Canada entering the Depression
I. Richard Bedford Bennett, Conservative
1. Bennett was chosen as party leader to succeed Arthur Meighen during the Conservative convention of 1927
2. Bennett was raised by a New Brunswick family with humble beginnings; practised law and became a successful corporation lawyer and investor
3. He was a self-made millionaire
4. In the Conservative tradition, Bennett thought that the Depression could be alleviated through the use of protective tariffs
II. William Lyon Mackenzie King, Liberal
1. King was a lawyer and an economist before becoming a politician
2. King was PM of Canada for a total of twenty-two years but led the country with passive compromise and conciliation and provided no substantial legislation or reform.
3. In the Liberal tradition, King believed at first that the economy would recover with little help from governments.
III. Depression conditions
1. The early depression years saw massive surpluses of wheat. After the big crop of 1928 the Wheat Pools (wheat farmers’ co-operative) had an unsold carry-over of about a hundred million bushels.
i. There were huge crops in the Argentine, the United States, and Australia, and Canadian salesmen who had watched their produce begin dropping from a peak of $1.60 in July were forced to accept that their wheat would not sell.
ii. Canadian farmers lost some of their European customers forever, for the Argentine, which had been content to sell its crop at the going price, had for the first time in history outsold Canada
iii. As a final hazard to Canada’s unsold surplus of 1929, Germany in 1930 raised its import duty on wheat to $1.62 a bushel. In Italy the tariff jumped to $1.07 and in France to 85 cents.
2. The ways in which food was distributed varied from one city to the next. For a family of four the vouchers might come to a total of $4 or $5 a week. This was hardly generous, but it did not mean starvation when bread was 4 cents a loaf and eggs were 15 cents a dozen.
3. 1930s were also years of natural disasters. First and foremost was the drought. In 1929 in some areas, farmers planted their crops in the spring year after year, only to see them shrivel in the summer heat. By 1931 and 1932 soil conditions had become worse and spring winds became dust storms, sometimes carrying away topsoil and seed
4. The unemployed and the prairies farmers were the largest groups on relief in the decade but there was another category of relief recipients, the "single, homeless, unemployed". These were young men ravelled from place to place, looking for work, frequently begging for food. Having never known security, it was feared that these men would be harm to society once conditions got better.
IV. The Election of 1930
1. King was Prime Minister during the beginning of the Depression. In his speeches outside the House during the six months after the market crash, he talked about everything but unemployment after calling for an election in 1930. When asked where the proceeds of raised taxes would go, King answered “I would not give them (a Tory government) a five-cent piece.”
i. King spent his campaign defending himself for this statement and never properly addressed the Depression or tariffs, which were Bennett’s main platform.
2. Bennett’s campaigning advocated traditional National Policy of the Conservative Party, promising the use of protective tariffs to stimulate production in Canada.
3. Bennett won the national election in 1930 with 23 seats in the prairies and 25 seats in Quebec.
The Bennett Years, PM 1930-1935
I. First action
1. Six weeks after the election Bennett called a special session of Parliament to address unemployment with emergency measures. These measures were relief bills and protective tariffs.
2. First was a bill to provide $20 million towards relief for the winter of 1930. This was a significant amount because the federal budget at this time was $500 million.
i. Since the majority of ratepayers were being affected, municipal revenues would decline and provincial governments would be forced to give aid. It was radical because no federal government accepted responsibility for supporting the unemployed before this.
3. The second measure was an increase of tariffs (Bennett Tariffs) on most manufactured goods that could be produced in Canada. It was the sharpest increase in tariffs since 1879, and its purpose was to give Canadian manufacturers a monopoly in the Canadian market so that factories could be kept open.
i. Aim of the tariff was “to provide that so far as may be possible the requirements of the 10 000 000 people living in the northern half of this continent shall be provided by Canadian producers” (House of Commons Debates, September 16 1930, p. 239)
4. Both measures were emergency measures and details were not given by Bennett as to the spending of the $20 million or which industries would benefit from tariffs most. The situation was an “emergency” but believed to be temporary so his actions seem justified.
5. Until 1932 Bennett produced no substantial policy to address the depression because the situation was thought to be temporary and the effects of the 1930 relief grants and raised tariffs were still being observed.
II. Relief
1. In 1932, the Bennett government created relief camps under military control to house single, unemployed, transient men. The government saw these men as a potentially explosive group that should be kept separate from society until economic conditions improved.
i. The number of Canadians already on relief (approximately two million by 1932) made it impossible for the federal government to fund public works programs adequately.
ii. Transients were denied welfare unless they agreed to go to relief camps, where they worked for board and an allowance of twenty cents per day.
iii. They performed jobs such as building roads, but funding for resources and machinery were not great and jobs often seemed menial. Camps bred hopelessness.
iv. Camps also housed radical politics and bred communism due to their poor conditions
v. Relief camps housed about 170 000 Canadians and were abolished by King in 1936.
2. In January 1935 Bennett talked of major reform in a series of five radio broadcasts, referred to as Bennett’s New Deal.
i. “The old order is gone [he thundered in his first speech]. It will not return. . . . I am for reform. And, in my mind, reform means Government intervention. It means Government control and regulation. It means the end of laissez faire. Reform heralds certain recovery. There can be no permanent recovery without reform. Reform or no reform! I raise that issue squarely. I nail the flag of progress to the mast-head. I summon the power of the State to its support.”
ii. W.D. Herridge, Canadian Minister to Washington at the time, realized that though Roosevelt’s New Deal was not successful in dealing with the Depression, it was successful in psychologically restoring Americans and winning their support for Roosevelt (Democratic landslide in 1934). Herridge asserted to Bennett that a psychological New Deal was needed in Canada. In a 1934 letter to Bennett:
a. “The people still look on [the President] as the man who gave them the New Deal and as a leader who, in some way not wholly revealed, will lead them out of the wilderness of depression. . . . We [i.e. in Canada] need some means by which the people can be persuaded that they also have a New Deal, and that the New Deal will do everything for them in fact which the New Deal here has done in fancy.”
iii. Bennett did not inform his cabinet before making these broadcasts and were alarmed when hearing them just as everyone else did. The broadcasts were startling because the phrase “New Deal” was associated with FDR’s radical experimentation in the US, but Bennett’s New Deal was to be much less radical.
iv. Bennett meant to provide federal action in provincial responsibilities as assigned by the BNA Act.
v. Critics thought that this was Bennett’s attempt at appealing to the public before the 1935 election. In the end the government was embarrassed when King requested presentation of actual legislation but no legislation had been prepared. The result was a number of hastily drafted bills.
3. The Prairie Farm Rehabilitation Act was passed in 1935 in response to the widespread drought, farm abandonment and land degradation. Its purpose was to secure the rehabilitation of the drought and soil drifting areas in the Provinces of Manitoba, Saskatchewan and Alberta.
4. The Dominion Housing Act of 1935 provided $20 million in loans and helped finance 4900 units over three years.
5. Natural Products Marketing Act of 1935 provided a legal framework for marketing boards, creating the Canadian Wheat Board to manage the sale of wheat.
6. In 1935 Bennett introduced legislation to regulate hours of work, minimum wages, and working conditions for social security. They had little effect in gaining public opinion because people had no jobs to be improved.
7. Bennett’s New Deal was declared unconstitutional because it breached into provincial responsibilities
8. In a period of five years (1930-5) the government spent a little over $100 million on farm and unemployment relief. Relief measures were seen as emergency measures however and were only a palliative, and not directed towards ending the depression
III. Tariffs
1. Modification of tariffs policy in occurred in 1932. Tariffs were reducing export of Canadian goods and producers were feeling the effects of this worse than manufacturers since it was easier for manufacturers to adjust to supply and demand than producers.
i. By 1935 there was an unsold surplus of two hundred million bushels of wheat
2. An Imperial Economic Conference was held in Ottawa in the summer of 1932. Bennett, who was the chairman of the conference, was looking for a Commonwealth solution to the tariff problem and Great Britain complied in finding a solution because it had by this time given up its policy on free trade as well. The conference was not effective because nations wanted to increase exports without increasing imports from other Commonwealth countries.
i. Several goods imported to Canada from the US would now be imported from Great Britain.
ii. Canadian farm products were given preference in the British market
3. This helped to preserve an export market but was unable to boost prices of farm products because Britain could not buy all of Canada’s surplus production
IV. Bank of Canada
1. The 1934 Bank of Canada Act made provisions for a central back in Canada, with its central function to regulate credit and currency in Canada.
i. The Bank of Canada which he set up was independent of the federal government and primarily concerned with financial stability. The Liberal government amended the constitution of the Bank of Canada to establish federal control and eventually federal ownership.
ii. It was thus in a position to determine the supply of currency and credit on the basis of the needs of the community. Under Graham Towers however the Bank of Canada had already established a policy of easy money and had money to lend at low rates of interest. The policy of easy money was continued but neither Towers nor the government under King was prepared to print more money.
V. Election of 1935
1. Parliament was dissolved in July
2. The Conservatives were going to campaign on its record of five years in office and Bennett was to run again. The result was a devastating repudiation of Bennett's party. Only 39 Conservatives were returned in a House of 245 members; 12 of the 18 cabinet ministers were among the defeated. Bennett left the Conservatives shattered.
Mackenzie King during the Depression years, 1935-1939 (PM 1935-48)
I. King as Opposition Leader
1. King blamed the depression on the tariff which Bennett had just raised to unprecedented levels. In a 1932 session the Liberal amendment to the budget declared that lower tariffs were "essential to a revival of trade, and improvement of business, and the return of prosperity."
2. The Beauharnois Scandal: When Parliament dissolved for the 1930 election, public scandal regarding the Beauharnois Power Corporation Limited emerged. Beauharnois had for some years held extremely important power rights on a stretch of the St. Lawrence River near Montreal. To make it possible to use them, Ottawa's approval of a diversion canal had been required and granted. A week before the last session under the Liberal government, the company received accusation that it was defrauding the public of some thirty million dollars. During his last few days in Opposition, Bennett, on the basis of new evidence and the impending stock flotation had been demanding a full investigation of the Beauharnois Company.
i. After Bennett became PM, the company was found to have paid at least $700,000 into the Liberal party's campaign funds. It had also given the Conservatives thirty thousand before Bennett ordered his party to stop.
ii. King denied any knowledge of the affair but said that the scandal had thrust the Liberals into “the valley of humiliation”. The scandal caused no long-term political damage to the Liberal Party but tarnished its image at the time
3. The Liberal platform of 1933 remained the official platform of the party through the election campaign of 1935.
i. The final consensus was that the Liberal party advocated a central bank. It went farther, however, and also stated that the supply of currency and credit should be determined by the needs of the community.
ii. The Liberal slogan in 1935 was "King or chaos," because of the rise of several new political parties; Liberals could be only majority government
4. The Liberals won the election of 1935 with 171 in a House of 245, the largest majority in Canadian history up to that time.
II. Trade
1. He began a policy of freer trade. Within three weeks of taking office he had signed a trade agreement with the United States (1935).
i. This marked the turning away from the ever-increasing tariff barriers between the two countries which had reached their peak with the Hawley-Smoot tariff and the Bennett tariff, both in 1930.
2. A further trade agreement was signed three years later involving Great Britain as well as the United States.
III. Unemployment and Relief
1. Soon after taking office King appointed a National Employment Commission, which was asked to do two things. It was to reorganize the administration of all relief expenditures, in the hope that a more centralized and more efficient administration would eliminate duplication and reduce costs. It was also asked to recommend measures which might be taken to create employment opportunities and so remove men from the relief rolls.
i. The National Employment Commission was not able to introduce many economies. Most of the relief was administered by provincial and municipal governments and, even though the federal government was providing much of the money, there was little the federal government could do to change the system.
ii. Two major conclusions were drawn from this analysis.
a. Because the Canadian economy was national and not local or provincial in scope, unemployment must be seen as a national problem. The Commission therefore recommended that the federal government should take over the full cost of unemployment relief
b. Instead of economizing and trying to balance the budget, it recommended increased federal expenditures and reduced taxation in times of depression. The motor of the economy was seen as investment. When private enterprise was not prepared to invest money--when there was a depression--governments should deliberately incur deficits in order to counterbalance the deficiency. This was called Keynesian economics.
iii. Mackenzie King was shocked at the suggestion that the federal government should pay the full cost of unemployment relief. It was at this time, in the fall of 1937, that King set up another royal commission--the Rowell-Sirois Commission on Dominion-Provincial Relations. King did not want the federal system to change unilaterally by having the federal government volunteer to take on new burdens.
IV. Changes in fiscal policy
1. The positive proposals of the Employment Commission were not forgotten. King suggested to the Minister of Finance, Charles Dunning, during the 1938 session that he planned a pre-election budget, which naturally meant a balanced budget. King and Dunning, however, were surprised to find that some cabinet ministers no longer believed in balanced budgets.
i. Norman Rogers, Minister of Labour, had been converted by the Employment Commission and argued that Dunning should budget for a deficit and talked of an additional $40 million for public works to inject money into the economy. Dunning threatened to resign if this policy was adopted; Rogers threatened to resign if it wasn't. Other cabinet ministers took sides.
ii. Eventually King proposed $25 million of additional expenditure as a compromise and set a cabinet committee to decide how the money would be spent.
iii. The budget of 1938 was a turning point in fiscal policy in Canada. For the first time a government had consciously decided to spend money to counteract a low in the business cycle.
2. In addition to the expenditures in the budget the government also offered loans to municipalities for local improvements and passed a National Housing Act to encourage the building of homes. Consistent with this Keynesian approach, the government also reduced some taxes and offered some tax exemptions for private investors.
Third Parties and other political movements
I. Newly emerging parties
1. The Co-operative Commonwealth Federation (CCF), Social Credit and the Union nationale formed during the thirties as new political parties in Canada, each with their own solution for preventing capitalist boom-bust economic cycles.
2. Communism also thrived in the appalling conditions of the thirties
II. The Co-operative Commonwealth Federation (CCF)
1. The CCF was a democratic socialist party formed in 1932 and led by J.S. Woodsworth, a Winnipeg Labour MP. It was influential but never formed a government during the Depression; in 1935 fewer than out of ten voters voted for CCF. It served as the forerunner to the New Democratic Party, founded in 1961.
i. It was formed to unite left-wing labour and farm organizations in Canada
ii. By 1939 it formed the opposition in BC, Saskatchewan and Manitoba
III. Social Credit
1. William “Bible Bill” Aberhart began broadcasting “social credit” into his radio show in 1932. Social credit meant that governments would replace financial institutions as the vehicle for deciding how much money should be in circulation.
i. Aberhart said that the Depression was caused by a failure of banks to print enough money so that consumer spending could match industrial production
2. Aberhart turned social credit study clubs created by his radio appeal into a political movement that one 56 of 63 seats in the provincial election of 1935.
i. He began by attempting to regulate banks and currency, but pressure from his party forced him to act on his word. As a result legislation passed by Aberhart in 1937 and 1938 was not allowed by the federal government and he was able to blame his failures on the federal government.
3. By 1943, Aberhart’s death, the Social Credit Party became a right-wing organization that showed anti-civil libertarian tendencies.
IV. Union nationale
1. Progressive Liberals led by Paul Gouin formed a breakaway party in Quebec called the Action libéral nationale, based on the 1931 papal encyclical Quadragesimo anno, which supported state intervention to achieve social justice.
2. Maurice Duplessis, who led the Conservative Party in Quebec, formed an alliance with the Action libéral nationale, creating the Union nationale in 1935. With Le Programme de restauration social as its platform, the Union nationale ran in the provincial elections.
i. Though the Liberals won under Taschereau, the Union nationale was able to capitalize on evidence of the government’s corruption and was able to win a snap election in 1936. By this time Duplessis took full control of the party.
ii. In power, the Union nationale delivered only on its promises to help farmers with cheap loans and programs to settle the unemployed in remote areas of the province.
iii. In 1937 Duplessis passed the Padlock Act, designed to suppress communism
3. Union nationale lost the 1939 provincial election
V. Communism
1. The Communist-inspired Workers’ Unity League formed among miners, loggers and garment workers in 1929
2. In 1931 the Communist Party of Canada (CPC) was declared illegal and seven of its members, including leader Tim Buck, were imprisoned
3. The Party was legalized in 1936 but then banned in Quebec in 1937 and again in Ontario in 1940
4. The CPC reorganized as the Labour Progress Party in 1943
5. Riots occurred in Regina in April 1935 when relief camp workers of the Relief Camp Workers Union (RCWU), organized by the Workers Unity League, organized a demonstration from Vancouver to Ottawa voice their concerns about relief camps to Bennett. This was known as the “On-to-Ottawa” trek.
i. Early in June, twelve hundred strikers boarded freight trains heading east, picking up support along the way.
ii. Bennett called the RCMP to stop the trek in Regina, resulting in violence. Hundred were injured and one constable was killed
The Politics of Chaos: Canada in the Thirties. H. Blair Netby. Macmillan of Canada, 1972.
History of the Canadian People by Conrad
The 1930s raised more questions than they answered. There was no political or economic revolution; governments were still operating on a small scale by contemporary standards and economic recovery was mainly the responsibility of private enterprise; most radical proposals had been watered down and any experiments had been tentative.
R. B. Bennett during his five years in office had lost the confidence of most Canadians in his party and in his government
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