HE Liberal government has
been sitting on a tack for
So long, one would think

that by now they would get the

Point. They haven’t, and Par-
liament is again building up
nto another flap.

This time it is Minister of
Finance Mitchell Sharp who is
feeling the pinch. At issue are
the revisions in the Bank Act.

The Bank Act is a piece of
legislation which dates from
the R. B. Bennett regime of
1934, The point of the Act was
to establish a central bank in
Canada to regulate credit and
currency — as the act states
to control and protect the ex-
ternal value of the national
Monetary unit and to mitigate

_by its influence fluctuations in

the general level of production,
trade, prices and employment.”

The Act is now before Parlia-
ment for revision — or should
be, but the government is split

and afraid to bring in its revi-
Sions,

The main thrust of the gov-
ernment revisions is reported
to be in the direction of allow-
ing the banks to raise their in-
terest rates above the present
SIX percent ceiling. According
to the Toronto Star, Sharp has
developed a “politically pain-
less way to do this.”

The banks argue such a re-
laxation of the interest rates
Would actually enable many
borrowers to arrange loans at
the bank at from 7 to 8 percent

interest rather than the present ©

1 or 12 percent.

The weakness of this argu-
ment is that it is likely to have
the opposite effect. In this con-
hection, John Diefenbaker, lead-
er of the Opposition, made the
following point: “There have
been suggestions that the inter-
est rate will only be increased
On larger loans. That type of
diplomatic subterfuge will only
result in small borrowers not
being allowed to borrow, and
large borrowers having a wide
Open opportunity to secure the
fund they need.”

The proposal will increase the
profitability of Canada’s char-
tered banks, which, with a pro-
fit margin of $85.5 million in
1965, hardly qualify as disaster
areas, but it will be a step away
from planned economic deve-
lopment and merely further re-
lease the monetary weight of
the banks into the speculative
money market.

The Toronto Star states in an
editorial: “The interest rate

What kind of
BANKING POLICY

do we need?

issue cannot be judged apart
from the banks’ leading role in
carrying out Canada’s monetary
policy, the adjustment of the
money supply to curb either in-
flation or deflation.”

In a sense this places the
problem on its head. The bank-
ing ,and financial system is,
basically, a reflection of produc-
tion and cannot be abstracted
from this as if money were
some mystical quantity that
“grew on trees’ or anywhere

$$$

The key question for the
Canadian people in the govern-
ments handling of monetary
policy is not so much the in-
terest ceiling applied to the

_privately-owned banks.

The essential issues involved

‘are:

e What monetary policies
can be advanced which will cor-
rect the imbalance of the eco-
nomic development in Canada
and ensure the elimination of
underdeveloped areas, let capi-
tal flow into underdeveloped or
non-existent aspects of our na-
tional economy such as ma-
chine-building and primary
manufacturing?

e@ What policies can be ad-
vanced now to eliminate the
spontaneous ebb and flow of
capital aimed at a quick pro-
fit and with the resultant boom-
and-bust tendencies which con-
stantly produce either infla-
tionary pressures or recessions?

e Will the government move
now to relieve the pressure of
consumer debt, lower interest
rates and take the individual
purchaser and small business-
man out of the clutches of the
usurers?

These questions are the nub,

_or should be, of any new Bank

Act.

No such orientation is being
advanced by the government.

Instead of using its respon-
sibility for the direction and
control of the monetary system
to directly influence the plan-
ning and control of the decisive
areas of production, the gov-
ernment chooses to stay on the
sidelines, to tinker with the in-
terest rates. It enhances a
money policy which protects
the competitive edge of the
large interests and leaves na-
tional development to chance.
Worse still, community, social
and industrial planning is left
to the whims of speculators and
foreign controlled monopolies
and to tangle and stagnate un-
der a maze of agencies and a
taxation system that dates from
the time Canada was a system
of disjointed communities.

ca

In discussing the economic
and social goals of our nation,
it would be well to go into the
genealogy of the Bank Act.

The present revisions are an
amended version of a bill for-
mer Finance Minister Walter
Gordon introduced in the House
but which lapsed at that time.

They come also on the heels
of Porter Commission, which in-
vestigated Canada’s banking and
monetary system in 1962-1963
and reported in 1964.

The Porter Commission dates
from the Coyne affair in which
the former governor of the
Bank of Canada, Jame Coyne,
used ‘his position and prestige
to warn about the American
takeover of the economy. He
had the nerve also to suggest

alternate policies and: for this

was fired by the then Prime
Minister Diefenbaker.

Thus the present amendments
to the Bank Act have a history.
A history which has been bound
up in the great debate of na-
tional destiny that has deve-
loped from the first days of the
Abbott Plan after the war, which
set our national orientation as
a reservoir and mineral preserve
of the United States — in fact
a client state relationship.

Today this problem is at the
centre of national politics. The
Americanization of Canada has
all but reached the point of no
return. One out of every three
dollars of . American capital
invested outside of the U.S. it-
self is in Canada. Investments
have reached such levels that it

is self-generating, that is, pro-

fits made in Canada by Amer-
ican-controlled corporations are
used to increase its stranglehold
on Canadian industry.

In its submission to the Por-
ter Commission, the Communist
Party argued for the unification
of the credit system and the na-
tionalization of the bank and

credit institutions. This, argued .

the Communist Party, “makes
it possible to achieve a balanced
economic development, based
on genuine industrialization of
Canada .. . Nationalization
would eliminate the present
superimposed absolute control
by a small group of financiers
over the production and distri-
bution of goods.” —

The~submission of the Com-
munist Party also stated that
“the financial and banking sys-
tem is, basically, an expression
of production, leads to the con-
clusion that the primacy of pro-
duction should be recognized in
policy making; anything that is
physically possible in Canada

Parliament is now in flap over minor
revisions to the Bank Act but what is
being evaded is the need for a major
overhaul of the Act to make it serve the
people first — not the bankers.

is also financially possible.”

By moving to eliminate the
contradiction between the gov-
ernmental responsibility for the

regulation and operation of the

monetary system, and the pri- .

vate control of organization and
planning of production, the
Communist Party projected a
plan for national investment
policies which would enable fii=
people to gain contrel of our
economy. The advantages, in-
deed the necessity, of such a
policy becomes obvious when
one examines the social and
economic goals of the people
and the essential contradiction
with private capital.

$ $ $5

- It is a paradox ofthe system
under which we live that as our
economy becomes more and
more highly developed and
complicated, the government is
forced to assume measures of
control over the economic and
monetary life within an archaic
system of private enterprise,

private profit and monopoly
control.

It assumes a key role in the
direction of the economy but,
because of the nature of the so-
cial system, it does so on the
premise of assuring profitability
of the major economic interests
operating in Canada.

It has been argued that what ~

is good for big business is good
for the country. The polluted
rivers, ravished forests, indus-
trial smog and squalid slums
of America are testimony enough
that such a simple equation,
“ain’t necessarily so.” A proper
business climate, when placed
in the context of private owner-
ship of the means of production
and monopoly control of the
national economy, can spell
havoc to the majority of the

people and completely warp the: ...
balanced economic developmest

of a given country.

A single principle like hie

when applied to a country such
as Canada—which on one hand
relies for its life blood on world

trade and on the other is in a -

position where foreign mono-
polies stand on the command-
ing heights of its economy —
can have no other effect but to
turn us into an economic pre-
serve, even though the profits
of General Motors of Canada,
International Nickel, Standard
Oil and. every other Canadian
subsidiary of a foreign monopo-
ly may bloom.

July 8, 1966—PACIFIC TRIBUNE—Page 3