1940: Canada, Dominion Of

The year 1940 in the Dominion of Canada was marked by a striking growth in national unity, and an equally impressive development in the nation's industries as the country's contribution to British war effort. This strengthening of its political and economic structure occurred in the face of national parliamentary elections, the death of a highly revered Governor-General, the introduction of conscription, and a precedent-smashing readjustment in its relationship to the United States.

Political Developments.

The parliamentary elections, held on March 26, naturally overshadowed all other events in the field of polities. The elections were called as a direct result of a vote of 'no confidence' in the Government's war effort which was pushed through the Ontario legislature. But they came close to the end of the Government's five-year term in office as provided by the constitution. The election had not been held earlier because of uncertainties growing out of the Government's conflict with the provincial governments of Ontario, Quebec, and Alberta. But last year's election in Quebec, bringing the Liberals back to power in that province, and Premier Aberhard's loyal support of the Government's war effort, left Ontario's dissident Liberal Premier Mitchell Hepburn as the Government's only provincial opposition. Premier Hepburn, like Dr. R. J. Manion, leader of the opposition Conservative Party, based his attack on the Mackenzie King Government on the ground that it had lagged in the prosecution of the war. Both charged that there had been widespread political inefficiency and that many war contracts had been let on the basis of political patronage. Dr. Manion, a veteran of the last war, promised that if elected he would form a national government, drawing upon the best brains of all parties for his Cabinet.

In view of Dr. Manion's personal popularity and the division in Liberal ranks, it was generally assumed that the Conservatives would make substantial gains. Although no one seems to have expected a Government defeat, another Liberal sweep such as occurred in 1935 seemed out of the question. Liberal spokesmen predicted a loss of from ten to thirty seats which would still leave the Government a comfortable majority. To everyone's surprise, the Mackenzie King Government not only repeated its sweep of four years earlier, but actually improved on it to the extent of some fourteen seats. Final returns, including the soldier vote, gave the Liberals 183 seats as against 169 in the old Parliament. The Conservatives gained two seats, increasing their representation from 38 to 40, and the Cooperative Commonwealth Federation obtained 8 seats as against 7 in the previous Parliament. The minor parties, particularly the New Democracy (Social Credit) Party, were heavy losers. The New Democracy party obtained only 9 seats as against 15, while the independents and other minor parties got but 3 seats as against 12 in the previous House.

Contrary to expectations, the Conservatives made no gains in Ontario, Mitchell Hepburn's province, where a Liberal loss of at least 20 seats had been anticipated. Although the Conservatives did much better in this province than elsewhere in Canada, they won but 25 of the province's 82 seats, the same number they had previously held. The Liberals scored nearly a complete sweep in Quebec where they won 61 seats, and candidates favorable to them won the remaining three. This despite the fact that six months previously the province had been strongly in the hands of an opposition party.

Prime Minister J. L. Mackenzie King and every member of his Cabinet was reelected while Dr. Robert Manion, head of the Conservative Party, was defeated in his home city of Fort William, Ontario. A number of other prominent Conservatives, including the deputy leader, M. H. Macpherson, were also defeated, leaving the party in an extraordinarily weak position in Parliament. The leader of the New Democracy party, W. D. Herridge, also lost.

On July 8, the Cabinet was enlarged and reorganized to strengthen Canada's participation in the war effort. The reorganization was forced, in part, at least, by the death of Norman M. Rogers, the Minister of National Defense, in an airplane accident near Toronto on June 10. In the reorganization, Mr. Rogers's post was split into three parts, carrying responsibility separately for the army, navy, and air force. The following are the new ministries, as announced on July 8:

National Defense (Military) — Colonel J. L. Ralston

National Defense (Navy) — Angus MacDonald, Premier of Nova Scotia

National Defense (Air) — C. G. Power

Finance — J. L. Ilsley, previously Minister of National Revenue

National Revenue — Colonel C. W. C. Gibson

Transport and Public Works — P. J. A. Cardin

Postmaster General — W. P. Mulock

Prime Minister Mackenzie King invited R. B. Hanson and Grote Stirling, leaders of the Opposition, to sit with the War Committee of the Cabinet as associate members while retaining the right to criticize the Government in Parliament. The proposal was rejected, however, by the Opposition, it being charged that the King Government was seeking to retain the benefits of a partisan government while offering the fiction of representation to its opponents.

Lord Tweedsmuir, Governor-General of Canada since the fall of 1935, died in Montreal on Feb. 11, 1940, just as the country was entering upon the election campaign. Lord Tweedsmuir had been ill for some time and his death was not unexpected. He was born John Buchan in Perth, Scotland, on Aug. 26, 1875, the son of Rev. John Buchan and Helen Masterton Buchan. He was an author, publisher, and historian, active in British politics before receiving his appointment to Canada. He had been a popular Governor-General and there was, at the time of his death, a strong movement to have him reappointed at the end of his five-year term. Sir Lyman Duff, Chief Justice of the Supreme Court, was sworn in as Administrator of Canada on the evening of Feb. 11, to serve until the appointment of a new Governor-General.

The Earl of Athlone, uncle of King George and brother of Queen Mary, was named Governor-General on April 3 to succeed Lord Tweedsmuir. The Earl of Athlone had been appointed Governor-General of Canada in May, 1914 to replace the Duke of Connaught. With the outbreak of the war, however, he had entered active service in France and his appointment had been cancelled. Later, on Oct. 27, 1923, he was named Governor-General of South Africa and served with distinction during a difficult period. His term of office was prolonged and he remained at the post for seven years. The Earl was formally installed as Governor-General of Canada in Ottawa on June 21 in a colorful ceremony. His first act was to give royal assent to Canada's newly enacted compulsory military service law.

Legislation.

The session of the new Canadian Parliament which met May 10 proved to be one of the most notable of recent years. In addition to adopting record appropriations for defense, it declared war upon Italy, enacted a conscription bill, and, after years of controversy, adopted an unemployment insurance law.

Although conscription had been an issue in the Quebec elections in the fall of 1939, Government leaders were united at that time in insisting that there was little likelihood of conscription in this war. The defeat of France, however, awakened Canada to the seriousness of the situation, and the Government introduced a full conscription bill into Parliament on June 17. The bill was rushed through Parliament virtually without opposition. The only two opponents were French Liberals who attempted to cripple the bill by amendments. Under the bill as passed, all human and material resources are mobilized for service of the Government. Able-bodied men up to the age of 45 years, except those needed for vital industries, were conscripted for home service. Overseas service continued to be on the basis of voluntary enlistment. Registration of all Canada's manpower was provided, both as a means of preparation for calling men into service and as a protection against fifth-column activities.

An unemployment insurance law had been passed in Canada in 1935, but it had been declared unconstitutional by the Privy Council. Since that time unemployment insurance had been a major issue, but had not again been re-enacted because of fear of violent opposition from the Duplessis-Hepburn provincial governments which were talking vaguely even of secession if the Dominion Government forced such a law upon them. But the defeat of Duplessis in 1939 and the implicit rebuke of the 1940 national elections to Hepburn cleared the way to action by the 1940 Parliament. The three provinces — Quebec, Ontario, and Alberta — which had opposed action, withdrew their objections. So when it came to a vote, the Government's unemployment insurance bill went through without opposition. Nor did the feared constitutional difficulties arise. The House of Commons by unanimous consent adopted a resolution petitioning the King for an amendment to the British North America Act, empowering the Dominion Parliament to enact compulsory unemployment insurance. This formula had been suggested in the report of the Sirois Commission on Dominion-Provincial relations and proved wholly adequate. After years of discussion as to what the British Parliament might do when asked to approve an amendment not universally supported in Canada, it was found that the British Parliament did not look beyond the two Houses of the Canadian Parliament for the voice of Canada. It granted the petition without question. The unemployment insurance bill was adopted by the Canadian Parliament at the end of July.

On June 20, a short time before passage of the resolution asking amendment of the British North America Act, the Government issued an Order in Council granting labor engaged in war work full right to collective bargaining and the right to organize labor unions free from control by employers or agents. Recognition of fair and reasonable wages is also provided, and the undue extension of working hours is frowned upon. The provisions of the Industrial Defense Act were extended to all war work, making it compulsory to call in a board of conciliation in the case of dispute. No new legislation was introduced to support this decree, it being held that the conscription bill, providing for the mobilization of all human and natural resources, gave sufficient authority to the Government to invoke whatever penalties were necessary. A change in the Government's policy with regard to hours was foreshadowed on Nov. 28, when the Labor Minister, Norman McLarty, asserted in the House of Commons that an increase in the working week from forty-four hours to forty-eight and perhaps longer had been made imperative as a result of damage to British industry arising from Nazi air raids.

Appropriations: Rise in Taxation.

Early in the parliamentary session both Houses approved an outlay of $750,000,000 for additional war expenses. This was an increase of $50,000,000 from the Government's original estimate. The budget submitted by Finance Minister J. L. Ralston on June 24 called for an expenditure of $1,148,000,000 for all purposes, of which $700,000,000 was for the war. But as expenditures had risen since these estimates were made, Colonel Ralston said that there would be an additional expenditure of at least $150,000,000 to $200,000,000. Revenue was estimated at $760,000,000, and it was forecast that from $550,000,000 to $600,000,000 would have to be raised by loans. As a yardstick to measure this budget, Colonel Ralston pointed out that Canada's national income in 1939-1940 had been only $3,800,000,000, but was expected to rise to $4,500,000,000 in 1940-1941. Indications at the end of the year were that the 1941-42 budget would be in the neighborhood of $2,000,000,000 out of a national income of $5,500,000,000.

The 1940-41 budget provided for an unprecedented rise in taxation of all kinds. Imports are discouraged by a 10 per cent tax known as the War Exchange Tax, which is added to the duty value of all goods brought into Canada, except under the British preferential tariff. Canadian-made motor cars were made subject to an excise tax and imported cars were made subject to a duty of 10 per cent on values up to $700; of 20 per cent on values from $700 to $900; of 40 per cent from $900 to $1,200; and over 80 per cent on values above $1,200. An additional $1 per thousand was levied on cigarettes, and 10 cents more a pound on tobacco, and a 10 per cent tax was imposed on minor luxuries such as phonographs, cameras, radios, and radio tubes.

A new tax on incomes is also provided. Unmarried persons earning $600 a year and married persons earning $1,200 a year were formerly assessed a 2 per cent tax; single persons earning more than $1,200 were assessed 3 per cent. The tax is deducted at the source. The old income tax exemptions are cut from $2,000 and $1,000 for married and single persons respectively, to $1,500 and $750. The tax rate is now 6 per cent on the first $250 of taxable income; 8 per cent on the next $750; 12 per cent on the next $1,000; and continues to increase with each additional $1,000. A new and more drastic excess profits tax was also adopted. Despite the drastic nature of the new taxes, they met with enthusiastic support from all parties. Members of Parliament cheered each new tax as it was read by Finance Minister Ralston. (See also TAXATION: Taxation in Leading Foreign Nations.)

A second session of Parliament convened on Nov. 7, but it had no major legislation before it. In December, legislation was adopted further regulating imports.

War Effort.

The collapse of France in May and June was followed by a marked speeding up of Canada's war effort. Actual training under the British Commonwealth Air Plan, by which it is ultimately planned to train 25,000 pilots from all parts of the Empire for the Royal Air Force, did not begin until April 29. The first 35 pilot graduates under the plan received their wings on Sept. 13. About the same time, some 300 airmen arrived from Great Britain for training.

The schools constitute the keystone of the program. Three initial training schools are planned for air crews: there are to be twenty-six elementary training schools and sixteen service flying schools for pilots; ten air observer schools, and two air navigation schools for air observers; four wireless schools for air gunners; and ten bombing and gunnery schools for air crew men. Pilots are to be trained twenty-five weeks, and air observers and gunners twenty-six weeks. The scheme is expected to cost about $600,000,000, of which Canada is to contribute $350,000,000.

On Oct. 25, Angus MacDonald, Minister of Defense for Naval Affairs, declared that by 1941 Canada would be training 2,000 airmen a month. He said that in contrast to the 4,500 men under arms in Canada in 1939, there would soon be half a million men in the army, navy, and national militia. In 1939, he pointed out, the personnel of the Navy consisted of 1,774 men, while in 1940 it was approximately 23,000. In contrast to the fifteen ships comprising the Navy in 1939, he estimated that there would be 240 destroyers, armed cruisers, patrol, and assorted harbor vessels in use by the end of 1941. He stressed the fact that Canada was willing and ready to share full responsibility for defending this hemisphere.

On June 21, it was announced that the greatest number of Canadian troops to cross the Atlantic to date had landed safely in England. They included airmen. This was the fourth contingent to land in England and contained part of the Second Division. A third and fourth division of volunteers were in training for possible overseas duty.

The months that followed the defeat of France also brought intensification of economic effort. On June 10, Charles Howe, Minister of Munitions, announced that Canada, in association with the British Government, would begin immediately to build two munitions plants, costing some $20,000,000 in all. One of these was a $12,000,000 plant for the production of nitrocellulose explosives, and the other an $8,000,000 shell-filling plant. It was announced at the same time that Canada had offered its entire automobile industry for the manufacture of war supplies. The heavy taxes subsequently adopted on new automobiles were designed to prevent, as far as possible, the purchase of new cars during the war, thus freeing the bulk of this equipment for war service. It was estimated at the middle of the year that the industry was already geared for the production of 60,000 pieces of mechanized military equipment a year, and could produce nearly 200,000 pieces if all civilian production were halted.

Toward the end of the year, a War-Time Requirements Board was set up to plan 'the most productive and direct use for war purposes of available supplies of material, power, manufacturing plants, and facilities and transportation in order to insure that war needs, in order of their importance, shall have priority over all other needs.' It was stated in November that this Board had as its objective the reaching of maximum productive capacity within eight months. One of the main jobs of the Board is the mobilization of skilled labor for the defense industries. Another is the curtailment of the output of nonessentials in order to free facilities for defense purposes. Shell output had reached a rate of 2,000,000 a month by November. Production of tank and airplane engines depended upon obtaining the necessary machine tools in the United States.

Airplane construction has been slow because of lack of plant facilities; in October 130 planes excepting their engines were being built. By March 1941, it is planned to increase this output to 360 a month, two-thirds of them trainer planes. Altogether nine explosive and chemical plants are under construction, costing $58,400,000. These have been carefully allocated to various sections of the country to avoid concentration in one area. A $40,000,000 aluminum plant is in operation. The mines and smelters of the country are producing at an all-time peak, and the lumber industry has also greatly expanded its output.

In December it was decided that imports of nonessentials into Canada would be drastically curtailed to aid in the war effort. Legislation was introduced by Finance Minister J. L. Ilsley prohibiting the import of 30 main categories of manufactured goods from outside the Empire. A second list of imported articles is to be admitted by special permit. An excise tax of 20 to 25 per cent is to be imposed on these luxury articles manufactured in Canada.

Subversive Activities.

Action against potential espionage or fifth-column activities has been extremely drastic. The Defense of Canada Regulations adopted upon the outset of the war were much more severe than the similar measures taken in Great Britain. Enforcement has been relatively strict, especially against Communists. On May 15, under a judgment delivered in an Ottawa court following the conviction of three men on charges growing out of the distribution of anti-war pamphlets, the Communist Party was declared an illegal organization. Eight members of the National Unity (Fascist) Party, including its leader, Adrien Arcand, were arrested on May 30, and on the same day a Bund gathering was broken up. On June 5, sixteen organizations were formally outlawed. These included the Communist Party (already banned by judicial decree), the Auslands organization of the German National Socialist Party, the German Bund of Canada, and other groups affiliated with foreign countries.

Strong protests were made from time to time by educational and religious leaders against the severity of the Canadian treatment of minority groups but no mitigation in policy seems to have ensued. More than a dozen prosecutions are reported monthly under the Defense Regulations. The campaign for preservation of a greater measure of civil rights in wartime was led by the Toronto Civil Liberties Union and a similar organization in Montreal.

Beginning July 1, much stricter regulations were invoked to cover travel across the United States-Canadian borders.

Dominion-Provincial Relations.

The thorny problems obstructing normal relations between the Dominion Government and those of the various provinces were largely ironed out during 1940. This achievement was in part due to the war which, rather unexpectedly, has eliminated many of the tensions between Ottawa and the provincial authorities. It was also helped by the defeat of the extremist Duplessis regime in Quebec, which for years had led the fight against the extension of Federal authority. The Alberta Premier, William Aberhard, ceased his opposition on the outbreak of the war, leaving only Ontario's Hepburn Government at odds with Ottawa. The success of the Mackenzie King election campaign in Ontario somewhat dampened the effect of this opposition, though it continued throughout the year.

But the most notable contribution toward a solution of the difficulties, which a few years earlier had caused talk of secession, came in the submission in May of the report of the Sirois Commission, more formally known as the Royal Commission of Dominion Provincial Relations. This Commission had been at work for two years on a study of the Canadian financial structure, but its 32-volume report actually contained much more than recommendations on financial matters. It has been called a Canadian Bill of Rights since it provided for equalizing education, public health, and business opportunities throughout the Dominion. This is to be accomplished by a system of Dominion grants-in-aid to raise the level of provincial social services to a common Canadian standard. In order to finance this ambitious program, the Commission also made recommendations for overhauling Canada's tax system so as to equalize burdens in various parts of the country. The most important specific recommendations are as follows: (1) That the Dominion take over the entire debt of each province, or alternatively, 40 per cent of the combined provincial and municipal debts where, as in Quebec, the situation is abnormal. Future borrowings by the provinces would be handled through a central commission and, if approved, would bear the Dominion's guarantee. Interest on provinces' revenue-producing debts would be paid directly into the Dominion Treasury, (2) That the Dominion assume complete responsibility for relief for such unemployed as are employable; that poor relief or care of the unemployables continue to be a provincial or municipal responsibility. Immediate setting up of a system of unemployment insurance by asking the British Parliament to amend the North American Act was recommended. (3) That the present subsidies paid by the Dominion to the provinces be replaced by 'national adjustment grants,' to be renewed every five years. No grant is recommended for the provinces of Ontario, Alberta, or British Columbia, since these provinces have relatively high revenues. (4) That provision be made for emergency grants to meet abnormal conditions, such as the recent drought in Saskatchewan.

To offset the advantages which the provinces receive from this plan, the provinces are asked to surrender certain kinds of taxation to the Dominion Government. The taxes which are to be given exclusively to the Dominion Government are the income tax, inheritance taxes, and taxes on corporations.

These taxes were, of course, considerably increased under the 1940-41 budget.

Reception of the Sirois Commission report was generally favorable, except by Premier Hepburn of Ontario. Hepburn charged that the release of the report was untimely and that it was being used as a 'red herring' to distract public attention from the Government's lack of vigor in conducting the war.

On Nov. 8, Prime Minister Mackenzie King disclosed before Parliament that he had summoned a Dominion-Provincial conference for mid-January, 1941.

United States-Canadian Relations.

The creation of a permanent joint board to coordinate the defenses of the United States and Canada reflected a major development in Canadian-American relations. The development was not wholly unexpected. At least twice in recent years President Roosevelt has publicly stated that the United States would defend Canada in case of attack by a foreign power. It was to implement this policy that the President conferred with Prime Minister Mackenzie King on Aug. 17, on the border near Ogdensburg, New York. The conference was arranged to coincide with the President's presence in that area reviewing troops engaged in peacetime military maneuvers. On the following day, Aug. 18, the two leaders announced agreement on the establishment of a permanent Joint Defense Board. A few days later President Roosevelt named Mayor Fiorello LaGuardia of New York to head the five American representatives on the Board. The others were: Lieutenant General Stanley D. Embrick, U. S. Army, commanding the 4th Corps Area, headquarters Atlanta, Georgia; Captain Harry W. Hill, U. S. Navy War Plans Division, office of the chief of naval operations; Lieutenant Colonel Joseph T. McNarney, Army Air Corps; and John D. Hickerson, Chief of the Division of European Affairs, State Department, who was named secretary of the American section of the Joint Board. The Canadian representatives were headed by O. M. Bigger, K. C. Others were: Brigadier Kenneth Stuart, D.S., M.C., deputy chief of the General Staff; Captain L. W. Murray, R.C.N., deputy chief of Naval Staff; Air Commodore A. A. L. Cuffe of the Royal Canadian Air Force; and Hugh L. Kennleyside, Counselor, Department of External Affairs, who was named secretary of the Canadian section.

The Joint Defense Board lost no time in getting into action. The first meeting was held in Ottawa on Aug. 26, and immediately tackled important strategical problems involved in the common defense of the two countries. On the following day the military and naval representatives of the Board left on an airplane tour of the strategic defense points on the Canadian East Coast. The Board reassembled in Washington on Sept. 9 and in Boston on Oct. 2 to continue its discussions. Later it journeyed to Vancouver to consider the problems of joint defense of the Pacific.

One of the immediate developments from the discussion was the transfer to Canada of a considerable amount of excess American military supplies. Several hundred World War tanks were turned over to Canada for training purposes. Other military supplies, including some thousands of old Lee-Enfield rifles, have been released from time to time. Canada also received six of the fifty over-age United States destroyers obtained from the United States in the British-American deal involving the lease of Atlantic bases in exchange for destroyers. While Canada was not directly involved in this deal — since none of the bases are in Canadian territory — that country was doubtless consulted frequently during the negotiations inasmuch as it had already made extensive commitments for the defense of Newfoundland and use of that island's bases.

Following up the earlier discussions between Prime Minister Mackenzie King and President Roosevelt, the Earl of Athione, Canada's new Governor-General, accompanied by his family, paid a courtesy visit to the President's home at Hyde Park on the weekend of Oct. 20. If anything of political significance came out of the two-day visit, it was kept secret as no formal statements were issued at its close.

The newly appointed Minister to Canada, James H. R. Cromwell, reached his post at Ottawa on Jan. 23, 1940. He resigned on May 22 to run for the United States Senate from New Jersey. His resignation was promptly accepted by President Roosevelt. During his brief time in office, Mr. Cromwell was widely criticized in the United States for an intemperately pro-Ally speech. On May 27, the President appointed Jay Pierrepont Moffat, chief of the European Division of the State Department, to replace Mr. Cromwell as Minister to Canada. The appointment of as able and experienced a diplomat as Mr. Moffat to the post was received with satisfaction in Ottawa.

Early in October the President named J. Warren Madden, chairman of the National Labor Relations Board, to study labor problems in connection with defense production in Canada.

Negotiations over the St. Lawrence Seaway Project were resumed in October, and general agreement was understood to be reached, though no details were announced at the time. An agreement was announced on Oct. 14, however, under which the Ontario hydroelectric system will obtain more water from the Niagara River. The arrangement provided that waters from the Albany River basin which ordinarily flow into Hudson Bay should be diverted into the Great Lakes system. Prime Minister King told the press that preliminary engineering and other investigations had begun on the St. Lawrence Seaway Project in order that construction could be started without loss of time when the final decision was reached by the two governments. Later, on Dec. 5, President Roosevelt announced that he would submit a Seaway treaty to the Senate when it reconvenes in January, 1941.

A general agreement regarding air travel between the United States and Canada was reached on Sept. 24 between the representatives of the Civil Aeronautics Authority of the United States and the Canadian Department of Transport. Non-stop flights between American and Canadian cities were provided under the new arrangement which was described as another major move to strengthen relations between the two countries.

Economic and Financial.

Farm, mining, and industrial production was at an extremely high level throughout 1940.

The wheat crop was estimated officially at 561,104,000 bushels as compared with the excellent crop of 489,623,000 bushels in 1939. With the large carryover from the previous year, the supply for the marketing year starting Aug. 1 was estimated at 834,101,000 bushels, the largest in the Dominion's history. Exports for the year, mostly to Great Britain, were 208,000,000 bushels. Canada was not only able to meet British demands for bacon and poultry products, but had a small surplus which was later absorbed by special arrangement. The tobacco crop was cut in half as a result of reduced acreage and early autumn frosts. The 1940 production amounted to only 46,000,000 pounds, compared with the record crop of 108,000,000 pounds in 1939. Despite the small crop, the carryover in Canada on Oct. 1 was at the record-breaking high level of 111,000,000 pounds. Exports for the marketing year amounted to only 12,000,000 pounds.

The physical volume of business activity during the first nine months of 1940 was nearly 20 per cent higher than in the corresponding period of 1939, according to the official estimates of the Dominion Bureau of Statistics. The index of manufacturing production rose from 112 to 141, an increase of 26 per cent. The most spectacular gain was made by the iron and steel industry. Steel ingot production increased from 937,000 to 1,465,000 long tons. Automobile production, including trucks for military purposes, rose from 110,000 to 155,000 units. Construction contracts awarded during the nine-month period were 57 per cent higher than last year. Newsprint production rose from 2,058,899 to 2,573,605 tons during the nine-month period, a gain of 25 per cent. The shipment of planks and boards increased from 1,579,885,000 to 1,788,363,000 feet.

The index of commodity prices for the 1940 period was 82.6 as compared with 73.8 in the first nine months of 1939. The cost of living rose 4.6 per cent during the first year of the war.

Employment was at the highest level for the twenty years for which records have been kept. Some shortage of skilled labor appeared in the war industries.

Exports ran far above the 1939 figures throughout the year. For the first quarter of 1940 they were valued at $243,898,000, or 24 per cent over 1939. In May they reached $109,000,000, the highest for any month since 1929. Imports were also much higher, owing to the need for war supplies and raw materials for the war industries.

On Nov. 6, the Dominion Bureau of Statistics stated that revenue on Canada's steam railways during the whole year 1939 amounted to $367,179,895 as against $336,833,400 in 1938.

It was announced on Feb. 6, 1940 that the total deficit of the previous fiscal year ending March 31, 1939, had been $50,891,744, or about $5,000,000 less than estimated by Finance Minister Dunning on April 25, 1939. Expenditures for the year were $553,063,098 and receipts and credits totaled $502,171,353. The net debt of the Dominion at the end of the fiscal year was $3,152,559,314. Expenditures for war purposes in the fiscal year ending March 31, 1940, amounted to $131,000,000. The deficit for the fiscal year was $118,000,000.

Revenues for the eight months ending Nov. 30, 1940, totaled $506,880,000 — an increase of $152,167,000 over the corresponding period of 1939. Expenditures for the period totaled $685,325,000, of which $392,787,000 was for war purposes. The eight-month deficit was $178,445,000.

A $200,000,000 war loan was floated without difficulty in January, 1940. It was supplemented by a system of war savings certificates for small borrowers which yielded $2,500,000 a month, and which Finance Minister Ilsley hopes will soon yield $10,000,000 a month. The second war loan, a $300,000,000 issue, was floated in September and was oversubscribed. The total public borrowing for the year up to late November amounted to $524,000,000. Mr. Ilsley gave notice on Nov. 21 that the next large war loan would be floated in the summer of 1941. (See also WORLD ECONOMICS: Canada.)