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By Harold A. Innis

Canadian Forum, March, 1929

The daily press has always taken the keenest interest in the price of newsprint, and the negotiations of the past few weeks have been chronicled in detail and in headlines with little interruption. Unfortunately these negotiations are but ripples on the surface of certain broader movements, and the compromise which has been reached is a matter of temporary adjustment. An appreciation of the strength and direction of these movements is essential to an understanding of the character of the present impasse and of future adjustments.

Of first importance is the trend of modern industrialism. In their earliest stages, the production of mechanical pulp and of sulphite pulp, which are required roughly in the proportion of three to one for the manufacture of newsprint, are processes requiring heavy investments of capital. With the tendency to bring all stages of production under the control of one plant, large-scale operations involving the use of heavy machinery and large quantities of capital have become increasingly the rule. The efficiency of large-scale industry in the manufacture of newsprint is conspicuous. For production on a large scale, enormous reserves of raw material, especially pulpwood, of plant and equipment, of fresh water, and, above all, of power, are indispensable. Cheap transportation of the bulky raw material and of the finished product is of crucial importance. The organization for cutting, transporting, and storing the pulpwood; the capital investment in cement dams, electric generators, and transmission lines; and the manufacturing plant with its mechanical equipment, its sulphite plant, and its newsprint machines, involve stupendous outlays of capital, heavy fixed charges and overhead, and an overwhelming drive for continuous operation. Plants which have access to large sums of capital, and are in a position to acquire extensive pulp limits, and to purchase more expensive property in thickly-settled areas, and consequently secure the advantages of larger quantities of power, cheaper water and land transportation and labour have obvious strategic advantages. The International mill at Three Rivers, with the largest newsprint plant in the world, and the same Company’s plant on the Gatineau, with one of the world’s largest electrical developments, are examples of the manner in which these numerous advantages are capitalized. With a command of engineering skill and capital, the International has entrenched itself in key positions. For this Company, capacity production is of vital consequence, and the contract with the Hearst interests was inevitable as a guarantee of continuous operation. An appreciation of the position of International is fundamental to an understanding of the problem. The position of the newsprint publishers is of almost equal importance. The demand of the Hearst interests for mass supplies of newsprint places them in a strategic position in bargaining for low prices. Mass production of newspapers involves precisely similar problems to mass production of newsprint. Overhead costs are of predominant importance. The price of newsprint determined in the contract between the Hearst interests and the International ($50.00 per ton) was a result of the importance of overhead.

At this point disturbing factors appear. The press insists that all publishers shall be treated on terms of equality and its power with the public is not to be questioned. The Hearst interests are entitled to no advantages over other publishers. But the newsprint companies which have operating plants less advantageously located and with higher costs are not in a position to accept the demands of the publishers that the low price of the Hearst contract shall prevail. The more powerful, larger, and more strategically located of the smaller mills may acquire a larger share of the newsprint market, and operate at capacity and at lower costs. The smaller, more inefficient, and high cost mills are obliged to be satisfied with the remnants of the market and to accept the low price governing the transactions of the large plants. With a decline in consumption of newsprint or an increase in production beyond the immediate capacity of the market, these mills may be forced to close down. But a small newsprint mill is a large undertaking and involves the employment of a large number of employees, the maintenance of small towns and of settlers in the neighbouring districts. Since the smaller mills are located in scarcely settled areas, the closing down of the plants becomes a local calamity.

The solution to the problem for the present involves a higher price for newsprint, which will permit a larger profit for International and will enable the smaller mills to continue operations. If the higher price is not responsible for a falling off in consumption, Canadians will be able to acquire larger profits at the expense of advertisers and consumers, chiefly of the larger American cities. On the other hand, Canadian pulpwood is more rapidly exploited. But fortunately, or unfortunately, a higher price will probably be responsible for a falling off in consumption. The newsprint market is a buyer’s market. The net results in any case are continuous operation for the larger mills, the consumption of their timber reserves, employment of labour in the industrial centres and discontinuous operation for smaller mills, conservation of timber reserves and unemployment in the newly-settled districts. Since the mass-production mills are located chiefly in Quebec, the settler of the Province of Ontario is in an unfortunate position.

But the question obviously cannot be settled on the grounds of provincial interests. The interests of Canada are at stake, with the result that we lose when the mills are operating at capacity, from the exhaustion of our resources; and when the inefficient mills are closed, with the burdens imposed on the settler. No definite progress can be made until the provinces decide on a policy which will enable them to control a situation which is now obviously beyond control. Confederation and the placing of the mines and forests in the hands of the provinces may be the occasion for the loss of our resources. Some united and definite policy on the part of the provinces, with conservation and settlement as essentials, is imperative.

TRANSCRIBER NOTES

Misspelled words and printer errors have been corrected. Where multiple spellings occur, majority use has been employed.

Punctuation has been maintained except where obvious printer errors occur.

A cover which is placed in the public domain was created for this ebook.

[The end of The Newsprint Dilemma, by Harold. A. Innis]