BEHIND DIEF’S ‘AUSTERITY’ PROGRAM Ottawa takes out $1 billion mortga on Canada from foreign financiers ee ae Canada has been mort gaged to foreign financ- iers to the tune of $1 bil- lion, said Leslie Morris, national leader of the Com- munist Party last week, in commenting on the Dief-, enbaker cabinet’s decision to seek that amount of cash and credit outside Canada to bolster rapidly dwindling foreign re- serves. “This is the second mort- gage,” added Morris. “I don’t know too much about mort- gages, but they tell me a, second one is even worse than than the first. “Before the June 18 vote, the Tories asked people to vote for them on their record of prosperity. But one week after the election, Diefen- baker warns the people of Canada that our country is in a serious crisis and we must tighten our belts.” “The people could expect little else of the old-line part- ies,’ said Morris, ‘Pearson, commenting on Diefenbaker’s action, had notHing else to offer. Had the Liberals been in power, they would have given the people exactly the same story. “Now Diefenbbaker de- _clares that he will not call Parliament until September. To say that this is adding in- sult to injury, is putting it very mildly. “What is needed is action by the people. Workers should protest wage cuts caused by devaluation and by emergency financial decrees. Consumers’ should protest price increases. The people everywhere should speak up and let their voices be heard.” Background to the govern- ment’s austerity program went something like this: In the first three months of 1962, profits of $147 million, in the form of interest and dividends, poured out of Can- ada. Most of them went to the American owners of indus- tries in this country. Estimated on an annual basis, this would mean that ‘more than half a billion dol- lars in profits are taken out of Canada in one year — as a result of the foreign owner- ship of industry here. (The actual yearly figure could be above or below that. In the first quarter of 1961, for example, there was an outflow of $168 million in profits, compared to the $147 million for the first quarter of this year. These figures do not show the total profits of foreign-owned firms, but only profits which actually leave the country, those not offset by profits coming into Canada from Canadian-own- ed firms abroad). But while the outflow of profits makes up more than one-third of the total flight of foreign reserves from Can- ada—which was recently an- nounced by the Dominion Bureau of Statistics to be $363 million for the first three month of 1962 — steps proposed last. week by the government to tackle the bal- ance of payments deficit were aimed at speeding up the in- flow of foreign capital. GAS ON FIRE This is like a man using gasoline to put out a fire. Action proposed by the Diefenbaker cabinet to ‘solve’ the financial crisis included: ® Moves toward higher in- teres: rates and a _ tighter money policy. In the past, the country’s overall payments deficit has been financed by the flood of such capital, mainly from the U.S. The government hoped that higher interest rates would once again encourage foreign investors to pour capital into Canada. e A surcharge of 5, 10 and 15 percent on goods flow- ing into Canada. Food is a special import duty allowable under the General Agree- & A re f < = AA asoyu et ee eee | Sn, \w ATTENTION! 1125 Heyw ANNUAL CANADA DAY North Shore Garden Party SUNDAY — JULY 8th : Starting — 2 p.m. ._ GOOD FOOD — REFRESHMENTS — RACES — GAMES BRING YOUR CHILDREN ood Ave. — North Van. EVERYONE WELCOME Visit Sunny Cuba ’ Passpo by July 10th 17- Day Excursion Ticket & Tour From Toronto — $399.00 Return DEPART TORONTO, JULY 20, 9 A.M. ’ RETURN TO TORONTO, AUGUST 7th Separate Ticket — Vancouver to Toronto Via Air Return — $198.00 Extra rts to be at Globe Tours 613 Selkirk, Winnipeg, Man., For Further Information, Phone AL 3-8642 a y \ 2 ELL CANADA Wa he ORT ment on Tariffs and Trades, as a measure to, combat an extreme economic crisis. e Procurement of $1 bil- lion in cash and standby credit to bolster foreign ex- change_ reserves. e Plans to cut government spending by $250 million. (Details of the proposed cuts will not be revealed until * Parliament meets in Septem- ber, Diefenbaker announced. FLOW OF CAPITAL The present financial crisis, and the downward pressure on the exchange rate of the Canadian dollar, has been largely, blamed on a slower rate of foreign investment in Canada. In the first quarter of 1962 for example, $8 million in long-term capital flowed into Canada, but $9 million in short-term capital flowed out. This left a deficit in such capital movements of $1 million. In the first quarter of 1961, the inflow of long- term capital was $147 million while the inflow of short- term capital was $296 mil- lion, for a total inflow of $443 million. The reduced flow of for- eign capital into Canada, however, does not change the basic~ pattern of foreign in- vestment, mainly from the U.S. It does not indicate a reduction in the foreign ownership and control of Canadian industry. Direct investment in for- eign-controlled industries in the first quarter of 1962, for example, amounted to $75 million. This compares to _$120 million of such invest- ment in the first quarter of 1961, and $140 million in the second quarter of that year. SLOWER INVESTMENT Thus, while foreign invest- ment was increasing at a slower pace, foreign, owner- ship, nevertheless, was get- ting a more and more power- ‘ful strangle-hold on the eco- nomy of Canada. One of the big reasons why U.S. capital wasn’t flow- ing into this country at the same rate as during the 1950s — when total U.S. in- vestment here jumped from $6,565 million to $17,000 mil- lion is that the USS. _ ments deficits. doesn’t have to send extend its existin sidiaries. They can extend ~ selves by using the ° accumulated from the of Canadian workers. — Another reason ~ seem to be the ine competition U.S. mont are facing from outside! America, and especialh the European Comm ket countries. 3 To get around such petition, U.S. firms hé creasingly invested especially in ECM ¢ such as West Germany The -effect of the & ment move toward h terest rates could be ©) courage more india investment here, loans and bond urct The people will be for this investment the higher interest rate But the rate of dire investment here, i plants, branch plants existing subsidiaries 1S ed by other factors, by the needs of the US nomy itself. This is probably James Coyne, forme! nor of the Bank of meant when he SUs that high interest ral the premium on the C dollar were the res U.S. investment in ~ and not the cause 0 The 5, 10 and 15 P surcharges on impor ed as a necessary and come step toward by the representative 1 business — were decide because in the first months of 1962, imp ceeded exports by 5? million. While the gové surcharge might ds® some imports into th his try, it would also pocket books of the ers. Most. impor would do very change the _ basic ec? structure — the nea eign ownership of Ce industry — which is © ; the main causes of perennial balance pror ¥ ‘Error could set world Pravda warns U.S. on There was no _ guarantee that a mishap similar to that which occured in the latest U.S. high-altitude test in the Pacific would not trigger off an all-out military catas- trophe, Pravda warned re- cently. —Pravda “BEWARE, IDIOT-" “During the past two weeks the U.S. has twice created consciously such dangerously inflammable situations which could set the world on fire,” wrote the Soviet Communist Party paper’s New York cor- respondent. : “There was ‘one mishap’, then there was yet ‘another,” and there is no guarantee that a similar ‘mishap’ and the technical malfunction of American rockets could not trigger off an all-out military catastrophe. In Washington they fully realize the extent of the catas- trophic consequences with which the Pentagon’s space testing attempts are fraught, and how dangerous is this ir- responsible playing with fire. “Reason and human cons- cience demand that an im- mediate end be put to these reckless actions of the Ameri- can H-bomb rattlers.” July 6, 1962—PACIFIC ablaze’ Despite warnings # tests from around the U.S. let it be ie it is proceeding W for a third attempt a high altitude test # 500 miles. The Pentagon reports last week t ber of people oF Island were injured ing debris from fail second test. SF bie oan # “IS IT DEUTSCHLAND UBER 5 DEUTSCHLAND UBER 4