Foreign Correspondent: Antiprofits Legislation


Toronto. The policy of the Liberal minority government during the last 18 months had been to present legislation geared towards the New Democratic Party and to allow that legislation to be compromised by the Progressive Conservatives. The final result was a document representing exactly what the Liberals themselves had wanted in the first place.

Of course, the Liberal, Conservative and NDP platforms, in the final analysis, do not differ too greatly. All, in their own degree, tend towards greater government intervention in the economy, welfare statism, and the standard host of government nonsense. The NDP, by far the most socialist of the major parties, has been demanding a program which includes an excess profits tax, stiff price controls, a six percent maximum mortgage interest rate, and a double pricing system for basic domestically produced goods. The Conservatives, what one might call the least socialist of the major parties, have been pressing for an immediate, all-encompassing 90-day wage and price freeze followed by selective controls lasting for 18 months or more. The Liberals fall somewhere in between.

The point is that each of these parties strives to obtain power not because they want to institute any particularly different policy, but rather because they want to institute their own particular brand of the same policy. The Liberals desperately clung to power because that, per se, was what they really wanted.

When the time came for the 1974-75 federal budget to be presented, the Cabinet began to panic. It appeared that Finance Minister John Turner would not include legislation in his budget to meet either NDP or PC demands. So, scant days before the presentation of that budget (April 29, 1974), an incredible bill was presented to the House. Described by the Liberals as tough "anti-profiteering, anti-gouging" legislation, it was clearly a shameless attempt to appease the NDP and to save their government. But worse than that, the bill set an unfortunate precedent. It was the first antiprofits bill to be introduced in peace-time Canada.

The bill was given low priority when first conceived by Consumer Affairs Minister Herb Gray last August. But, by-passing the numerous committee screenings which usually weed out the more glaring inanities, it rocketed to the top. And it smashed right into the ceiling as one of the worst bills the Liberals had presented in their term, even by bureaucratic standards.

The bill was designed to "frighten people into making sure they don't make excess profits or charge excessive prices" (Trudeau). Under an amendment to the Combines Investigations Act (cf: Antitrust), the bill would give the Cabinet the power to declare a "customary" profit level for a certain company, using figures from the company which the Cabinet alone could select. The Cabinet would rely heavily on the advice of numerous price review boards which it would create. If a company were to exceed the "customary" profit level, a 30-day price-freeze or rollback would be ordered and the matter would be passed on to a Trade Practices Commission which would again be set up by the Cabinet. The Commission would hold hearings at which the parties responsible for setting prices would be required to justify those prices. If the Commission decided that the company was indeed earning excess profits, it could:

  1. Order a further rollback or a continuation of the price-freeze for a year or more.
  2. Require the company to refund to its customers any profits earned in excess of the "customary" level since legislation took effect.
  3. Or, if that proved impractical, it could order the companies to pay an equivalent amount to the federal treasury in the form of an excess profits tax.

Failure to comply with the orders of the Commission would result in fines up to $10,000 or jail terms up to two years for the company directors and executives who would be held personally responsible.

The legislation would apply to all levels and types of industry with few exceptions. It would also apply to industries deemed to be withholding products in order to create an artificial shortage. Particular attention would be paid to the natural resource industries.

Both the NDP and the PCs turned the bill down. What is incredible is that the bill was considered at all.

Apparently the Liberals had paid no attention to a tragic little drama which had just taken place in one of the provinces. Four months earlier, Premier Allan Blakeney's NDP in Saskatchewan had been boastfully proclaiming that its sweeping antiprofits energy laws would bring a new prosperity to the province. Until that time, the province and particularly the oil town of Estevan had seemed prosperous enough, in spite of the socialist government. Blakeney then froze the price of oil at $3.47 a barrel, stating that future profits would belong to the public treasury. The price of oil rose to $6.50 a barrel, generating $300 million for the province. The oil companies picked up their rigs and moved elsewhere. And they left behind them, in the prosperous town of Estevan, more than 80 formerly thriving oil service industries facing near bankruptcy. None of these businesses blamed the oil companies. Indeed not.

The federal bill, at its most definitive, could only be impossibly vague and horrifyingly arbitrary. When asked exactly what "profiteering" was Trudeau answered, "That's a good question and there is no simple answer to it." Even David Lewis, leader of the NDP, said that he could not precisely define an excess profit but he has been demanding a tax on it since Parliament convened.

Of course there is no definition for an excess profit since it does not exist. As long as the free market is operating without interference or distortion, all prices and profits must necessarily be held down by competition.

The bill would create a crime without defining what that crime is. It would set no criterion for judging what constitutes excess profits or product hoarding. A businessman would not know whether what he was doing was illegal until after he had done it. Under the bill, the government could arbitrarily fix a "customary" profit level and punish those who dared to exceed it. Numerous price review boards would be set up to "advise" the Cabinet, throwing the gates wide open for favor-granting, discrimination, small-time authoritarianism, graft, bribery, and the myriad other unpleasantries which accompany arbitrary power. Businessmen would be brought before a Trade Practices Commission in which the judges and the prosecution would both represent the same party—the state. In short, the bill would give the government vast, unrestricted discretionary power. There is no shorter route to tyranny.

The only meek voice of reason in the entire business came from Keith Rapsey, president of the Canadian Manufacturers Association which represents 75 percent of Canadian manufacturers, and from John E. King, vice-president of Texaco Canada and president of the 125,000 member Canadian Chamber of Commerce. I say meek because both men are apologists for capitalism. In other words, they grant the state the right to such power in the first place and then attempt to persuade the state that "now" is not the time to use that power. That, in effect, is the voice of Canadian business.

At any rate, the bill was defeated and about a week later so was the Liberal minority government. Shortly after the defeat of the bill, Robert Stanfield, leader of the PC's, declared that he did not expect to see the bill again. Unfortunately, I cannot agree. Depending on the outcome of the July election, we have only to wait and see how soon the bill will reappear in a different guise.