Solutions in Canada Notes

Background

1. The Great Depression struck Canada particularly hard due to its export-dependent economy.
2. Reliant on selling wheat, timber, and minerals abroad, mostly to the U.S. and Britain, Canada’s economy collapsed when global demand fell.
3. Unemployment reached 27% by 1933, and the Prairie Provinces suffered ecological disaster from the Dust Bowl.
4. The federal government’s slow and uneven response deepened hardship and led to major shifts in economic policy and political ideology.

Economic and Political Context

1. Export Dependence
   1. Before 1929, 40% of Canada’s GNP came from exports.
   2. The collapse of wheat prices devastated farmers, especially in Saskatchewan and Alberta.
2. Regional Disparities
   1. Industrial centers in Ontario and Quebec suffered layoffs; rural areas faced mass foreclosures.
   2. Maritime provinces faced long-term economic decline, deepening alienation.
3. Federal–Provincial Divide
   1. Provinces were responsible for welfare, but lacked funds, forcing Ottawa to intervene.
   2. This strained federal–provincial relations and fueled political experimentation (e.g., rise of the Co-operative Commonwealth Federation).

R. B. Bennett (1930–1935): Conservative Leadership and Limited Intervention

Nature of Policies

1. Initial Response : Orthodoxy and Austerity
   1. Elected in 1930, Bennett promised to “blast” Canada out of the Depression but initially followed traditional economic orthodoxy.
   2. Imposed protective tariffs to stimulate domestic production, worsening the export slump.
   3. Reluctant to engage in deficit spending; prioritized balanced budgets.
2. Unemployment and Relief
   1. Established Relief Camps for unemployed men, offering low pay and poor conditions.
   2. Created the Unemployment Relief Act (1931), providing limited federal aid to provinces.
3. Monetary and Banking Policy
   1. Formed the Bank of Canada (1934) to stabilize currency and centralize credit control , a significant institutional reform.
4. Shift Toward Activism : The “Bennett New Deal” (1935):
   1. Facing political pressure, Bennett adopted more interventionist policies.
   2. Proposed a “New Deal for Canadians”, modeled after Roosevelt’s reforms: minimum wages, unemployment insurance, and social welfare.
   3. Introduced legislation on working hours, collective bargaining, and fair-trade practices, but too late to save his government.

IR. B. Bennett (1930–1935): Conservative Leadership and Limited Intervention

Nature of Policies

1. Initial Response : Orthodoxy and Austerity:
   1. Elected in 1930, Bennett promised to “blast” Canada out of the Depression but initially followed traditional economic orthodoxy.
   2. Imposed protective tariffs to stimulate domestic production, worsening the export slump.
   3. Reluctant to engage in deficit spending; prioritized balanced budgets.
2. Unemployment and Relief
   1. Established Relief Camps for unemployed men, offering low pay and poor conditions.
   2. Created the Unemployment Relief Act (1931), providing limited federal aid to provinces.
3. Monetary and Banking Policy
   1. Formed the Bank of Canada (1934) to stabilize currency and centralize credit control, a significant institutional reform.
4. Shift Toward Activism : The “Bennett New Deal” (1935)
   1. Facing political pressure, Bennett adopted more interventionist policies.
   2. Proposed a “New Deal for Canadians”, modeled after Roosevelt’s reforms: minimum wages, unemployment insurance, and social welfare.
   3. Introduced legislation on working hours, collective bargaining, and fair-trade practices.

Mackenzie King (1935–1939): Pragmatism, Gradualism, and Recovery

Nature of Policies

1. Return to Power
   1. King, who had lost to Bennett in 1930, returned with promises of a calmer, cooperative federalism.
2. Fiscal and Monetary Policy
   1. Used the newly established Bank of Canada to manage credit and stabilize the economy.
   2. Pursued moderate deficit spending and currency adjustments.
3. Social and Employment Policy
   1. Expanded public works projects (roads, housing, and hydroelectric development).
   2. Introduced the National Housing Act (1938) and Trans-Canada Air Lines (1937) to modernize infrastructure.
   3. Supported provincial initiatives for relief rather than central control.
4. Trade Policy:
   1. Reversed Bennett’s protectionism; negotiated the 1938 U.S.–Canada Trade Agreement, reviving exports and fostering economic recovery.

Efficacy and Impact

1. Economic Recovery:
   1. GDP began to recover by 1936; industrial output and trade improved steadily.
   2. Wheat exports partially revived as global conditions stabilized.
2. Political Stability:
   1. King’s moderate approach restored confidence in federal leadership.
   2. Maintained social peace compared to radical movements elsewhere.
3. Limitations:
   1. Relief remained uneven; Prairie provinces continued to struggle until WWII.
   2. King avoided large-scale welfare programs, preferring provincial autonomy.

Assessment of Efficacy

Short-Term Impact

1. Bennett’s early conservatism deepened hardship, though his late reforms were pioneering in concept.
2. King’s cautious fiscal management and trade revival achieved gradual stabilization but limited relief for the poorest Canadians.

Long-Term Impact

1. Institutional innovations i.e. the Bank of Canada, centralized relief, and federal–provincial negotiations.It laid the foundations for postwar economic planning and the welfare state.

• The Depression reshaped Canadian federalism by expanding Ottawa’s role in social and economic affairs.