Canada is the fourth industrial power, the fourth naval power, and the fourth air power in the free world. These facts are new, the result of the war. Taken with Canada's membership in the British Commonwealth, her close association with her friendly American neighbour, and her geographical relationship to the Soviet Union, they give her world-wide interests, major responsibilities, and definite opportunities. Canada's resources, geographical position, and dependence on world trade give her a stake in the peace of the world as great as that of any nation.

But whatever may be the position or interests of any nation today, it is clear that the making of peace, the keeping of peace, and, to a lesser degree, the formation and conduct of the numerous functional organizations necessary to conduct business between nations, depend on the attitude of the three major military powers among the United Nations.

What Canada's place will be in post-war international organization depends partly on the nature of the organization and partly on the recognition by our Canadian people of Canada's position and interests. To tell what that place is likely to be we must first try to see what the post-war organization may or should be like, and then estimate where Canada's opinion will stand.

The time is, I think, opportune for introspection by Canadian social scientists. The present is a transitional period in the life of the nation. Five years of war have profoundly altered Canadian society: Canada has become a great industrial nation; the paternalistic state has arrived at least at adolescence under the stimulus of war; for the time being the Canadian people have become military-minded, a condition which may well continue into the peace in view of the shift of world power in favour of North America; everywhere social values hitherto accepted are under fire, and traditional folkways have been rudely disturbed; new social goals are being raised and new patterns of life are being established.

It is probable also that we are in a transitional stage in higher education. At any rate Canadian universities, like other social institutions, will be compelled to adjust themselves to the changed conditions of the post-war world. One condition likely to obtain is an increasing interest in the social sciences, if for no other reason than the increasing demand for social technicians to manage a paternalistic society. It is not improbable also that Canadian society faces a prolonged and acrimonious, if not violent, debate on social objectives. Under these conditions I suggest it is of first importance that social scientists should have firm opinions as to the nature of their calling, both with 'a view to guiding educational expansion, and assisting them in deciding their personal responsibilities in a distracted world.

No one can delineate the precise state of affairs likely to prevail at the conclusion of the present world conflict. The drama is too kaleidoscopic, too much is hidden in the wings, and the number of acts is uncertain. The best that one can hope for is to distinguish the main threads of the unfolding mystery and to guess the probable position of the dramatis personae at the final curtain. Yet a few things are becoming increasingly apparent.

From facts already before our eyes it is clear that economic rehabilitation and reconstruction on a grand scale will be necessary before life can begin to function again in many parts of the world. Moreover economic reconstruction will be something more than the distribution of “K” rations and bowls of soup to the undernourished peoples of Europe and Asia. The physical destruction of factories, industrial plants, railways, harbours, gas and electric works, and all the rest of the means of production by which civilized peoples provide themselves a living, of course will have to be made good. Yet this is not all. Much of the world's population—in south-eastern Europe, in China, in India—subsisted at an almost unbelievably low standard of living even before the war began. To tender these peoples no better prospect than a return to the miserable pittance that was theirs before the war would not augur well for world peace and order, nor make more than a hollow mockery of the solemn promises of the United Nations. Their standards of living cannot be raised by driblets of charity and pious good wishes, but only by making available to them the capital instruments by which they themselves can raise their per capita productivity and hence their material welfare. The task of relief, rehabilitation, reconstruction, and development that will confront the world at the war's end promises to exceed anything of a similar nature that has ever been undertaken. Yet it is a task which lies inevitably before the world and one for which the penalties of inept handling are certainly severe and possibly disastrous.

In this paper an attempt is made to work out mathematically a pure theory of money. The method employed is to consider only those operations which are fundamental to all monetary economies. These fundamental operations are spending, saving, and investing and any relationships which can be shown to exist between them must, therefore, be valid for all economic systems employing money.

The quantities dealt with in this analysis are purely monetary ones: no considerations of value arise. The resulting equations, therefore, express relationships between different quantities of money or between different money flows.

We shall first investigate the operations of spending and investing and then consider the operation of saving.

In order to simplify the problem, we shall consider first an economic system of a restricted type and then later remove the restrictions in order to achieve generality. We postulate that this simplified system operates under the following two restrictions: (a) no investment is made except by an industrial unit; (b) there is no taxation.

The life of the overseas Dominions in the past generation has been dominated by the related movements of democracy and nationalism. Here my concern is with a general and comparative treatment of the nature of Dominion nationalism and its influence on the relations of the Dominions to the outer world.

In some important and obvious respects nationality within all the Dominions has common features: it is a growth among immigrant peoples not politically severed entirely from the parent state, and not devoid of loyalty to the parent stock; it is mainly rooted in a culture derived from an older land, and draws inspiration from no wells of a past distinctive only to itself; it cannot in the nature of things nurture the sentiment of “we alone,” and it has not attempted to do so; it is expressed principally in a language common to two powerful world states, one of which has had a great literature for many centuries, and hence it has to be content only with such idioms of speech as local environment slowly brings. In all cases this Dominion nationality has a short history with the emotional shallowness of such. Its spirit is not steeped in the legendary glories of country and town. Unlike the small and intense nationalities of Europe, including the Irish, it rests its claims upon present achievements and future hopes rather than on reference to an epic past, or the tale of oppression suffered at the hands of another. In every Dominion it was both inspired by and expressed in the struggle of people for self-government and democracy, and the political institutions arid ideologies to which it is wedded have a common ancestry. It has arisen within Communities which grew big and prosperous quickly, thanks to a conjuncture of highly favourable world circumstances, notably the rapid industrialization which brought speedy benefit to frontier countries with rich natural resources and abundant land, countries linked to the heart of industrialism and world trade in the period, the British Islands. Related intimately to this circumstance was the Pax Britannica, or long era of relative peace secured by British sea power, which controlled the exits and entrances to the strategic seas and enabled the flow of people and capital, the unhampered occupation of wide territories, and the pursuit of the arts of peace to absorb these frontier communities, and thus achieve that sense of community expressed in their nationality.

Liberalism is based upon bold assumptions. It is a political doctrine built upon confidence in the rationality and good will of men. Crisis might well be treated as endemic to any theory so premised. Hence, difficulties caused by the failure of men to act in a manner consistent with such assumptions could be easily anticipated and readily dismissed. The present difficulty seems to go much deeper and to rest upon a questioning of liberal assumptions as valid guides to action.

It is but a step from such pragmatic probings to a challenge of the essential philosophic value of liberalism. To lose faith today in the values of liberalism would, I think, be tragic. The liberal tradition is the strongest political heritage of western culture, and particularly of the United States and the British Commonwealth of Nations. What are the essentials of this heritage?

The essentials of liberalism are familiar to us all—civil rights, the tolerance of political differences, freedom of opportunity and a career open to talents, belief in the dignity and integrity of human personality, the acceptance of diversity and of compromise. These are the elements, and to many bred in the liberal faith they are taken as universal truths.

At an early point in the Economics of Imperfect Competition Mrs. Robinson assures us that her attention is to be confined to equilibrium analysis only and that she proposes to make no study of the process of inter-equilibrium adjustment. “The technique set out in this book is a technique for studying equilibrium positions. No reference is made to the effects of the passage of time. Short-period and long-period equilibria are introduced into the argument to illustrate various technical devices, but no study is made of the process of moving from one position of equilibrium to another ….” There are two alternatives open to the theorist who has adopted a methodological precept involving the complete separation of equilibrium and process analysis. It is possible, on the one hand, to follow the precept with the utmost rigour, in which case the equilibrium theory will be almost purely formal and hardly constitute an explanation of the equilibrium. Or the theorist can in practice relax his rule and introduce process propositions into the equilibrium theory. Few writers have been able fully to resign themselves to the first alternative and most have in greater or less degree followed the second. Thus there has been elaborated, largely unconsciously, a theory of the process of interequilibrium adjustment which forms an integral part of the accepted theory of the equilibrium of the firm in its usual form. It is the purpose of this paper to bring this adjustment theory explicitly to view and to determine the degree to which the validity of the equilibrium propositions is dependent upon it. It is emphasized that the discussion is restricted to the questions of internal logical consistency and formal generality of the theory.

Among persons unfamiliar with agricultural markets, it is not uncommonly assumed that here, if in no other area of economic activity, prices are established through the free play of competitive forces in an environment at least approaching the perfect market. To be sure, agricultural production is carried on by atomistic units and, at least prior to the inauguration of government crop-control programmes, there have been few limitations upon competition among farmers for the use of productive resources. And, in the processing and distribution of farm products, the illusion of pure competition has been strengthened by the relatively large number of firms and the fact that they frequently do not have direct control of the short-run supply of their raw material.

But those who are familiar with actual conditions in these markets know how unrealistic it may be to proceed on the assumption of pure competition. It has become increasingly evident to the agricultural economist, for example, that typically—even where the number of processing firms is large—a few firms dominate a given industry, often aided and abetted by active trade associations. Again, in the local market, where assembling and processing is done by a relatively large number of small independent agencies, differentiation of services—including that of location—may lead to non-aggressive buying policies. Finally, the fact that processor-distributors do not control the short-run supply of farm products does not preclude monopoly elements. For imperfect competition in a processing-distributing industry implies control of the supply of processing-distributing services, hence the price of these services (the margin or spread).

In a world torn with nationalistic conflicts, men's minds are naturally turning to projects of international government and to hopes for a wider acceptance of international loyalties, language, and civilization. One of the last epochs in which a measure of such international unity can be said to have actually existed was the European Middle Ages. The following study of the conditions underlying medieval unity, therefore, may offer some information on a topic of present interest.

Accounts of the rise of modern nationalism frequently begin with a picture of the spiritual, linguistic, and cultural unity of medieval Christendom. Mr. Carlton Hayes speaks of “the traditional internationalism of civilized Europe” before the sixteenth and seventeenth centuries; other authors similarly use the Middle Ages as a point of departure. New forces are then pointed out, which in their rise toward the end of the Middle Ages broke up that unity into the present multitude of nations and sovereign states. This useful method of exposition, however, suggests further questions. How did that “traditional internationalism” of medieval Europe come to exist? What were the conditions favouring its spread, and how durable was it likely to be under the law of its own growth? Can the medieval vision of cultural unity again be recreated on similar foundations?

In a consideration of the economic problems that confront agriculture there is much wisdom in a return to the classical tradition of treating these problems within the context of the political economy. In our division of labour in professional effort we have departed from this tradition; and our work has been weakened as a consequence. The Older Economists were deeply concerned about agriculture. They did not, however, make the mistake of treating agriculture in isolation, as if it belonged in another category to be studied, one might be led to suppose, by a different set of analytical models and presumably, largely by surveys and statistics. Such procedures certainly are not in keeping with what the Older Economists did as they put together an engine for economic analysis and laid down a roadbed for policy. On the contrary, their major premises and the basic policies that emerged were heavily weighted with agricultural affairs. This is evident when we consider the attention they gave to the production of food, the distribution of rewards to factors, particularly to rent and land. Whether our analysis pertains to labour, finance, trade, agriculture, or any other problem sphere, we will do well to formulate our approach in terms of the economy as a whole. We need especially to view agriculture as an integral part of the political economy and not as a series of particular farm problems treated as if they were self-contained.

Economic historians are faced with the task of reconsidering modern European history as a whole. No age is more in need of reinterpretation than the hundred years or so which began in England with the outbreak of the Civil War and in France with the accession of the infant Louis xiv. Tawney, his associates, and pupils have revealed the main features of English agrarian, industrial, commercial, and financial development in early modern times. With the copious data provided in the nineteenth and early twentieth centuries, Clapham, his associates, and pupils have built recent English economic history into a solid edifice on massive and precise statistical foundations. But Continental and British economic history have still to be brought into appropriate relationship to each other. And even in modern English economic history, an unfilled gap of more than a century remains. The materials that have been thrown into it are inadequate from about 1640 down to 1740, the year in which the war of the Austrian Succession broke out. The task of arranging such materials as are available into a durable pattern has not been seriously faced. So our knowledge of the place of these hundred years in the rise of industrialism both in Great Britain and on the Continent is vague.

The Consolidated Revenue and Audit Act of 1931 is the statutory embodiment of the principles underlying the control which the Parliament of Canada exercises over the receipt and issue of moneys from the Consolidated Revenue Fund. It is the most recent of the legislative milestones which mark the evolution of systematic control from the plodding simplicity of the methods of 1855, when the first Audit Act was passed, to the mechanized organization of the present day.

Legislative financial power had been firmly established in 1878 with the appointment of an Auditor General as an officer of Parliament, to regulate the issue of moneys from the treasury and to examine and report upon the public expenditures. With wide powers of inquiry and examination, the Auditor General possessed the means to learn if legislative directions were being obeyed. Control of the issue gave him the means to deal with the misapplication of appropriations by refusing to sanction further issue. This ever-present threat, hovering as the sword of Damocles over the heads of the spending departments, was ready at the word of the Auditor to cut off the flow of money from the treasury. For fifty-three years, legislative regulation of the issue served as a more or less effective restraint on executive disobedience to parliamentary directions.

One of the great elements of stability in the British constitution has been the sovereignty of parliament. The fact of parliamentary sovereignty has given the British constitution a flexibility which has enabled it to serve the changing needs of different periods by modifying the inflexibility of the common law by direct changes in positive law. Even before the period of deliberately created law the fiction of the king's conscience enabled the courts of equity to introduce an element of peaceful change into the legal structure of England.

The supremacy of the will of parliament involved in the notion of parliamentary sovereignty presupposes two things. Firstly, it assumes a single supreme legislature, and secondly it assumes the superiority of legislation over the will of the courts. If, as Walter Bagehot contended, the efficient secret of the British constitution lay in the almost complete fusion of the executive and legislative functions, it equally depended upon the supremacy of the legislative branch over the judiciary. It was no abrogation of that theory that it was the business of the courts to determine whether the subject was bound by the words of a particular expression of the will of the legislature. That was merely a protective device against an administrative abuse of power. What that theory cannot logically contain is the notion that the courts could say that the legislature was or was not exceeding its powers in legislating. For by definition those powers are unlimited.

How will the introduction of health insurance influence the demand for health services? In the discussions on the reform of our health services this question has been seldom put and hardly ever answered. Expressly or tacitly the assumption is made that the present demand can be used as a yardstick for measuring future needs under a system which it is thought aims mainly at a more equitable distribution of available services.

The problem is, however, of a more fundamental nature. What health insurance would achieve is to remove the whole field of health care from the automatism of the price system. The fee-for-service system based on the individual's ability to pay for medical care will disappear. A compulsory scheme of prepayments will be introduced which will entitle insured persons to services whenever they need them or whenever they feel that they do. Economic and psychological factors about which very little is known so far will come into play, and are bound to have a profound influence on the demand for health care. Changes may be of a quantitative and of a qualitative nature. Not only may the demand increase but it may also be directed toward other types of health care than in the past.

All these factors have to be considered when the foundations of a national system of health insurance are being laid. They are, of course, decisive for the cost of the scheme and for the supply of health personnel. But the evaluation of the potential demand will also have a bearing on the type of services to be offered, on the form of organization and administration, and above all, on the methods used for making the beneficiaries of the scheme conscious of their responsibilities.

Two features of Canada's international economic position stand out so conspicuously that everyone is familiar with them. We are dependent upon foreign markets almost as completely as a country could be; and we depend upon an export surplus in markets overseas to pay for an import surplus from the United States. Our interest, therefore, lies in the freest possible access to the markets of other countries and in the unrestricted convertibility of world currencies at stable rates of exchange. During the inter-war years the attempt to secure stable exchange rates under the gold standard system failed, and thereafter restrictions upon international trade multiplied. The fact that the system broke down during a very severe depression has associated the gold standard with deflationary tendencies so strongly in the popular mind that, apart from any question of its merits, it is now impracticable to suggest its general restoration. Government experts have therefore been at work on a series of related plans for a new and improved international economic framework. By setting up an international monetary system which will not periodically collapse they hope to create an atmosphere in which nations will be willing to remove barriers to trade and in which international investment may revive. They design an international economic order within which nations may strive for a high level of employment and national income without being thwarted at once by the international consequences of expansion.

Dominion Order-in-Council 1003 passed in February of this year promises to be epoch-making in labour relations in Canada. It commands the parties to bargain collectively, assists them to reach agreement, names and enjoins against both employer and workers certain practices opposed to wholesome bargaining relations, and sets up a special Board judicial in character to administer and enforce the Order. Following as it does in the wake of a half-dozen provincial statutes reaching toward the same general purpose, its appearance calls for a review of state policy with respect to collective bargaining in modern industrial society. What are the trends? And with what particular phases of the movement has the State concerned itself across a century and a half? What is to be the future status of collective agreements at law?

The attitude and behaviour of the State may conveniently be considered in three phases which are only roughly separable in time. In some countries all three have been experienced while in others progress has been made only to the second. There is considerable difference in opinion in fact whether the change from the second to the third represents the true path of social advance. The first phase is found in the earlier nineteenth-century outlook and practice of State opposition to collective bargaining (a condition which in some countries continued well into the twentieth). The second involves the withdrawal of opposition but where collective bargaining is regarded as outside the State's responsibility. Trade unions and employers' associations are treated as voluntary autonomous associations having important dealings with one another, but collective agreements have no status as contracts; neither in negotiating or enforcing, in assisting or in interpreting does the State lend its authoritative hand. The two collective parties are left to work it out for themselves without benefit of sovereign authority. Third we find the phase of positive State participation, operating as the case may be (1) through compulsion in labour disputes seen in its fullest in Australia; (2) through making collective agreements enforceable at law and thus making the parties responsible for performance, practised for many years in Sweden; (3) through compelling the parties (and particularly the employer) to negotiate with a view to forming agreements, the classic example being the United States since the middle 1930's; and finally (4), in addition to this last, through assuming a responsibility for assisting them to reach agreement and provide adequate machinery for interpretation and enforcement, these being the heavy tasks of government under the Canadian Order.