There is an almost universal expectation of considerable social reconstruction in Great Britain as soon as the United Nations have achieved victory, and even of instalments in the course of the war itself. This expectation rests upon keen disapproval of certain British social and economie institutions, but also upon confidence in and respect for a national character, which, in the centuries of its development, has achieved mighty and noble works in the building of its political and economic habitation.

In the following observations on the subject of reconstruction we shall be chiefly concerned with four factors: the influences that have produced the manifestly strong impetus to reconstruct; the cardinal reforms that are in mind; the agencies which have been established to collate, ponder, and implement the proposals; and finally, it will be well to find an answer to the question, what are the prospects of substantial advance?

Britain entered the war in a deliberate, not a romantic frame of mind. There was a job to be done, a terrible problem to be solved, not an adventure to be enjoyed. This sobriety led to the immediate raising of the question, “How can this shocking event be prevented from recurring, and to what extent are we as a nation responsible for it?” The result was a widespread canvassing of war aims and peace aims—the newspapers were at once full of the discussion. Generally, the first phase of attention was to international arrangements, and, in the course of time, this produced a spate of suggestions revolving around the conception of federalism. We need not do more than point to the establishment of Federal Union, and the series of papers written on the subject of World Order under the auspices of the Royal Institute of International Affairs.

As indicated by the attribute “historical,” this essay is not concerned with evaluations on metaphysical grounds of life and the universe. Statements by philosophers to the effect that this is the best of all possible worlds, or that “life is a business the returns for which do not cover the costs by any means,” may indeed become objects of historical inquiry. After all, what has not become “historicized” these last hundred years! But investigations of that kind are not likely to yield any great results. Metaphysics, like mathematics, is all but timeless.

A good deal more closely related to historical and political categories are certain fundamental ideas regarding the nature of man. It has been observed that “the pessimistic view of human nature is, and has always been, the deepest sense of a conservative argument.” The inverse is true of a philosophy of progress, which is almost invariably based on an intrinsically optimistic evaluation of human nature. We shall have to touch occasionally upon that interdependence of metaphysical and politico-historical thought in the course of this inquiry. Our chief interest, however, centres on different problems.

Thus far in the twentieth century Canadian statesmen have been faced with two major constitutional problems, one relating to external autonomy, the other to internal economy. The first of these was the adaptation of existing governmental procedures in such fashion as to make Dominion nationhood a political reality by institutionalizing the processes appropriate to what is now called “Dominion Status.” The second has been the development of a more closely integrated national economy within the framework of a federal system. It is not necessary to consider the advisability or soundness of pursuing either of these purposes; it is enough for the student of constitutional machinery that they have been widely assumed as desirable ends, pursuit of which is considered to be progress. The very fact, however, that the attainment of these aims has had to be sought consciously in the past twenty-five years, more than half a century after the establishment of the Dominion, indicates that they were hardly in contemplation in 1867. And, as there can be no progress without change, it must be recognized that the progressive fulfilment of Dominion national aspirations, externally and internally, must carry with it very considerable if not almost revolutionary alteration in Canadian constitutionalism.

The obvious purpose of the formulation of the principles of Dominion status was to place each of the Dominions on terms of constitutional equality with Great Britain. If each Dominion had inherited British institutions in their pure form, the result would have been the creation of half a dozen reproductions of the British constitutional system. But no Dominion was actually a simple replica of the British polity, and in consequence the declaration of the new status created almost as many problems as it solved. With regard to the external aspects, the Dominions differed among themselves as to the immediate desirability of the legal consequences of the new status, so the Statute of Westminster, 1931, was drawn in such a way as to apply automatically only to Canada, the Irish Free State, and South Africa; for the other Dominions, the Statute was to come into operation only when adopted by them. So, also, with regard to the internal aspects, special reservations were made in the Statute to protect the constitutional systems of Canada, Australia, and New Zealand from change.

There are two approaches to questions of earning power, the first, annual, which is the one adopted in this paper, the second, a whole-life study. Of the two the latter is incomparably superior. A study of annual rates of earnings is inevitably biased by the fact that it can include the surviving corporations only. Those which fail make no reports, nor are the capital losses in failure offset against the profits of the survivors to show the net return to capitalists as a class upon their ventures. In addition, the rates of earnings of any year are affected by the business conditions of that year. It is only when one has a series extending over a full business cycle that one has material from which to compute a “normal” rate of return, subject to the inclusion therein of a bias which is not open to any reasonably dependable estimate.

In the whole-life study the rate of return found is that rate which will equate the in-payments of capital by investors to the corporation with the dividends paid to investors including therein the liquidating dividend(s) if the corporation is wound up (or the current market value as a reasonable substitute therefor if it still continues). The beauty of this method is that it avoids the whole problem of allocating earnings to particular time-periods and escapes the illogicality of showing as earnings what never reaches the owner. Its disadvantage is that it is applicable to long periods only. A decade is probably the minimum and two are preferable. It is the only method of determining earning power which is logically defensible; but for many purposes the annual data, with all their imperfections, are still useful and it is for such uses that this study is presented.

In pre-war days corporations paid a Dominion income tax of 15 per cent on net income, or 17 per cent if they consolidated their returns with those of subsidiaries. In the case of unincorporated businesses—partnerships and sole proprietorships—income tax was levied on the individual incomes of the persons participating in the business; no tax was levied on the business as a unit. Under present taxation schedules, the corporation income tax stands at 18 per cent; 20 per cent for companies making consolidated returns. Proprietorships pay higher taxes through the steeply increased individual income tax rates. And, finally, the excess profits tax has been superimposed on the previous tax structure.

The excess profits tax applies to all businesses, incorporated and unincorporated. In addition to the taxes assessed under the Income War Tax Act, they have paid up to the present either a flat rate on their total profits (in 1940, 12 per cent for all businesses; in 1941, 22 per cent in the case of corporations, 15 per cent in the case of other businesses) or 75 per cent on profits in excess of pre-war profits, whichever tax was the larger. The provisions listed in the Income War Tax Act for the exemption of educational, charitable, labour, farmers', and other such organizations apply equally to this tax. Otherwise it was assessed in 1940 and 1941 against every business in Canada having a profit, before any payments to partners, proprietors, or shareholders, of more than $5000, with the proviso that any part of the tax which would reduce the profit thus defined to less than $5000 was not to be paid.

Recent publications have once more drawn the attention of the scientific world to the School of Lausanne. While economists emphasize chiefly the originality of the conception of economic equilibrium in Walras, sociologists and mathematicians pay homage to Pareto's versatile genius. Contemporary authors are mainly interested in the mathematical method and the conception of pure economics advanced by these two men. But the same authors forget too easily that Walras and Pareto dealt with numerous political and social questions, and that their opinions in these matters are important from the point of view of both applied economics and methodology. The object of this paper is to discuss these opinions. We shall first state the great philosophical antithesis which marks the division between the ideas expressed by Walras and Pareto, and secondly, consider the ideas themselves.

Although the works of Walras and Pareto on the subject of pure economics are complementary, their methods in dealing with practical economics are completely different. According to Walras, the duty of a politician is to apply the principles and data deduced by the pure economist. The pure economist must scientifically deduce laws from the “good old Natural Law.” Walras believes in scientific ideals and in the permanence of political laws; in philosophy, he is a Realist, in the sense given to this word by the quarrel of the Universals. In contrast with this, the conception of Pareto is much more flexible, much more pragmatic. His doctrine is that certain principles, rationally erroneous, can in practical reality be excellent, because people are usually governed by their feelings and not by their intelligence. To the great Italian, scientific laws were only “experimental uniformities.” This is the conception of the nominalist philosophy, which Pareto stresses when he writes: “Io sono il piu nominalista dei nominalisti.”

There is a popular impression that the contemporary family has lost that position of dominance which it held in the days of our forefathers. Many have come to regard the family as an institution with a great and historic past but with a dark and uncertain future. Meyer F. Nimkoff has assembled some of the evidence in support of this position. “Some students,” he writes, “think they see the eventual demise of the family in the growing restlessness of large numbers of people over the limitations of conventional family life.” He draws attention to the trend towards unconventional sex arrangements as revealed in recent studies of sexual phenomena, to changing public opinion as shown in the changed attitudes towards the family of representative modern novelists, to statements concerning the evolutionary supersession of the family made by scholars such as Müller-Lyer, to increase of childlessness, and to the possibilities of ectogenesis. Though of qualified significance, he might have cited statistics on divorce.