The Lost Massey Lectures (46 page)

8. We all share the view that more predictability and less volatility in oil prices would be helpful to world economic prospects. We agreed that the fall in oil prices in no way diminishes the importance and urgency of efforts to conserve energy, to develop economic alternative energy sources, to maintain and where possible improve contacts between oil-exporting and importing countries, and to encourage the growth of indigenous energy production in developing countries which at present lack it.

9. East-West economic relations should be compatible with our security interests. We take note with approval of the work of the multilateral organizations which have in recent months analyzed and drawn conclusions regarding the key aspects of East-West economic relations. We encourage continuing work by these organizations as appropriate.

10. We have agreed to strengthen cooperation in protection of the environment, in better use of natural resources and in health research.

Our discussions here at Williamsburg give us new confidence in the prospects for a recovery. We have strengthened our resolve to deal cooperatively with continuing problems so as to promote a sound and sustainable recovery, bringing new jobs and a better life for the people of our own countries and of the world.

We have agreed to meet again next year and have accepted the British Prime Minister's invitation to meet in the United Kingdom.

Strengthening economic cooperation for growth and stability

I.  We have examined in the light of our experience the procedures outlined in the undertakings agreed at Versailles last year which seek to ensure greater monetary stability in the interest of balanced growth and progress of the world economy.

II. We reaffirm the objectives of achieving non-inflationary growth of income and employment, and promoting exchange market stability through policies designed to bring about greater convergence of economic performance in this direction.

III. We are reinforcing our multilateral cooperation with the International Monetary Fund in its surveillance activities, according to the procedures agreed at Versailles, through the following approach:

A. We are focusing on near-term policy actions leading to convergence of economic conditions in the medium term. The overall medium-term perspective remains essential, both to ensure that short-term policy innovations do not
lead to divergence and to reassure business and financial markets.

B. In accordance with the agreement reached at Versailles, we are focusing our attention on issues in the monetary and financial fields including interaction with policies in other areas. We shall take fully into account the international implications of our own policy decisions. Policies and objectives that will be kept under review include:

(1)Monetary Policy. Disciplined non-inflationary growth of monetary aggregates, and appropriate interest rates, to avoid subsequent resurgence of inflation and rebound in interest rates, thus allowing room for sustainable growth.

(2)Fiscal Policy. We will aim, preferably through discipline over government expenditures, to reduce structural budget deficits and bear in mind the consequences of fiscal policy for interest rates and growth.

(3)Exchange Rate Policy. We will improve consultations, policy convergence and international cooperation to help stabilize exchange markets, bearing in mind our conclusions on the exchange market intervention study.

(4)Policies Toward Productivity and Employment. While relying on market signals as a guide to efficient economic decisions, we will take measures to improve training and mobility of our labour forces, with particular concern for the problems of youth forces, with particular concern for the problems of youth unemployment, and promote continued structural adjustment, especially by:

— Enhancing flexibility and openness of economies and financial markets.

— Encouraging research and development as well as profitability and productive investment.

— Continued efforts in each country, and improved international cooperation, where appropriate, on structural adjustment measures (e.g., regional, sectoral, energy policies).

IV. We shall continue to assess together regularly in this framework the progress we are making, consider any corrective action which may be necessary from time to time, and react promptly to significant changes.

Eric Kierans resigned as Federal Minister of Communications in April, 1971, citing many of the points he discusses in the Massey Lectures. Below are the texts of his resignation and Prime Minister Trudeau's reply.

My dear Prime Minister:

I appreciate very much our lengthy discussion yesterday in which I expressed my concern about the economic problems, particularly employment, facing Canada in the seventies. Challenges which did not exist ten years ago now present themselves and demand a total re-examination of all elements of our economic policy. The rise of the international corporation, for example, is leading some economists and businessmen to talk in terms of gross world production as a better index of economic growth than the sum of national products. This may be, although
I sense no similar concern with the distribution of that product. One can detect, however, the implicit assumption that Canada is to be assigned the role of supplier of resources presumably because we have them and also because we do not have a sufficient domestic market to justify their conversion into finished or semi-finished products here at home.

Economic policy is put together from a variety of elements, but the overriding objective of all nations in the seventies must be the attainment of full employment, however defined, as the best guarantee of political, social, and economic stability. To this end, all elements of policy—monetary, fiscal, commercial, energy and resources, agricultural, regional development—must be interconnected to ensure that they do not work at cross purposes and at the expense of overall objectives.

It is in this realm of ideas and policy that I wish to concentrate my efforts. Economic growth is not unlimited. Even with an exponential increase in capital and population—three billion now, six billion people by the year 2000—a diminishing supply of nonrenewable resources will restrain world growth. Canada is fortunate in its resource base and can insist on exports with a higher labour content. Tax concessions that force the pace of our raw material exports or favour the over-employment of capital, which we have to import, at the expense of labour which is in surplus would not be consistent with long-run Canadian growth and employment objectives. If Canada is to be an industrial force in the 1980s, we must be prepared now to husband our resources and to select those areas in which we can be internationally competitive and to manage and invest in the resources, physical and human, that will give us a compelling position.

To challenge openly long-established policies and practices would be embarrassing to my colleagues and to you, and unfair, if I were to remain in the Cabinet. Therefore, I ask you to accept my
resignation as Minister of Communications, effective immediately. I leave with real regret.

I fully support the national unity policies of the government and I am certain that these will achieve a better and a united Canada. In my own sphere of activity, I have greatly enjoyed the challenge that you entrusted to me as Minister of Communications.

With my warmest personal regards, I am

Sincerely yours,
(signed) E
RIC
K
IERANS
.

Ottawa, April 29, 1971.

Dear Eric,

It was with regret that I received your request to resign as Minister of Communications and it is with reluctance that I shall recommend to the Governor General that it be accepted.

I fully share your concern about the economic future of Canada as do all your colleagues. While your own views have not always prevailed in the frequent discussions the Cabinet has had on this subject, they have nevertheless added a dimension that has helped provide the broad perspective within which our decisions have been made. It is not only I, but all of your colleagues who will miss your contribution.

As Minister of Communications, you have played a most important role in defining the problems and helping to shape Canada's course in this difficult and challenging field.

I would also like to express my thanks for all the other contributions that you have made to the government and to the people of Canada.

While you will no longer be participating in Cabinet, as a member of the Liberal Caucus your views on all matters will still command the government's attention.

I appreciate the courtesy you have shown and the spirit you have exhibited in handling the difficult personal dilemma that has faced you.

With warmest personal regards,

Yours sincerely,
(Signed) P. E. T
RUDEAU

1
. Stern traditionalists in the service of the United States still insist on this form. Cf. an interview with Mr. Thomas Mann, Undersecretary of State for Economic Affairs,
New York Times
, May 9, 1965.

2
. Albert O. Hirschman.
The Strategy of Economic Development
. New York. Yale University Press. 1958. Pp. 11 et seq.

1
. Cf. Jacob Viner, “The Economics of Development,” in
The Economics of Underdevelopment
. A. N. Agarwala and S. P. Singh. (Bombay. Oxford University Press.) P. 13. Also Bernard Okun and Richard W. Richardson,
Status in Economic Development
(New York. Holt, Rinehart and Winston) p. 236. “The size of per capita income is used by most writers as the criterion for differentiating between advanced and underdeveloped countries.”

2
. Henry J. Bruton, “Growth Models and Underdeveloped Economies,”
Journal of Political Economy
, 1955. Reprinted in Agarwala and Singh. Op. cit. pp. 219-220.

3
. Cambridge. (Cambridge University Press), 1960.

4
.
Ibid.
, p. 36 et seq.

5
. Simon Kuznetz, “Notes on the Take-Off.” Paper presented before International Economic Association, September, 1960.

6
. Professor Rostow states that India, along with China, launched its take-off during the 1950's. (Op. cit., p. 9.) He later cautions (p. 38) that it is still too soon to judge whether the effort will be successful—a suggestion of an otherwise unexplored notion that the stages of growth may be somewhat reversible. (He then concludes that as in China “the commitment . . . to modernization appears too deep to permit more than temporary setbacks”) (p. 48). The near certainty is that only heroic efforts, including a continuation of extensive provision of food from abroad, will prevent a deterioration of per capita income in India in coming years.

7
. I have drawn heavily, and gratefully, on seminar and class discussion of this classification. I first presented it at the Third Rehovot Conference in Israel in August, 1965. I have also benefited from that discussion.

8
. Elliot J. Berg. “Socialism and Economic Development in Tropical Africa.”
The Quarterly Journal of Economics
, November, 1964, pp. 560-561. (Mr. Berg argues with much effect that this shortage of qualified talent has not prevented—and has possibly encouraged—a number of these countries to commit scarce administrative resources to demanding experiments in socialism and planning at heavy cost to themselves.)

9
. Ernest Lefever.
Crisis in the Congo
. The Brookings Institution, 1965. P. 9.

10
. Frederick Harbison and Charles A. Myers,
Education, Manpower and Economic Growth
. New York. McGraw-Hill, 1964. P. 38. I am indebted to Richard S. Sharpe for a useful discussion of these figures in “The Manpower Gap in Middle Africa,” an unpublished seminar paper, Harvard University.

11
. Cf. George H. Kimble.
Tropical Africa
, Volume II, “Society and Policy.” New York. Doubleday, 1962. Pp. 469 et seq.

1
. “Basically, the problem [of Chilean agriculture] is lack of economic opportunities—resulting from the lack of employment alternatives, lack of knowledge and skills, and lack of collective power among workers.”
An Open Letter to Chilean Landowners
. By Peter Dorner. Mimeographed, May, 1965. Professor Dorner of the University of Wisconsin has recently spent a number of years studying Chilean agricultural and tenure problems.

2
. In 1949, 20 per cent of the population in Canada and the United States was in agriculture as compared with 60 per cent in South America. Production per person was something over five times as great. In 1947/48 output per person was 143 per cent of prewar levels in North America (including Central America) and 83 per cent of pre-war in South America. United Nations Department of Economic Affairs. “Land Reform: Defects in Agrarian Structure and Obstacles to Economic Development.” New York, United Nations, 1951. Data are from the Food and Agriculture Organization of the United Nations.

3
. In certain philosophical or political contexts, this may be held to be true of the armed forces of any country. They are said to serve the wrong foreign policy, be part of the wrong defense
strategy, serve only the arms race, or whatnot. But the armed forces are seriously in the service of the disapproved philosophical or political goals. In Latin America no serious observer supposes that the armed services are seriously important for national defense, territorial integrity or any other military or foreign policy objective. Their role is exclusively related to domestic politics and income.