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Jack Ranger

Tapping the Wall St. Wire

(13 September 1948)

From Labor Action, Vol. 12 No. 37, 13 September 1948, p. 3.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The weekly rail unions’ newspaper Labor in its Canadian column of the August 28 issue headlines a story: “Socialism seems far off in Canada, except to the CCF.” The story declared that the Cooperative Commonwealth Federation [Canada’s socialist party] at its recent national convention approved a platform proposing more socialism than ever before and more than the socialist labor government in England had tried to put into effect; and Labor mentioned Canadian newspaper opinion that “there is no sign the CCF will get a chance to govern Canada and carry out its program.”

The Canadian newspapers are wrong. The Canadian economy is due to enter a crisis of the most far-reaching proportions. Socialism is bound to appear as an increasingly attractive program to the people of that nation.

Canada’s economic dilemma and foreign-exchange crisis are dealt with in a 28-page report just released by the National Foreign Trade Council. Though the council’s economists, like good capitalist employees, do not draw the necessary conclusions, they are all implicit in the statistics presented.

Canada’s industrial growth in the last two decades has been phenomenal. By 1944, manufacturing accounted for almost 60 per cent of the national economic product, as contrasted with 7.5 per cent for the forest industries, 7 per cent for mining and mineral production, and approximately 23 per cent for agriculture. Between 1939 and 1947, 5,000 new companies were added to Canadian industry; the volume of machinery and related capital equipment built in 1947 was almost four times that of 1939.

Conditions Now Different

Most of this development of Canadian industry has been financed by U.S. big business. By 1945, American capital invested in Canada amounted to $4,982 million, accounting for about 70 per cent of total foreign investments in the country. Of the income from American direct investments abroad, U.S. business derived about 27 per cent from Canada in the period from 1940–1946.

Since 1946, however, the amount of annual new U.S. investments in Canadian enterprises has sharply declined because the conditions under which earlier investments were made no longer prevail.

What has happened is that the imperial preference system, under the hammer blows of the recent war and the ruination of England and Europe, has broken down.

Big business in the U.S. launched subsidiaries in Canada for one main reason, the assumption that the commonwealth and imperial market would require increasing quantities of goods of Canadian manufacture. Expanded industrial investment by U.S. banks and industries in Canada has rested on the British preferential system and on the convertibility of sterling obtained from exports to other British countries.

Today sterling is no longer freely convertible. A vital market for Canadian goods is fast disappearing.

Foreign Trade Difficulties

As the NFTC study reports:

“A further complication in this situation has been that under the protection of the imperial preference system, much of the industrial development of the country has resulted in duplication of manufacturing facilities in the United States. Often subsidiaries are competitors of the parent companies in this country (the U.S.) developed because of tariff protection advantages ... Relatively heavy capital investment has been made necessary in many cases, where a small expansion of a plant in the U.S. would have been sufficient to fill Canadian requirements ...

“A fundamental change has occurred in the Canadian industrial economy. Exports to imperial markets on which many industries have relied historically have declined relatively, at a time that much the greater part of required imports have had to come from hard currency areas [i.e., the U.S. – J.R.] necessary for the continued functioning of the industrial plant.”

Canada is neck-deep in foreign exchange difficulties. “With a total foreign trade of $74 billion in the period 1918–1947, exports to the U.S. were valued at $16 billion, about 38 per cent of all Canadian shipments.” But 71 per cent of Canadian imports, or roughly $23 billion, were of American origin.

“The most distinctive feature of the post-war years has been the marked accentuation in imports from the U.S., the inability of the British economy to supply needed industrial goods, and the non-convertibility of sterling. Despite an export balance of $237,800,000 in Canada’s visible foreign trade in 1947, a debit balance of $918,100,000 was registered in trade with the U.S.”

Rough Time Ahead

Thanks in part to the extremely high prices charged Canada by U.S. big business, Canadian holdings of gold and U.S. dollars declined $743 million in 1947. Dividend payments from Canada to the U.S. were $182 million in 1947 alone. In a desperate attempt to stem the tide, the Canadian government, last November imposed severe restrictions on imports from the U.S. This has hardly solved the problem, but instead has created two more problems. The restrictions “reduce the volume of American exports and thereby lower the quantity of products available to the Canadian consumer. Inflationary pressures are increased and the pace of industrial development retarded.”

What does it all boil down to? This: For decades U.S. business, by launching subsidiaries in Canada, has smuggled under the umbrella of Britain’s preference system. But the umbrella no longer protects. Currencies throughout the empire are no longer freely convertible, and progressively lose ground to the U.S. dollar. The barriers to the conduct of multilateral trade both within and outside the imperial market grow more numerous. The market for Canadian industry is fast drying up. Capital has ceased to flow into the country and, indeed, is flowing outward. The Canadian market itself can absorb but a fraction of the goods which the Canadian economy can produce. Canada’s industrial structure faces ruin.

World capitalism is like a man doomed with cancer extending throughout the organism.

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