Courtesy Reuters

The Canadian Economy in Two Wars

CANADA enters the second winter of war with her economic policy meeting its first crucial test. Until now the Canadian Government has not found any great difficulty in adhering to its declared policy of pay-as-you-go. In September 1939 there was unused factory capacity and there were reserves of labor and raw materials. Indeed, a mildly inflationary policy was adopted during the early months to stimulate production. Now, after more than a year of war, full employment is clearly in sight; immense extensions of plant are under way; and expenditures are approaching 30 percent of the national income. These developments reveal that a critical moment in economic policy is at hand. The next few months will demonstrate whether or not the Government has the courage to impose the taxation and controls necessary to avoid inflation, and whether or not the people will accept a parallel reduction in the standard of living. What can be said today is that the Government shows no sign of faltering in its policy of pay-as-you-go and that the people of Canada have thus far revealed a truly heroic eagerness to sacrifice now to attain ultimate victory.

That Canada is already in a critical phase of her war economy reveals the extent of her war effort. This effort has two objectives -- to give all possible aid to Britain, and to strengthen Canadian home defense. Every last impulse of Canada's power in men and resources is being given to these ends. There is no disposition to rely upon the United States for the defense of Canadian territory. On the contrary, the Canadian Government, with the full approval of parliament and the people, is making a supreme effort to achieve Canada's own salvation. Some of the gravest weaknesses in the war program arise out of this new manifestation of nationalism. Canada is trying to do so much, she is spreading her limited resources over so wide an area, that there is some reason to doubt if she can carry the present

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