase. The duration and severity of such abnormal phenomena as the present depression are, of course, incapable of measurement in advance. Second, the nature and extent of human reactions to environmental change vary greatly both from country to country and from time to time. How a particular people will behave in a new situation is, therefore, usually a matter of considerable uncertainty. This uncertainty is in part at least attributable to a third difficulty. While many excellent studies, especially during the last decade, have contributed materially to a more adequate understanding of the forces controlling population growth, the existing state of knowledge still falls appreciably short of permitting precise quantitative measurement of many important influences on the birth-rate.

The word “Confederation” is often used in a restrictive sense to refer merely to the “British North America Act”; in this restricted sense, it refers to the constitution of Canada. In its broader sense, it should refer to the union of the entire population of Canada, grouped together, on the one hand into provinces, and on the other hand into Canadians of French and English descent, for the attainment, the development, and the protection of interests common to all, while safeguarding for each group, whether province or race, the rights and traditions peculiar to it. These two understandings of Confederation are indispensable for a better comprehension of the attitude of French Canada towards it.

Two lines of thought as to the understandings, agreements, pacts, or contracts—call them what you like—which were satisfactorily or unsatisfactorily formulated by the British North America Act must be noted. While for the majority of Anglo-Canadian constitutional authors the pacts of 1864, 1865, and 1866 were primarily made between provinces, one of which happened to be populated for the most part by Canadians of French descent, for French-Canadian constitutional writers these pacts were at one and the same time agreements between the four original provinces on the one hand and between the two great races on the other hand. The fact that Sir George Etienne Cartier and other French Fathers of Confederation did not, at the time, foresee that at some future date the provinces of Canada other than Quebec would also be populated by an important number of French Canadians, and that they consequently directed all their efforts for the safeguarding of the rights of French Canadians to securing for the province of Quebec the largest possible amount of independence, does not, in our opinion, change the above views on the matter.

“All economic problems which are concerned with overhead costs, whether those of the individual farm enterprise or those of communities or governmental bodies, are rendered active or quiescent by the fluctuations of net agricultural income.” Herein, lies the fundamental economic problem of the West. It is the purpose of this paper to examine provincial and municipal finance in the Prairie Provinces in the light of this fact, in an attempt to reveal some of the more important problems and possible lines of attack on them. The area designated as the Prairie Provinces, however, is not a unit with uniform geographic and economic characteristics. Therefore, the factors of diversity, as well as those of variability, constitute the background against which the problems of government finance should be examined. Since these factors are vital to a consideration of the problems, there must be some preliminary account of them.

The prairie economy is “exposed” to the fluctuations characteristic of a variable climate, of extreme specialization, and of dependence upon prices determined in world markets. The contrast between an almost exclusively agricultural and an agricultural-industrial region, sheltered by a kindly federal government, is most marked. The climatic and economic instability of the West has been thoroughly studied by Professor Mackintosh in two volumes in the series “Canadian Frontiers of Settlement”. The instability reflected in variable community income is highly significant, because it is the net income “which must carry the fixed charges of both the individual enterprise and the agricultural community at large”.

A sorry state of affairs was discovered by the Newfoundland Royal Commission of 1933. This article is a review of its Report. No attempt is made to describe subsequent events or to consider the actual results of the publication of that remarkable document. These matters are treated elsewhere. Here we are only concerned to disclose its substance and to criticize its arguments and recommendations.

The immediate cause of the appointment of the Commission was financial. The government of Newfoundland was unable to meet its obligations. At the end of 1932 the governments of Canada and the United Kingdom had arranged an advance to save Newfoundland from default and a further advance had been made by the United Kingdom on the following first of July (p. 55). This explains why the Commission was appointed by His Majesty on the advice of his ministers in Canada and Great Britain, as well as in Newfoundland. The commissioners were Lord Amulree, a British lawyer with wide experience of official investigations and industrial conciliation, raised to the peerage under the Labour government of 1929-31; Mr. C. A. Magrath, whose most outstanding work had been as chairman of the Canadian section of the International Joint Commission; and Sir William Stavert, who had “had the privilege of establishing the first Canadian Bank, the Bank of Nova Scotia, in the island” (p. 29), whose later banking connections had been with the Bank of Montreal, “bankers of the Government” (p. 45), and who had become in 1932, on the recommendation of the latter bank, the government's “financial advisor” (p. 55). The secretary was Mr. P. A. Clutterbuck of the Dominions Office; and two other British civil servants were also assigned to assist in the Commission's work (p. 233). The whole of the terms of reference consists in the few words: “To examine into the future of Newfoundland and, in particular, to report on the financial situation and prospects therein” (p. 1).