The pulp and paper industry has fallen on evil days since 1929. It is still our largest manufacturing industry both in value of output and amount of payroll, and still ranks second only to wheat among the export staples on which our economic life is built: in the calendar year 1934, wheat provided just over 20 per cent, of the value of our exports; pulp and paper, 17¼ per cent, a gain of 4¼ per cent, since 1930. Unhappily it is also second only to wheat in the calamities which have overtaken it. In 1933, its salary payments were barely 68 per cent, of the pre-depression figure, its wage bill not quite 50 per cent., its bond and debenture interest payments less than 15 per cent., its dividends about 9 per cent. Mr. C. P. Fell, in his valuable chapter in The Canadian Economy and its Problems, says that “mills having 58 per cent, of the total Canadian [newsprint] capacity are in bankruptcy or receivership, or are passing, or have recently passed through, some form of reorganization; … they include five out of eight of the larger newsprint manufacturers in North America.”The general decline in prices and consumption will explain only a small part of the disaster. It is tempting to dismiss the rest as no more than an instance of the common plight of all export industries; especially as the only section of the pulp and paper industry in a reasonably satisfactory financial position is the small group of firms producing fine paper and specialty goods for the protected home market. But this explanation also is hardly adequate. The Canadian wheat grower has had to contend against the vagaries of nature, against foreign tariffs, quotas, and other such restrictions, against a considerable expansion of home production in his chief markets, and against the formidable competition of exporters from countries with depreciated exchanges. The Canadian newsprint manufacturer, on the other hand, faces no such obstacles. On the contrary, he has free entry into the United States market, and, until the worst of the depression was past, enjoyed the advantages of a depreciated exchange, netting him at times as much as $8.00 a ton, and an average of $3.00 in 1933. It is necessary, therefore, to look deeper to discover why the industry has suffered such exceptionally severe losses.