Good-bye, penny - Macleans.ca

Good-bye, penny

From 2011: The Senate wanted it phased out. The finance minister called it useless. Now it’s really over.

by

Update: The federal government announced it would phase out the penny on March 29, 2011. This is a look back at the history of the one-cent coin–there’s more to it than meets the eye.

FRANK GUNN/CP


Canada’s one-cent coin, colloquially known as the penny, is a unit of currency equalling one one-hundredth of a Canadian dollar. You need 100 cents to make one dollar, a truth that now seems trivial but was an innovation of moment in 19th-century Canada, when 12 pence still made a shilling, 20 shillings a pound. Yet the coin’s debut in 1858 proved inauspicious: light and flimsy in comparison to the copper tokens Canada’s charter banks had issued for years—and which long remained legal tender on par with the penny, as per Canadian legislation—it was shunned. Years after its first issue of 10 million one-cent coins, the Canadian government was still seeking to unload that inventory, and offered pennies for sale at a 20 per cent discount—a financial loss that coin enthusiasts call “negative seigniorage.”

It took 18 years for Canada to order another batch from Britain’s Royal Mint, which squeezed out, punched and stamped our coins for us, in a plant by the Tower of London. Coppers, as they were called, remained for years a phenomenon of Canada’s East—unpopular beyond Ontario and an early emblem of western distaste for Toronto, Ottawa, Montreal. “You left Ontario, the coppers became worthless,” says Ian Laing, president of Winnipeg-based Gatewest Coin Ltd. “People gave them away as they left.” Attitudes toward the cent were still antagonistic as late as 1905, when Jack and Timothy Eaton opened a five-storey Eaton’s in Winnipeg, where retailers had banded together to keep the penny out by pricing goods to the nickel. When Jack, a stickler for such things, decreed his prices on Portage Avenue would be the same as in Toronto, he sent $500 worth of one-cent coins to Winnipeg. Beside each cash register, he set up charity boxes so customers could discard them should they wish. But he began to sell newspapers at two cents rather than five. Soon, all of Western Canada was awash in pennies.

Things only grew worse. Since founding its own coining plant in Ottawa in 1908, Canada has produced more than 31 billion one-cent pieces. At its main facility in Winnipeg, the Royal Canadian Mint produced an average 800 million pennies a year this past decade—1.2 billion in 2006, 500 million in 2009. They are packed in rolls of 50, 50 rolls per box. Each box weighs six kilograms and gets driven across country by armoured car. In 2006, those cars moved 480,000 boxes—a total of 2.9 million kilograms, with a value of $12 million. All pennies. In 2006 alone. There are upwards of 20 billion pennies in circulation—$200 million worth—a volume even coin purists can’t accommodate. “I’ve probably got about a buck and a half sitting in my desk drawer here,” says Bret Evans, managing editor and associate publisher of Canadian Coin News, a numismatics magazine. “I’m going to confess I’ve probably confined a few dollars of them to my local landfill.”

 

So pity it, with its sprig of maple leaves and effigy of our monarch: the one-cent coin, that most fundamental particle of Canadian currency, has never been embraced. Now, even its days appear numbered.

Finance Minister Jim Flaherty has long hinted he’d like to scrap the coin, which now costs around 1½ cents per penny to make and as much as three cents to distribute (for the record, the coin’s negative seigniorage is due not to its “material” costs, which are less than its face value, but to its manufacturing and distribution). The private sector also loses money on the pieces—sorting, counting, rolling and transporting them costs some $100 million a year. Yet it retains just five per cent of the purchasing power it had on Jan. 2, 1908, the day Lady Grey, consort to governor general Earl Grey, struck the first-ever Canadian-made penny. “I think it’s inevitable that eventually the smaller coin—the penny—would be eliminated,” Flaherty has said. “I remember pennies being useful things,” he added, with reference to his own youth of baseball cards and penny bubble gum. “It’s a question,” he added, “of usefulness.”

Last month, the standing Senate committee on national finance called the coin a drain on the taxpayer and recommended dropping it. “It is a piece of currency, quite frankly, that lacks currency,” said Tory Sen. Irving Gerstein, apparently making no effort not to sound like an official from the Land of Oz. “In fact, a penny can’t even buy a penny anymore, and this is the heart of the issue.” The Senate suggested voluntary guidelines be established on how best to round prices—to the nearest nickel, “in cash transactions only,” a system known as “Swedish rounding” after the first country to adopt it in the 1970s (New Zealand and Australia opted for Swedish rounding after scrapping their pennies 25 years ago). The scheme would see the cent remain as a unit of accounting in non-cash transactions. Flaherty’s office has said only that he’s reviewing the report. While the mechanics of ridding Canada of the coin aren’t clear—a Finance Ministry spokesman said he couldn’t comment on hypotheticals—a 2008 Desjardins Group study suggested the decision could only be made by the minister of finance in consultation with his government and would require amendments to the laws governing both the mint and our currency. It wouldn’t be an unpopular move: an Angus Reid poll conducted shortly after the report’s release said over half of Canadians—55 per cent—would ditch it.

Which is too bad. How bereft as a people Canadians would be without dropping pennies, penny arcades and penny dreadfuls? Pennies from heaven? Not in Canada—not in either of Penny, B.C. (111 km east of Prince George, pop. 10) or Baffin Island’s Penny Ice Cap, a congress of glaciers that spreads 6,000 sq. km. Calgary bulldozed its 100-year-old Penny Lane Mall, on Eighth Avenue and Fifth Street, in 2007, replacing it with yet another gleaming office tower. Must we now offer a whole nickel for somebody’s thoughts—a rip-off, in most cases? Will wishing wells still grant the secret yearnings of Canadians who wish on a demonetized coin? That too seems unlikely. What will become of Canada when it is penniless, and why is the Senate so eager to attain this strange, strange goal?

It’s easy to forget the Canadian one-cent coin, modelled after the decimalized, very practical U.S. penny (introduced in 1793), once represented an improvement—and not just over the maddening abacus of British denominations, with all those 240 pence required to count out a pound. In 17th-century Newfoundland dried cod was used as currency—likely so that poor Newfoundlanders might emulate the stinking rich. Moose hides and gold dust, molasses and wheat have all at one place or another been used as money in Canada. So have Portuguese escudos, old French livres, Dutch guilders, U.S. pennies stamped with a long-haired Liberty, and Spanish dollars, often cut into eight bits to make change (hence the expressions, “two bits,” meaning a quarter, and the “pieces of eight” of pirate lore). Brass coat buttons, de-shanked, flattened and stamped, were enlisted as currency, and an archaeological dig in Quebec unearthed an ancient Greek bronze as part of an early settler’s pocket change. “It just shows you money always has some value to somebody,” says Paul Berry, chief curator of the National Currency Collection, part of the Currency Museum at the Bank of Canada.

Merchants and consumers resorted to such measures because money was scarce in early Canada—and not just because most of our hard currency went to buy European goods (a condition typical of international basket cases). “It simply disappeared into the stockings and strongboxes which were kept by the people, even in the narrowest of circumstances, in accordance with a well known national characteristic of Frenchmen,” wrote economist and historian Adam Shortt, not known for his love of the French, in his 1896 classic, The Early History of Canadian Banking. This currency chaos prevailed into the mid-19th century—a confusion of foreign coins, copper tokens issued by our charter banks and a treasure of merchant’s tokens handed out by outfits of all sorts, from bakers to restaurants to dry goods purveyors, the Canadian Tire money of yore. Counterfeit coins—so-called blacksmith’s tokens—also changed hands, badly struck but still good for a couple of beers.

Then, like God’s spirit upon the waters, order: the 1858 one-cent piece, with its diameter of exactly one inch, was at once the dollar’s most basic, atomic unit and a useful tool of measurement. It was hammered into “French bronze,” a variation on a copper alloy with roots in post-1789 France, when revolutionaries seized church bells and melted them down for coinage dubbed “sous des cloches”—”bell cents.” Our first, copper-rich pennies weighed a hefty 5.6 grams, an imposing bit of currency that, in a pinch, could also be used to keep a man’s hockey socks up (simply pull the coin and sock through the metal garter hanger and—voila!—a trick now superseded by the advent of Velcro). It bore the words “ONE / CENT / 1858” surrounded by a garland of maple leaves that predated the Maple Leaf flag by 107 years. Encircling Victoria’s laurel-crowned profile ran the inscription, “DEI GRATIA REGINA”—”by the grace of God, Queen.”

More than just a medium of exchange, Canada’s penny was “a reflection of our aspirations for independence—a national identity, if you will,” says Berry. Yet for all that pomp it bought very little. It’s a measure of the penny’s reputation for worthlessness that we marvelled at its past glories even in the 1890s: “In Rome, B.C. 6, roses were one cent a dozen,” reads an 1894 brief from Toronto’s Evening Star, which ran you a cent—a good buy, as most papers cost two. Reads another brief from that year: “An electric streetcar war in Savannah has driven fares down to the lowest possible figures. On short trips the fare is one cent and on long trips three cents, and the president of one of the companies threatens to make all the fares one cent.”

The humiliations never ceased. Canada reduced the penny’s size by a quarter in 1920 due to soaring copper costs and to bring it in line with its U.S. cousin—the piece now measures 19.05 mm in diameter. In the Depression, penny production actually climbed against falling wages, making the coin a sort of spectre of ill tidings. The coin most of us grew up with—two maple leaves growing in an anatomically suspect manner from a single twig—appeared in May 1937, delayed by the abdication of Edward VIII over his marriage to the American divorcee Wallis Simpson. As climbing copper prices continued to bleed it of its original substance, the cent’s mass sank—to 2.35 grams today. It is now mainly steel or zinc, depending on which the mint can buy more cheaply, and the planchets, or blanks, are just as often sourced from Greeneville, Tenn.-based Jarden Zinc Products, which incidentally has lobbied the U.S. government aggressively to keep that country’s penny, but which has apparently left Canada’s Senate to its own devices.

Our penny has always stretched the definition of disposable cash. Officials at the mint even now must remind magazine writers that placing a one-cent coin on a railroad track for the purposes of flattening it is a criminal act. “It is illegal to deface a coin in Canada,” says Alex Reeves, the mint’s communications manager. “We’ve all heard of the pennies on railroad tracks and so on. That’s something that’s not allowed.” Which was news to Dick MacKenzie, publisher of the Sioux Lookout Bulletin, a weekly paper in the northwest Ontario railroad town of Sioux Lookout—pop. 5,000—whose kitchen door opens 10 m from the CN tracks. “I still do it sometimes as the freights pass,” he says. “It’s great to show off for little neighborhood kids who have never seen it done. Their eyes grow bigger than the processed penny.”

The one-cent coin has long delighted children, particularly when it still held the promise of candy. Roy Bolin, a 79-year-old Winnipeg resident, recalls those Saturdays in the 1930s when his parents handed him a quarter and sent him and his younger sister Shirley to the Tivoli Theatre. “It would be 10 cents admission and we’d have five cents to spend,” he says. “We would go to the drugstore and licorice was my favourite candy—you know those Twisters? They would be one cent each or two for a penny. We would kind of load up. A nickel bought you a lot of candy.”

Sometimes, you see, the penny delivers. Consider again the Winnipeg Eaton’s, this time in the early 1960s. A keen-eyed shopper finds a rare penny in the change he receives at a counter, freshly minted but with a date from the late 1930s—a small gold coin shining in his palm. On his next visit he finds another golden penny, three decades old but again as though new. Coin enthusiasts begin rushing to the store on Portage Avenue. “They were probably worth 50 cents, a dollar, per penny,” says Laing, the Winnipeg numismatist. Eaton’s management, alerted to this strange phenomenon, traces the cache of rare coins, now called the “Eaton’s hoard,” to the store vault, where tens of thousands of pennies had been deposited, buried under more recent inventory, and forgotten—a treasure of pennies.