Canadian-American Industry. by Herbert Marshall; Frank A. Southard,; Kenneth W. TaylorReview by: Leland H. JenksThe Economic History Review, Vol. 7, No. 2 (May, 1937), pp. 242-244Published by: Wiley on behalf of the Economic History SocietyStable URL: http://www.jstor.org/stable/2590162 .

Accessed: 04/12/2014 01:44

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact support@jstor.org.

.

Wiley and Economic History Society are collaborating with JSTOR to digitize, preserve and extend access toThe Economic History Review.

http://www.jstor.org

This content downloaded from 128.235.251.160 on Thu, 4 Dec 2014 01:44:20 AMAll use subject to JSTOR Terms and Conditions

242 THE ECONOMIC HISTORY REVIEW

Neither was it without views or action on some matters now very controversial: it had sometimes to act on the foreign exchanges without forcing higher rates on the domestic trade, and even had to consider the effects of Bank Rate policy on the government's borrowing. He reaches the conclusion: " When compared with the perfection of the post-war system of market control by the Bank, the imperfection of the pre-war system must be described as one of the outstanding failures of the pre- war Bank "-the second being its failure to deal with the autumnal drain. As is well known, the Bank Rate was by the i88o's well on the way to complete ineffectualness, and the complex of rates associated with it was threatened with dissolution, with adverse repercussions pending on London's international position. Under Lidderdale, the reversion of the policy of I 8 5 8 as to brokers' accounts, and the Baring crisis, the Bank did re-establish its older supremacy. In addition to Bank Rate it tried out various other devices: real transactions in Consols, "time transactions there, borrowing in the market, from the clearing banks, even from its depositors-and " hints from headquarters." Borrowing from depositors helped at a few dates, especially from the India Council and the Japanese government and, once, the Argentine. (There was also a borrowing from the Counties a little before i890, which Mr. Sayers does not mention.) Other methods were used to raise Market Rate, especially without raising Bank Rate, where home and international circumstances did not march together. The Bank was learning that Market Rate and Bank Rate could be used independently. The methods employed were: refusal to work at Bank Rate, breaking the normal relationship of Bank and Advances Rates, and varying the eligibility of bills. An entirely different section of management was operating directly on the gold market. It could and did buy gold at more than the statutory price, vary its charges for delivery of foreign coin, excuse interest charges to gold importers, excuse smelting charges, raise its rate for selling bars of gold (the Act of i8i9 only referred to sovereigns), pay out minimum legal weight coins. These were every-day weapons to protect the gold reserve without changing Bank Rate-Mr. Sayers has thirty pages of details on them. Mr. Sayers gives a chapter to the knotty question of the supposed continental help in i906-7, and he reaches a cautious negative. On the main question of general policy, he gives us this suggestive conclusion: "while the Bank's primary aim was to protect the reserve, it showed an occasional tendency to avoid action which would be detrimental to home trade." In these days of controversy, both as to policy and as to methods, we must view this historical account, informed in theory, as a real acquisition.

H. A. SHANNON.

HERBERT MARSHALL, FRANK A. SOUTHARD, JR., and KENNETH W. TAYLOR. Canadian-American Industry. A Study in International In- vestment. With an Excursus on the Canadian Balance of Payments by Frank A. Knox. (New Haven: Yale Univ. Press. I936. $3.00.)

This is the first of a series of thirty volumes sponsored by the Carnegie Endowment for International Peace in which it is proposed to cover the

This content downloaded from 128.235.251.160 on Thu, 4 Dec 2014 01:44:20 AMAll use subject to JSTOR Terms and Conditions

REVIEWS 243

whole field of Canadian-American relations. Subsequent volumes will deal with railway communication and mining relations in detail. This monograph focuses especially upon the branch industry movement and the broad ramifications of reciprocal economic penetration between the two countries. The study, prepared by scholars of both Canada and the United States, assisted unofficially by the statistical bureaus of the two governments, is striking evidence of the cordiality and mutuality of existing relations. Canada has been the recipient of more American capital than any other country. Three-fourths of the total sum, now esti- mated at four billion dollars, has been invested since the World War. Half of the total amount has gone in the form of direct investment in industrial, mining and commercial enterprises. Over one thousand firms are involved in this activity, the most prevalent type of which em- ploys from $50,000 to $I99,999 capital. But million-dollar companies employ go per cent. of the American direct investment and 82 per cent. of that employed in manufacturing, while they turn out from 75 to 8o per cent. of the goods produced by American-owned branches.

What has been the impact of this penetration upon Canadian economic life ? It is significant that these investments have not secured or sought control of " key " points in Canadian economy. The banks, the railways, buses, airways, newspapers, and radio, while necessarily involved in American relations, are not under American control. " The staple export trade, with the exception of pulp and paper and the base metals, is almost entirely in Canadian hands." So are the telegraphs and cables. On the other hand, manufacturing, which the authors regard as secondary in Canadian economy, is one-fourth under American control. 8z per cent. of the automotive goods, 64 per cent. of rubber, 68 per cent. of electrical apparatus, 50 per cent. of non-ferrous metals, 44 per cent. of non-metallic minerals, 4i per cent. of chemicals, 42 per cent. of machinery, 34 per cent. of pulp, paper and lumber, are produced in American-owned plants. The Americans control a third of the mining output, two-thirds of the natural gas and monopolise the telephone system and the motion-picture industry. They dominate the variety store field. They sell about a third of the in- surance. The authors at one point (p. I73) allow the Americans a third of the electric power production, but elsewhere (p. 2 8 2) restrict it to I 8 per cent.

At the same time, many of the American-controlled concerns have Canadian minority interests which the authors believe are increasing. Repatriation of whole enterprises has set in in some cases; the depression has witnessed a slackening in the rate of establishment of new branches in Canada; and repeal of prohibition has opened new fields for Canadian branch plants in the United States. Not the least significant aspect of Canadian economy is her own export of capital. No debtor country is so heavily a creditor. Proportionate to her population Canadian investment in the United States is already larger than that which she has received from there, though its sociological features are not so striking.

By the employment of questionnaires the authors have sought to throw light upon problems of motivation. Overshadowing everything else is the tariff barrier. This is specially a factor in the northward flow. Each

This content downloaded from 128.235.251.160 on Thu, 4 Dec 2014 01:44:20 AMAll use subject to JSTOR Terms and Conditions

244 THE ECONOMIC HISTORY REVIEW

tariff boost in Canada has been followed by a significant increment of American branches. In this connection imperial preference has played a role, but a minor one. That it is the Canadian market which is specially aimed at is confirmed by the other most frequent objectives-consumer preference and after-sales service. Costs of raw material and labour figure scarcely at all. On the other hand, mining, lumbering and paper enter- prises seem hardly aware that they are venturing " abroad." They seek raw materials where they are. Similarly various " service " enterprises are simply realising upon a market demand created by the spread of American periodical and radio advertising. Most curious is the Inter- national Nickel Company, a museum of business history. It is the leading copper company of Canada and produces most of the world's nickel. It markets this chiefly in the United States. It is American-controlled from a New York office, but the majority of stock interests are in Canada and Great Britain.

The authors treat broader aspects of their problem briefly. The branch factory movement, together with the tariff changes, has notably curtailed probable American exports to Canada. It has hastened the rise of second- ary, as distinct from primary manufacture, making for diversification and non-seasonal employment. It has placed American research at the disposal of Canadian production. In some fields it has intensified competition, thus giving rise to occasional hostility. Most plants, however, identify themselves with local business feeling-as in tariff attitudes. More invest- ment pressure in politics has been felt from London than from New York. Still more broadly it must be clear that Canadian economy is so inter- twined with American that drastic alterations in the former must wait upon the latter. In this connection it must be said that rich in descriptive material as the book is upon business economics, labour policy receives little attention (pp. 239-4I).

While this book is a mine of fascinating information on the structure of modern industry in its relation to national frontiers, the historian must confess to a wish that room had been found for more genetic treatment. The one brief historical chapter is confined to the role of showing that there was reciprocal economic penetration arising as far back as the American Civil War. Possibly forthcoming volumes will deal more amply as well as more readably with developmental aspects, their relation to cycles of prosperity, to cycles of commercial hostility and good feeling, to the industrialisation of the United States, to trade movements, immigra- tion and the interplay of railway strategy. Something of an historical tonic might be of advantage to the disappointing though technically adequate study of balances of payments from 1900-34 embodied in the appendix. The compiler is candid in admitting that his figures show a cumulative error of three billion dollars for the period in favour of Canada. It is to his credit that he has not sought to cover this up by applying questionable and arbitrary corrections. But a discrepancy which averages ten per cent. of total transactions for the period from I914-26 suggests the very great difficulties involved in retrospective quantification of the international economic network. LELAND H. JENKS.

This content downloaded from 128.235.251.160 on Thu, 4 Dec 2014 01:44:20 AMAll use subject to JSTOR Terms and Conditions