Great Depression in Canada

In late 1929, the Grat Depression started in United States and reached in Canada unexpectedly rapidly, up to 27% of unemployment forces man businesses to close and bring millions of losses. The Canadian government came with a series of solutions, some are At the Depression, the provincial and municipal governments were already in debt after an expansion of infrastructure and education during the 1920s. It thus fell to the federal government to try to improve the economy. When the Depression began Mackenzie King was Prime Minister.

He believed that the crisis would pass, refused to provide federal aid to the provinces, and only introduced moderate relief efforts. New Deal[edit] The Bennett Government initially refused to offer large-scale aid or relief to the provinces, much to the anger of provincial premiers, but it eventually gave in and started a Canadian "New Deal" type of relief by 1935. By 1937, the worst of the Depression had passed, but it left its mark on the country's economic landscape.

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Atlantic Canada was especially hard hit.

Newfoundland (an independent dominion at the time) was bankrupt economically and politically and gave up responsible government by reverting to direct British control. World War I veterans built on a history of postwar political activism to play an important role in the expansion of state-sponsored social welfare in Canada. Arguing that their wartime sacrifices had not been properly rewarded, veterans claimed that they were entitled to state protection from poverty and unemployment on the home front.

The rhetoric of patriotism, courage, sacrifice, and duty created powerful demands for jobs, relief, and adequate pensions that should, veterans argued, be administered as a right of social citizenship and not a form of charity.

At the local, provincial, and national political levels, veterans fought for compensation and recognition for their war service, and made their demands for jobs and social security a central part of emerging social policy. [19] Blaming it on Bennett: A 1931 political cartoon suggests that Liberals had failed to take responsibility for their own errors.

The Liberal Party lost the 1930 election to the Conservative Party, led by R. B. Bennett. Bennett, a successful western businessman, campaigned on high tariffs and large-scale spending. Make-work programs were begun, and welfare and other assistance programs became vastly larger. This led to a large federal deficit, however. Bennett became wary of the budget shortfalls by 1932, and cut back severely on federal spending. This only deepened the depression as government employees were put out of work and public works projects were canceled.

One of the greatest burdens on the government was the Canadian National Railway (CNR). The federal government had taken over a number of defunct and bankrupt railways during World War I and the 1920s. The debt the government assumed was over $2 billion, a massive sum at the time, but during the boom years it seemed payable. The Depression turned this debt into a crushing burden. Due to the decrease in trade, the CNR also began to lose substantial amounts of money during the Depression, and had to be further bailed out by the government.

With falling support and the depression only getting worse, Bennett attempted to introduce policies based on the New Deal of Franklin Delano Roosevelt in the United States. Bennett thus called for a minimum wage, unemployment insurance, and other such programs. This effort was largely unsuccessful; the provinces challenged the rights of the federal government to manage these programs. The judicial and political failure of Bennett's New Deal legislation shifted the struggle to reconstitute capitalism to the provincial and municipal levels of the state.

Attempts to deal with the dislocations of the Great Depression in Ontario focused on the "sweatshop crisis" that came to dominate political and social discourse after 1934. Ontario's 1935 Industrial Standards Act (ISA) was designed to bring workers and employers together under the auspices of the state to establish minimum wages and work standards. The establishment of New Deal style industrial codes was premised on the mobilization of organized capital and organized labour to combat unfair competition, stop the spread of relief-subsidized labour, and halt the predations of sweatshop capitalism.

Although the ISA did not bring about extensive economic regulation, it excited considerable interest in the possibility of government intervention. Workers in a diverse range of occupations, from asbestos workers to waitresses, attempted to organize around the possibility of the ISA. The importance of the ISA lies in what it reveals about the nature of welfare, wage labour, the union movement, competitive capitalism, business attitudes toward industrial regulation, and the role of the state in managing the

collective affairs of capitalism. The history of the ISA also suggests that "regulatory unionism," as described by Colin Gordon in his work on the American New Deal, may have animated key developments in Canadian social, economic, and labour history. [20] The failure to help the economy led to the federal Conservatives' defeat in the 1935 election when the Liberals, still led by Mackenzie King, returned to power. The public at large lost faith in both the Liberal Party of Canada and the Conservative Party of Canada.

This caused the rise of a third party: the Cooperative Commonwealth Federation (a socialist party that achieved some success before joining the Canadian Labour Congress in 1961, becoming the New Democratic Party). With the worst of the Depression over, the government implemented some relief programs such as the National Housing Act and National Employment Commission, and it established Trans-Canada Airlines (1937, the predecessor to Air Canada). However, it took until 1939 and the outbreak of war for the Canadian economy to return to 1929 levels. Liberals return[edit]

The onset of the Depression led to a Liberal defeat in the 1930 elections. In opposition, it was William Lyon Mackenzie King's policy to refrain from offering advice and to let the Conservative government under Bennett make its mistakes; Mackenzie King's policy preferences were not radically different. Though he gave the impression of sympathy with progressive and liberal causes, he had no enthusiasm for the New Deal of American President Franklin D. Roosevelt (which Bennett tried to emulate), and he never advocated massive government action to alleviate depression in Canada.

In 1935 the Liberals used the slogan "King or Chaos" to win a landslide. Promising a much-desired trade treaty with the U. S. , the Mackenzie King government passed the 1935 Reciprocal Trade Agreement. It marked the turning point in Canadian–American economic relations, reversing the disastrous trade war of 1930–31, lowering tariffs, and yielding a dramatic increase in trade; more subtly, it revealed to the prime minister and the president that they could work together well.

[21] After 1936 the prime minister lost patience when westerners preferred radical alternatives such as the CCF (Co-operative Commonwealth Federation) and Social Credit to his middle-of-the-road liberalism. Indeed, he came close to writing off the region with his comment that the prairie dust bowl was "part of the U. S. desert area. I doubt if it will be of any real use again. "[22] Instead he paid more attention to the industrial regions and the needs of Ontario and Quebec regarding the proposed St. Lawrence Seaway project with the United States.

As for the unemployed, he was hostile to federal relief and reluctantly accepted a Keynesian solution that involved federal deficit spending, tax cuts and subsidies to the housing market. [23] Mackenzie King returned as prime minister, serving until his retirement in 1948. During all but the last two years he was also secretary of state for external affairs, taking personal charge of foreign policy. Social Credit[edit] Social Credit (often called Socred) was a populist political movement strongest in Alberta and neighboring British Columbia, 1930s-1970s.

Social Credit was based on the economic theories of an Englishman, C. H. Douglas. His theories became very popular across the nation in the early 1930s. A central proposal was the free distribution of prosperity certificates (or social credit), called "funny money" by the opposition. [24] During the Great Depression in Canada the demand for radical action peaked around 1934, after the worst period was over and the economy was recovering. Mortgage debt was significant because farmers could not meet their interest payments.

The insecurity of farmers, whose debts were increasing and who had no legal protection against foreclosure, was a potent factor in creating a mood of political desperation. The radical farmers party, UFA was baffled by the depression and Albertans demanded new leadership. The prairie farmers had always believed that they were being exploited by Toronto and Montreal. What they lacked was a prophet who would lead them to the promised land. [25] The Social Credit movement began in Alberta in 1932; it became a political movement in 1935 and suddenly burned like a prairie fire.

The prophet and new premier was radio evangelist William Aberhart (1878–1943). The message was biblical prophecy. Aberhart was a fundamentalist, preaching the revealed word of God and quoting the Bible to find a solution for the evils of the modern, materialistic world: the evils of sophisticated academics and their biblical criticism, the cold formality of middle-class congregations, the vices of dancing and movies and drink. "Bible Bill" preached that the capitalist economy was rotten because of its immorality; specifically it produced goods and services but did not provide people with sufficient

purchasing power to enjoy them. This could be remedied by the giving out money in the form of "social credit", or $25 a month for every man and woman. This pump priming was guaranteed to restore prosperity, he prophesied to the 1600 Social Credit clubs he formed in the province. Alberta's businessmen, professionals, newspaper editors and the traditional middle-class leaders vehemently protested Aberhart's crack-pot ideas, but they had not solved any problems and spoke not of the promised land ahead. Aberhart's new party in 1935 elected 56 members to the Alberta Assembly, compared to 7 for all the other parties.

[26] Alberta's Social Credit Party remained in power for 36 years until 1971. It was re-elected by popular vote no less than 9 times, achieving success by moving from left to the right. [27] Social Credit in office[edit] Once in office in Alberta Aberhart gave a high priority to balancing the provincial budget. He reduced expenditures and increased the sales tax and the income tax. The poor and unemployed got nothing. [28] The $25 monthly social dividend never arrived, as Aberhart decided nothing could be done until the province's financial system was changed, and 1936 Alberta defaulted on its bonds.

He did pass a Debt Adjustment Act that canceled all the interest on mortgages since 1932 and limited all interest rates on mortgages to 5%, in line with similar laws passed by other provinces. In 1937 backbenchers passed a radical banking law that was disallowed by the national government (banking was a federal responsibility). Efforts to control the press were also disallowed. The party was authoritarian and tried to exert detailed control over its officeholders; those who rebelled were purged or removed from office by the new device of recall elections.

Although Aberhart was hostile to banks and newspapers, he was basically in favor of capitalism and did not support socialist policies as did the Cooperative Commonwealth Federation (CCF) in Saskatchewan. [29] By 1938 the Social Credit government abandoned its notions about the $25 payouts, but its inability to break with UFA policies led to disillusionment and heavy defections from the party. Aberhart's government was re-elected in the 1940 election, carrying 43% of the vote. The prosperity of the Second World War relieved the economic fears and hatreds that had fueled farmer unrest.

Aberhart died in 1943, and was succeeded as Premier by his student at the Prophetic Bible Institute and lifelong close disciple, Ernest C. Manning (1908–1996). The Social Credit party, now firmly on the right, governed Alberta until 1968 under Manning. Recovery[edit] The Canadian recovery from the Great Depression proceeded slowly. Economists Pedro Amaral and James MacGee find that the Canadian recovery has important differences with the United States. [30] In the U. S. productivity recovered quickly while the labor force remained depressed throughout the decade.

In Canada employment quickly recovered but productivity remained well below trend. Amaral and MacGee suggest that this decline is due to the sustained reduction in international trade during the 1930s. In the midst of the Great Depression, the Crown-in-Council attempted to uplift the people, and created two national corporations: the Canadian Radio Broadcasting Commission (CRBC), and the Bank of Canada. The former, established in 1932, was seen as a means to keep the country unified and uplifted in these harsh economic times. Many poor citizens found radio as an escape and used it to restore their own faiths in a brighter future.

Broadcasting coast to coast in both French and English, the CRBC played a vital role in keeping the morale up for Canadians everywhere. The latter was used to regulate currency and credit which had been horribly managed amongst Canadian citizens in the prior years. It was also set up to serve as a private banker’s bank and to assist and advise the Canadian government on its own debts and financial matters. The bank played an important role to help steer government spending in the right direction. The bank's effort took place through the tough years off the depression and on to the prosperity that followed into and after the Second World War.

Both of these corporations were seen as positive moves by the Canadian government to help get the economy back on track. 1937 was an important year in the recovery from the Great Depression. The Bank of Canada was nationalized in that year, and the Canadian Radio Broadcasting Commission (CRBC) became the Canadian Broadcasting Company (CBC) in that same year. Both corporations were successful aids in the cultural and financial recovery of the Canadian economy during the Great depression. It took the outbreak of World War II to pull Canada out of the depression.

From 1939, an increased demand in Europe for materials, and increased spending by the Canadian government created a strong boost for the economy. Unemployed men enlisted in the military. By 1939, Canada was in the first prosperity period in the business cycle in a decade. This coincided with the recovery in the American economy, which created a better market for exports and a new inflow of much needed capital. See also[edit] Book icon Book: Great Depression Canada in the World Wars and Interwar Years Cities in the Great Depression#Canada List of riots and civil unrest in Calgary References[edit]