Chapter Three
A Curious Lack of Proportion: Canadian Business and the War

Robert Bothwell

Old traditions die hard. One of the founding myths of the Canadian Liberal party proclaims it the party of the common man, the support of the lower middle class and the defender of the backwoods against the twin millstones of capital and labor. It was and is a potent myth, and never more so than during the long leadership of William Lyon Mackenzie King. King feared and abhorred the spectre of class conflict, and liked to picture himself as the great compromiser of economic and political differences--a role that he played with unusual skill for most of his forty years in politics.

King was not a universally beloved figure, but a contemplation of his career almost persuades the historian that he selected his enemies, personal and symbolic, with great care and uncanny skill. Among the personalities were numbered Arthur Meighen, the Bay Street prophet, and Lord Bennett, whose bloated features were lovingly reproduced by a generation of Liberal cartoonists as the epitome of Tory capitalism. Meighen and Bennett and their ilk represented for King and the Liberal party the forces of darkness against which good Liberals were locked in perpetual struggle, pitted against the infernal legions of Bay Street, Saint James Street and the Winnipeg Grain Exchange.

It came as a great shock to the forces of good and evil when they discovered that a malign fate had united them in a common war effort against Hitler. Mackenzie King was a reluctant convert to the policy of enlisting business aid for government. It was a deplorable necessity, rendered all the more difficult because the platoons of businessmen who came to work in Ottawa as "dollar-a-year-men" were most of them Tories and as such sworn enemies of the King government.

By the end of the war notions of proper Liberal-business relations had suffered a sea change. C.D. Howe, the Minister of Munitions and Supply, wrote of Ottawa's business helpers as "great Canadians" and contributed to a volume celebrating their achievements, Canadian Strength. The businessmen, in their turn, regarded their wartime service as a useful and prideful experience, proof positive that businessmen and business had done their patriotic duty and more between 1939 and 1945. And, they reluctantly conceded, it was under a Liberal Government. The only sour note was struck by Prime Minister King. After scrutinizing Canadian Strength one evening at home, he confided to his diary that there was "a curious lack of proportion" in describing Canadian businessmen as pillars of the nation. "It is rather surprising, "King wrote, "that any colleague should indicate that from his point of view Canadian strength was composed primarily of the heads of large corporations who, though nominally receiving a dollar a year from the government, continued to draw their large salaries from corporations. Large salaries," King added, "which they were accustomed to receive".¹

King saw large salaries, and the dollar-a-year men saw large productions; King fantasized about undue rewards, and they remembered full employment, overflowing order books and a quantum leap in industrial productivity. But King expressed a lingering resentment of business and it was heartily reciprocated. What galled him most was the obvious affection

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that parts of his government and the business community cherished for one and other. "I only met King once," one war executive--ordinarily a corporation lawyer--later recalled. It was not an impressive occasion, for the Prime Minister, with his eye always on the future, wanted to talk about wills and perhaps secure some free legal advice. "I never had any use for the man," then or later, the executive concluded. But King would soon be gone, and his legacy, to his great distress, would be a party and a government linked with business by interest, experience and preference.

To begin at the beginning, in 1939, Canadian business was not organized for war. It was hardly organized for anything, but it had large aspirations. The approach of war had not gone unnoticed in Canada, and Canadian businessmen were eager, after a decade of depression, scenting a bonanza of war orders. As in 1914, London, not Ottawa, was the focus of their desires.

Ottawa approved. The government perched precariously on a political precipice, hardly daring to stir. There was no money to spend, and overt preparations for war sat badly with public opinion, especially in French Canada. While most members of the King cabinet might be reconciled to the inevitability of conflict, their constituents were not. Nor was the Canadian exchequer, which viewed war as a calamity beyond the country's financial capacity to endure. When war finally broke out, financial considerations remained upper most, producing what C.P. Stacey has aptly styled, "the Reign of the Dollar".²

The dollar reigned, unhappily and uneasily, on both sides of the Atlantic. Both governments shuffled uneasily passing responsibility back and forth between them. The Canadian government expected the British to take the lead in establishing a Canadian military supply system: as Mackenzie King informed a delegation of Canadian manufacturers in June 1939, British orders were highly desirable. And, as he might have added, the British had the know-how and plans for using it. But a few educational orders apart, the British were uncertain both of what they wanted, and of what they could afford. As one British supply official wrote, when the war was six weeks old, "there will have to be great expansion of our orders there, but at the moment it is difficult to give decisions" until Britain's own supply concerns were properly formulated.³ The sterility of Canada's war production policy was, outside Ottawa, blamed on the government. Canadian business in relationship to war, for the first nine months of the conflict, was therefore less than fulfilling. Business grumbling, naturally pronounced, reached a crescendo at the turn of the year. It became fashionable to denounce Mackenzie King and the Liberals for their "do-little" attitude to the war effort. Typical was the resolution of the Ontario legislature, in January 1940, deploring King's failure "to prosecute Canada's duty in the war in the vigorous manner the people of Canada desire to see". Doubtless the authors of the resolution did not expect the consequences that followed: the dissolution of Parliament and King's stunning victory in the general election that followed. That King could be decisive about anything came as a severe shock.

There were several losers in the 1940 general election. First and foremost there was the Conservative party, which for the duration of the war could never summon from its own resources enough strength, or from its leadership enough wit, to displace the entrenched Liberals. But the elements that the Conservatives represented did not go away. The business community may not have thrilled to the oratory of Dr. Manion, the erstwhile Conservative leader, and in many cases had rejoiced in Manion's defeat; but it liked Mackenzie King no better. Under the circumstances it was fruitless to talk of a Conservative administration as a

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feasible possibility, but it was not beyond business' political imagination to conceive of a coalition, or "national" government.

Proof of the need for political change, beyond what the electorate prescribed, was found in Canada's sluggish war production. That was still dependent on British orders, for the Canadian military hardly dared to transgress Treasury restrictions and order on its own. Even if it had, it would not have known what to order, where it could be produced, or how. The King government's War Supply Board did what it could--which was little enough, because the Board was hamstrung by internal disputes and obsolete financial procedures. British representatives in Ottawa wrung their hands at their inability to prise orders from the home government, while suspicions mounted among their Canadian hosts that there would be no new orders in Canada. As one of the British supply mission helpfully explained to a Canadian Senator, even Britain "could not maintain her munitions industry in full operation unless there was fighting on the western front. England," he added, "was filled up with shells, bombs and so on."⁴

The only initiative within the King government's control was to shake up the War Supply Board in April 1940. Its chairman was sent packing, and a new civilian department, Munitions and Supply, established under the direction of the Minister of Transport, C.D. Howe. Howe had a reputation for being "quick in making decisions"⁵ and decisions were what the public wanted. Howe could, and did, make decisions about reorganizing munitions purchasing. The hierarchy of the War Supply Board was abolished, and with it most of the Board's cumbersome financial regulations. Instead, Howe established a departmental Executive Committee (a procedure borrowed from corporate life rather than government) whose members, individually and collectively, were given extensive authority to straighten out Canada's production for war.6

Howe's appointment was not received with great enthusiasm outside Ottawa, and the succeeding months did not improve his standing. Canada's leading business newspaper, the Financial Post, was disappointed. What Canada needed was an "industrial statesman", not another politician. The commander-in-chief of Canada's industrial army, the Post told its readers, "should not be the political head of a department." While Howe might stay on as minister, what he and the country needed was "a Sir Joseph Flavelle"--the Toronto businessman who had run munitions production during the First World War. Flavelle was dead, regrettably, but surely there was someone waiting to fill his shoes. Whatever Howe's qualities, the Post decided, he was "No Superman."⁷

Howe's position improved during the summer, as Britain's deteriorated. The defeat of the allied armies in France, with the consequent loss of their equipment, transformed Britain's supply situation. To meet the new scarcity, Howe place orders wherever he could, relying on probability rather than certainty. Where production capacity was lacking, it would be created; where vital parts were deficient, they would be imported from the United States. The reign of the dollar was definitely over. In the months after June 1940 Howe and his agents had carte blanche to spend as they liked. As Howe reasoned, "we have no idea of the cost, but before the war is over everything will be needed so let's go ahead anyway. If we lose the war nothing will matter.... If we win the war the cost will still have been of no consequence and will have been forgotten."⁸

In the ensuing bustle, the British supply mission was quietly wound up and its functions transferred to Howe's department. The Americans also agreed to place their Canadian

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war orders only with Howe. Overnight, Munitions and Supply became Canada's largest wholesale and retail enterprise. Henceforth there would be only one central supply agency, with one executive head: Howe.

Canada's late start in war production inevitably entailed difficulties for Howe and his administrators. There was no time to consider production programs in detail. No-one could hope to know when production would actually come on stream--merely that a commitment to production must be made, often orally, and ratified with government dollars. When the key decisions were made--in mid-June--details, blueprints and specifications for most of Canada's intended production were lacking and, as we shall see, production skills were scarcer still. Even where a previous agreement existed, as in the provision of aircraft for pilot training, the American minister reported that the British could not provide what they had promised. "Hundreds of planes... promised by Britain were not delivered," the American Minister reported at the beginning of August. The manufacture of training aircraft was added to Munitions and Supply's load.⁹

To meet the crisis, Howe's executive committee recommended the creation of crown corporations to fill gaps in Canada's supply and production. Crown money and authority would be needed to short-cut dangerous bottlenecks in meeting short-term crises in rubber, machine tools and silk. By the end of the summer there were five crown companies (two of them in secret) at work. Establishing such companies outside the regular civil service allowed decentralization of head offices, thereby relieving congestion in Ottawa, and permitted business recruits to government to work in a more familiar and congenial atmosphere than the bureaucracy would have furnished. But the executive committee added a warning. Private companies were inherently more efficient, in its opinion, than government bodies. "We believe," they informed Howe, "it is safe to sy that under the auspices of private capital the time factor will be considerably reduced."¹⁰ Howe did not disagree. The dominating consideration in determining the character and form of Canada's industrial war effort, therefore, was less the expansion of government than the assimilation of the practices of private industry to the war effort.

If the adoption of techniques borrowed from private enterprise added verve and drive to Canada's war production, so much the better, Howe reasoned. But it was not an unalloyed blessing. Canadian business was, after all, recovering from years of depression and underproduction. Executive and technical skills were deficient, where they existed at all.

Howe started at the top. There, fortunately, there was no shortage, and by June 1940 Howe had made his initial selection of advisers. The most important were Munitions and Supply's executive committee, consisting of R.A.C. Henry, Henry Borden, Gordon Scott and E.P. Taylor. Henry, Borden and Scott were holdovers from the old War Supply Board, which had stifled their talents; Taylor was appointed later on Borden's advice. As a group, their connections stretched across the country, Henry is with Montreal business and the CNR (and the CNR obligingly furnished the backbone of Munitions' supply purchasing organization), Scott is with the Montreal financial community and the Quebec government, Borden and Taylor are with Toronto business and corporate law.

Relying on their advice, Howe began to stock his department and crown corporations with executives, accountants and lawyers from across the country. The selection was revealing. Borden, the department's counsel, naturally took a primary role in the selection of lawyers,

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whose background not surprisingly reflected one or another facet of Borden's own heritage: Dalhousie Law School, Toronto business, or the conservative party. Borden's selections were good men who performed well; so well that they were not replaced until after the war when the suspicion dawned on the government that many of the local lawyers for Howe's departments were the backbone of the Conservative party.

Howe quickly learned one useful lesson in administration. Many of his recruits were used to the limelight, if not on the national scale than at least inside their own companies. Prima donnas by temperament, they preferred to establish a direct feudal relationship with their Minister, who rewarded them with extensive powers and titles. On every side directors-general bloomed and controllers preened themselves; more directors were downcast about their relative lack of status. For a few months, Ottawa became a miniature laboratory for Weberian experiments in creative bureaucracy. Howe went one better than most Ministers. On the side he kept a close eye on the civilian honors that a democratic society still permitted its government to dispense: these were handed out to the deserving in suitable periodic dollops. Relying on Howe's authority, the dollar-a-year men achieved an expansive administrative style. There were few, if any, who could contradict them, and they had a whole country at their disposal.

Liberal politicians were naturally disgruntled. Pierre Casgrain, the Secretary of State, took his grievances to Norman Lambert, the chief Liberal organizer, in the fall of 1940: "contracts in Que. from Munitions & Supply," the Minister averred, were "all going to English Tory firms." Howe might have observed that business in Quebec was made up of "English Tory firms", but that was a regrettable fact of life. In response to another Quebec Minister's complaints Howe was adamant:" even if they were supporters of Duplessis nothing can be done on that score.¹¹ In any case, complaints of discrimination faded quickly as war production expanded to include all available manufacturing capacity. Liberal or Conservative, businessmen had no cause for complaint: everything they had to offer, and more, was contracted to the war effort.

It proved, in the long run, politically advantageous to demonstrate to sceptical Tories that the Liberal government could run what one reporter described as "a graftless war." The absence of political preference and preferment cemented the loyalty of Howe's executives to the war effort and to their political leader; it helped them accept that their temporary masters were still civilian politicians and shook their allegiances, for war purposes out of their old partisan grooves. Once displaced they were never fully restored.¹²

Purity was all very well, but efficiency was another highly approved business value. Could Howe, a mere consulting engineer, hope to run such a complicated department as Munitions and Supply by himself? Many, especially in Toronto, thought not. Surely he would crack under the strain. The Financial post depicted Munitions and Supply as a thirty-ring circus with Howe as principal ringmaster. Fair words, and the phrase was appealing: with so much going on in Ottawa, so fast, it was difficult to imagine that one man could possibly master it all. So it proved, contracts lagged behind authorizations, and manufacturing specifications behind contracts. Comprehensive statistics trailed them all. The Minister, meanwhile, traveled every other week to new York and Washington to shore up crucial contracts and open communications with American finance and government. He was rewarded--but the rewards were slow. In what time remained, Howe's attention was perforce concentrated on a few key issues; the rest was left to subordinates.¹³ That was good, if risky, management: but under the circumstances there was no alternative.

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Starting up thirty new programs, "making the thunder roll and the lightning play," as one participant called it, was exhilarating. It was also expensive and necessarily time- consuming, as executives and technicians tumbled with their assigned tasks. Later, only the accomplishments would be recalled. At the time, however, it seemed that one fumble followed another in an apparently endless succession. Press reports from the fall of 1940 took a decidedly unfavorable tone, and they mirrored real difficulties, problems that could not be solved within the mental deadline that press and politicians allowed between the breaking of ground and the triumphant christening of the first ship, gun or tank. For most of the participants, it was a challenging and ultimately enlightening education in modern industrial strategy--one that would eventually work out. For a minority, it proved that the King government and Howe, its chosen instrument, were incapable of the proper direction of Canada's economic war effort.

The Timber Controller, H.R. MacMillan, voiced the minority opinion. A British Columbia lumber millionaire, MacMillan was accustomed to taking his own decisions; he knew from experience that they were mostly right. Howe, he believed, could not; nor could Mackenzie King and his ramshackle Liberal government. In searching out corroboration for his assessment of King and company, MacMillan lent a ready ear to critics of King's policies. Men such as Ontario's Premier Mitchell Hepburn soon found that they had an appreciative audience in Ottawa's Timber Controller. Returning from one trip to Toronto to seek enlightenment from Hepburn, MacMillan confidently predicted a short and wretched future for Mackenzie King. In so saying, MacMillan was probably uttering the common currency of business political attitudes--and anti-Liberal opinion outside of Ottawa.

MacMillan singled out his own department, Munitions and Supply, as the focus for his criticism of the government. Bungling and disorganized, staffed by the wrong people, wasting public funds, Munitions and Supply required a businesslike reorganization. With its faint echo of the "business government" propaganda of the National Government movement of the thirties, MacMillan's critique opened up a dangerous line of political attack on the government's position. If one of its major programs and one of its principal figures could be demolished or crippled by charges of "un-businesslike" activities, the government would be obliged to come to terms with its critics, and would lose its freedom of action in running economic policy.

MacMillan's activities reached a crescendo in the winter of 1940-1941. Howe was absent for most of December and January, attending to munition business in England, while the acting minister, Angus Macdonald, was preoccupied with his full-time job of running the navy. MacMillan was appointed chairman of a special commission, the Wartime Requirements Board, whose task was to investigate and rate the conduct of Canada's industrial war effort. While chairing the Board, MacMillan felt free to let the press in on what he was finding, and the result was a barrage of press criticism of the failures of Munitions and Supply's supposedly lagging production program. Meanwhile MacMillan embodied his findings in a report which he imagined would blast Howe out of the direction of Munitions and Supply, and propel himself into the job of head of production.

The affection of the press is at best a doubtful political asset. Those who bask in the warm light of favorable publicity risk alienating their less fortunate colleagues whose efforts go unnoticed or, worse yet, are criticized by comparison. Self-glorification, as MacMillan should have known, is next door to self-deception. There was little support from the other businessmen-turned-administrators inside Munitions and Supply. The glazed expressions on the faces of MacMillan's fellow controllers as they listened to his endless discourses masked real

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concern and then outright anger. For them, MacMillan's criticisms bespoke the bystander rather than the responsible administrator. MacMillan, one of Howe's controllers wrote in February 1941, "soon found that he could not, by a wave of the hand, create ideal conditions in all things and grew dissatisfied, and had an alibi that he was only an adviser and not an executive."¹⁴

Isolated from his peers, daily incurring the wrath of the cabinet, MacMillan placed himself in an untenable position by the time Howe returned to take up the reins of his department. Howe was furious at MacMillan's conduct, and expressed himself on the subject at some length. But rather than seek a head-on confrontation with his errant subordinate, Howe chose to encircle him and further isolate him in the eyes of the cabinet and the press. Even MacMillan's most fervent Cabinet sponsor, J.L. llsley, had lost his enthusiasm and, one reporter claimed, had grown to dislike him "very much because he believes him to be a tory and a national government man."¹⁵ Believing that his position was fundamentally sound, and that war production would appear in time to save the government's credibility, Howe publicly turned on MacMillan, tabling his report in the House of Commons while professing to believe that no loyal public servant could possibly have said the things attributed to MacMillan and remained in the employ of the crown. MacMillan had not resigned, ergo he could not possibly have been disloyal.

Speaking to Defence Minister Ralston, Howe observed that he now had MacMillan exactly where he wanted him. "You know why I published his report," Howe told his colleague. "I did it to ruin him and I think I did a pretty fair job of it."¹⁶

Macmillan's fall was spectacular. From an aspirant to the job of Canada's industrial czar, he descended quickly to building merchant ships from his new headquarters in Montreal, safely removed from the heady atmosphere of political Ottawa. Having learned through experience to appreciate Howe's political talents, MacMillan forgave and forgot. Howe, he told a Vancouver audience after the war was an "organizing genius", nothing less than "the greatest organizer Canada has ever seen."¹⁷ He did not mention that one of Howe's greatest feats of organization was organizing his own departure.

Unsurprisingly, given the sequence of events, MacMillan left by himself. His was the only serious challenge to the political direction of the war economy, and he made it alone. His failure is revealing. He failed to enlist any of his peers among the dollar-a-year men. Their respect and trust were already committed--to C.D. Howe. More knowledgeable in the ways of business than MacMillan, and more attuned than he was to the problems of starting up production where none had existed before, they rejected his sweeping claims that a good businessman could do the job better. To the mind of Howe's executives, such a person either did not exist, or could do no better than what they already had.

And just as MacMillan departed, production started to come on stream. By November 1941 Canada had produced 3,749 aircraft; in 1942 it would produce 3,811 more, and in 1943 would add another 4,133 to the total. MacMillan himself added to the total: tonnage of cargo vessels rose from 800, in 1942, to 1½ million in 1943. It was, all told, a notable achievement, and it was reflected in the sums of capital employed in Canadian factories. In 1939, that totaled roughly $3.65 billion; by 1943 it was $6.3 billion--an injection of over $2½ billion in under four years. It was small wonder that Howe later decided that the Canadian economy needed little in the way of reconstruction after the war, at least not in the investment line.

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The magnitude of Howe's program was its best political defence. There was so much, and the opposition knew so little. Disputes there were and would always be, within the precincts of Howe's department: but they were seldom taken outside for an airing. Even when they were, they were quickly squelched. And the Opposition was less tempted to take the initiative because so many of its own dwelt happily within the enemy citadel.

The official political opposition, deprived of its normal business alliances, found it best to hew to a "constructive" line in handling war production questions. Today's bureaucrat, after all, was yesterday's contributor--and tomorrow's. The presence of friends and party supporters among the dollar-a-year men encouraged Conservatives in Parliament to constitute themselves as government auxiliaries in the flight against defeatism and rumour-mongering. In May 1943 the leader of the Opposition, Gordon Graydon, even intimated to Howe that he would co-operate "to the fullest extent" in suppressing and contradicting unfounded rumours about Munitions and Supply's activities. For Howe, the transition from goat to sacred cow was smooth and swift.¹⁸

The positive reaction of the "dollar-a-year men" to their wartime service, therefore, helped to de-claw the opposition. It also reinforced the Liberal government. But the simple absence of overt conflict is not enough to explain what happened inside Canadian business nor do aggregate totals of investment and production reveal what was going on inside the industrial system. For that, we must become more specific.

The hot-house growth of Canadian industry did more than reproduce what had existed in 1939 on a grandiose scale. Visitors to Canadian factories at the beginning of the war remarked on the under-utilized and illequipped facilities, with their short runs of often shoddy products. There was no point in retooling, their hosts explained: there was no market that could justify the expenditure. Except for the automobile factories and the railway shops, there were few modern factories worthy of the name. "I reached the conclusion," one British inspector reported, "that existing machine tool facilities in Canada were definitely inferior to those in prewar England. With the exception of the more prominent general engineering firms, all the equipment was of a greater age, not equal in relative condition, and the modern type of machine tool was conspicuous by its absence." Indeed, most of the facilities listed as engineering works proved on inspection to be only "slightly superior to the garage type of shop situated in the country districts."¹⁹

Reconversion to war production from such a base was often shockingly expensive, especially in the view of the British Treasury, which footed most of the initial bill, but it did have its bright side. Little that was obsolete had to be retained, for there was little to begin with. Archaic work habits were no problem, for there had recently been so little work done; and the hand-to-mouth conditions of the thirties bred ingenuity and adaptability in shop managers and their mechanics.

They needed to be adaptable. Canada was expected to produce weapons to British design, using British Specifications. Originally, British tools and materials would have been used as well, but because so few factories were established before the fall of France and the subsequent suspension of British deliveries, it was necessary to turn to the only other source of supply available: the United States. Howe's Citadel Merchandising crown corporation assumed the responsibility for ordering and assigning scarce machine tools for war factories. Once the tools arrived, local managers and engineers laboured to convert the American tools to fit British

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lines, and to refashion British production specifications and schedules to meet new Canadian conditions.

Frictions often developed. In the CPR shops in Winnipeg, management was indignant at the behaviour of a British production expert who was so scrupulous of the use to which British "specs" were put that at the close of work every day he rolled up his documents and took them back to his hotel, where they were carefully stuffed under a mattress until duty called the next morning. Complaints about the concealment of specs gave way to complaints about the specs themselves. "In one Canadian plant," the Financial Post reported in June 1942, "an important war weapon is being produced in 30% of the man-hours required for its production in Britain." In another case, production time and cost were reduced by half. Of course, the Post piously concluded, "this represents no criticism of British industry."²⁰ At the very least, however, it bespoke a self-confidence verging on bumptiousness. Canadian industry had reached the dawn of emancipation, but with help from a friend.

Much of the improvement in Canadian production did not depend on local initiative, but on design and management techniques borrowed directly from American industry. Local initiative could not fill large orders. A case in point was Sorel Industries Limited, owned by the Simard Brothers. Sorel Industries received, before the outbreak of war, an educational contract from the British government for the production of one hundred twenty-five pounders and two hundred carriages. The British committed L 1,000,000 to the enterprise, and the French armaments firm of Schneider-Creusot agreed to provide French-speaking technicians from its own factories. Everything went smoothly until the fall of France. The French technicians decided to return home, and the whole project (which had yet to produce a single gun) faced derailment. The Simards appealed to Ottawa for help. Howe immediately agreed to do whatever was necessary to salvage the plant, including a matching grant of $5,000,000 the despatch of one of his own staff to become general manager, and an immediate increase in production targets from eight to seventy-five "equipments" per month. Sorel Industries advanced in a stroke from a virtual cottage industry (though at a high technical level) to a massproduction factory.

Howe's last condition was too ambitious for the resources of Sorel Industries. Before the end of 1940 the Simards were back in Ottawa asking for more help to relieve an intolerable strain on their overworked executives. Howe had established a control committee to oversee Sorel's affairs, including J. Edouard Simard, and the committee decided to appeal for outside help. What they wanted, a committee member afterwards wrote, was "competent managerial assistance". Their preferred source was Chrysler Corporation, whose American President as well as the President of Chrysler of Canada responded quickly and favourably. One of the Vice- Presidents of the American corporation was dispatched to Sorel and "given full charge with instructions to put the plant on a production basis as rapidly as possible."

The new manager, Ledyard Mitchell, undertook large operations like Sorel. Before long, "the factory began to function as a whole" and in the spring of 1941 the first complete twenty-five pounder rolled off the production line--almost two years after the start of construction. There was no problem with the production of guns--that was a matter of training and technique, with a bit of personnel management thrown in. But to produce seventy-five or more guns a month was an organizational problem, and one that could not be solved with Sorel's existing resources. The solution, Mitchell told his executives, was one that was tried and true in the automobile industry: sub-contracting.

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Chrysler's existing sub-contracting practices were directly applied to the problem of producing guns. Sorel hired platoons of accountants and engineers to supervise its new programs and, after the usual teething troubles, the scheme worked smoothly. At its peak, Sorel's sub-contracting empire involved sixty or seventy firms, working smoothly under newly- trained executives left in place by the Chrysler management.²¹

What had worked at Sorel was duplicated throughout Canadian war industry. Howe speedily grasped what was at stake, as did his production chief, Harry Carmichael, who was himself a product of the automobile industry, a Vice-President of General Motors of Canada. Munitions and Supply now applied what Chrysler had learned to the whole of Canada. Adapting sub-contracting to a situation where any business establishment of any size was already producing for the government, Carmichael found a use for the scores of minor factories that the British had despairingly rated little better than garages back in 1939. Howe called it the "bits and pieces" program, explaining to a puzzled House of Commons that it worked on the principle of a jig-saw puzzle.²²

Howe's appreciation of Carmichael soared. Originally imported to Munitions and Supply by H.R. MacMillan, Carmichael stayed on when MacMillan left. Howe used him to plug a painful gap in his production branch where one of his less successful appointees, W.F. Drysdale, had embroiled himself with his own staff and peers. The problem with Drysdale, Howe learned, was that his experience was that of a branch plant president: good at implementing but not initiating. Drysdale was packed off to a quieter job, and Carmichael took his place.²³

Drysdale's case was not uncommon. Much of Canadian industry was foreign-owned, and foreign-managed. It provided jobs, but furnished scant opportunities for executives and central office employees. Often enough, designs and decisions were centralized at an alien head office from which it sometimes proved difficult to extract them. Even a company like Canadian Industries Limited, a technically proficient and prosperous firm, was hamstrung by its arrangements with its British and American parents, who forbade it to compete with them in export markets. The results were most apparent at the beginning of the war, when the relative underdevelopment of design and drafting proved a considerable handicap in the commencement of production. The existence of this initial handicap may partially explain the attention and concentration given crown companies like Research Enterprises Limited or Polymer. As one observer commented, without Research Enterprises, "the armament equipment and other productions would have been 'lopsided', where as its existence has enabled Canada to complete all the requirements for any equipment."²⁴ As a result, Canadian business developed scientific and engineering skills undreamt-of during the depression.

The incentives offered industry by government to co-operate in the war effort were largely "positive"--and business showed a distinct, natural and sensible preference for the carrot over the stick. The King government, and the Minister of Munitions and Supply, realized that public opinion demanded not merely the absence of political patronage and corruption, but the elimination of excess profit altogether. Aided by an exceptional staff of corporation lawyers, Henry Borden devised a system of contracts that managed to be flexible enough to allow for unforeseen disasters while siphoning away any profit of more than 10 per cent of cost. Howe's staff of accountants took care of the rest, scrutinizing and comparing the accounts and efficiency of factories from one end of the country to the other. Behind them lurked the minister's emergency powers to intervene in the management of any company that had failed,

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for one reason or another, to meet Ottawa's expectations.²⁵

Examples of coercion were well-publicized, but remained rare enough to serve as a salutary warning, rather than an oppressive burden. Howe preferred to confine his interventions in private companies to instances where there was real evidence of financial misconduct, or where continuity of operational management was endangered. The most spectacular example was the National Steel Car Company plant at Malton, Ontario. That company had accumulated a bad record in the eyes of the government, which regarded it as extravagant, inefficient and cursed with chronically bad labour relations.²⁶ The Malton plant became Victory Aircraft, and for the rest of the war it produced bombers directly for the government.

There can be little doubt that business came to enjoy and appreciate its absorption into a comprehensive government control of the economy. As we have seen, individuals working for the government in Ottawa soon shed most of the antigovernmental and anti-political prejudices that has characterized business political attitudes in the 1930s. The same could be said of the entities they represented, and the owners and managers they left behind them in the private sector. In order to guarantee production, it had become necessary to ensure supply; once supply was certain, transportation and power had to be secured. Above all, there was an assured market. Confronted with such an array of temptations, it is small wonder that Canadian businessmen, relieved of the ordinary worries of private enterprise, abandoned some of their mistrust of federal power--even to the extent of abandoning older allegiances to the provincial governments that had previously sheltered them. Even Sir James Dunn, the baron of Algoma Steel, was moved to write in August 1944 that he was "strongly in favour of continuing Steel Control when the war is over as far into the future as I can see."²⁷

There were many who, in 1944 and 1945, would have agreed wholeheartedly with Dunn. The spectrum extended from the CCF on the respectable left all the way to the large corporations which dreaded the end of the war and craved the security the government gave them--"the security brigade" as Howe scornfully dubbed them. It was only with the aid of large incentives, backed by his remaining controls, that Howe propelled much of Canadian business outward, into the world of private enterprise where it ostensibly longed to be. That, it should be stressed, was a political decision, and one unsought by the forces of private enterprise who, on another part of the front, were mobilizing themselves for George Drew's climactic struggle against communism, socialism and the CCF.

Business was grateful--grateful enough to give the government no serious problems as the complicated machinery of war controls wound itself down during 1944 and 1945. It was not, however, so overwhelmed with admiration as to accept uncomplainingly the perpetuation of the King government in power.

Much of this essay has focused on the peculiar relationship between Canada's wartime business executives and their Minister, C.D. Howe. That relationship was, as legend and fact tell us, highly congenial and successful. Part of the success derived from shared attitudes and values--values that Howe, a good late Victorian Liberal free trader and free enterpriser, never seriously questioned in their abstract. That Howe and his "boys" talked the same language, in and out of the office, that they enjoyed fishing and golfing and playing cards together (however ineptly), these were distinct socializing advantages. They were advantages that were not shared by most other members of the cabinet and in particular they were missing from the Prime Minister's repertoire of social graces.

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Congeniality, which may explain Howe's ready acceptance by his executives, is hardly a sufficient explanation for the respect his authority commanded. Nothing succeeded like success, of course, and success on the level of billions of dollars has a compelling logic all its own. But organizational and political factors cannot be ignored. Howe inherited Munitions and Supply (the act was drafted months before he ever dreamed of becoming its minister), but he defended both his department with great tenacity and great tactical political skill. E.P. Taylor, who worked with the Americans and for the British, had no hesitation in selecting Canada's war supply organization as tops. "The Canadian plan of a single supply department," he told a reporter, "having also the power to restrict production of civilian goods, is by long odds the best of all." A single department under a single Minister, largely independent of domestic political constraints, whether from colleagues or from opponents, permitted a concentration and alliance of political and economic power unique in Canada's history.²⁸

It is beyond the scope of this essay to trace the post-war legacy of business's rapprochement with the Canadian state, except to note that there was remarkable continuity of personnel and policy for over a decade after the war. The legend or the reality of the "dollar-ayear men", Howe's boys as they proudly called themselves, influenced the next generation of Canadian businessmen. Old associations and old habits died hard--but not as hard as the legend that the Liberal party and Canadian business did not and could not mix. That rumour, Howe's boys knew, was greatly exaggerated.

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