RB Bennett and Mackenzie King in the Depression

THE GREAT DEPRESSION: CANADA – RB Bennett and Mackenzie King

RB BENNETT

Historical Context

-          When the crisis began, King urged Canadians to “wait it out”. A similar approach was being taken by Hoover in the US.

-          Bennett became prime minister in 1930, defeating King in the elections because of his failure to address the problems of the depression.

-          The early depression years saw massive surpluses of wheat—over of about a hundred million bushels.

-          The 1930s were also years of natural disasters. Droughts hit the prairies starting in 1929.

-          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".

Relief and Reform

1.       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.

a.        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.

2.       In 1932, the Bennett government created relief camps under military control to house single, unemployed, transient men.

a.        The government saw these men as a potentially explosive group that should be kept separate from society until economic conditions improved. By the end of 1932, about 2 million men were employed and given a means of living.

3.       In January 1935 Bennett talked of major reform in a series of five radio broadcasts, referred to as Bennett’s New Deal.

a.        Bennett realized that although FDR’s New Deal never lived up to expectation, it was successful in psychologically restoring and winning the support of Americans. Bennett wanted to employ a ‘psychological New Deal’ in Canada.

4.       The Prairie Farm Rehabilitation Act was passed in 1935 in response to the widespread drought, farm abandonment and land degradation.

a.        Though its total effects were insufficient, some money was given to farmers for the purpose of improving their farming practices.

5.       The Dominion Housing Act of 1935 provided $20 million in loans and helped finance 4900 units over three years.

a.        Though its effects were not significant, active federal initiative was taken to improve the coniditons of Canadian people.

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.       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.

a.        It was thus in a position to determine the supply of currency and credit on the basis of the needs of the community.

b.       Under Graham Towers however the Bank of Canada established a policy of easy money and had money to lend at low rates of interest.

Tariffs

8.       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.

a.        The tariffs were to give Canadian manufacturers a monopoly in the Canadian market.

b.       Effects of the tariff were merely counteracted by Hoover’s Hawley-Smooth tariff, and foreign trade was hit.

9.       By 1935 there was an unsold surplus of two hundred million bushels of wheat

a.        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.

10.    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.

a.        The conference was not effective because nations wanted to increase exports without increasing imports from other Commonwealth countries.

b.       Several goods imported to Canada from the US would now be imported from Great Britain. 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.

Failures

11.    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.

a.        Conditions continued to worsen due from inaction—from 1929 to 1933, income per person had declined by 75 per cent in Saskatchewan.

12.    Poor conditions in the relief camps, offering a lowly wage of 20 cents per day, led to unrest.  

a.        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.

b.        Camps generated hopelessness, housed radical politics and bred communism due to their poor conditions

c.        Eventually camps were abolished by King in 1936.

13.    In June 1935, over a thousand 1000 camp men in British Columbia travelled towards Parliament Hill in the On-to-Ottawa trek to for better economic conditions—like increased wages and a true system of social security.

a.        They were stopped by Mounted Police in Regina and Bennett regarded them as lawbreakers.

b.       Like Hoover, who harshly responded to the ‘Bonus Army’ in 1932, Bennett was criticized for his harsh handling of the situation. He appeared unsympathetic to the plight of Canadians affected by the depression.

14.    Bennett’s New Deal was heavily criticized. Bennett associated it strongly with FDR’s new deal, as he declared in his five broadcasts: “reform means Government intervention… I nail the flag of progress to the mast-head.”

a.        Bennett’s cabinet was alarmed with his announcements 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. Bennett’s New Deal was declared unconstitutional because it breached into provincial responsibilities

b.       Critics thought that this was Bennett’s attempt at appealing to the public before the 1935 election.

c.        The result was a number of hastily drafted bills and Bennett’s New Deal never lived up to expectations.

15.    In 1935 Bennett introduced legislation to regulate hours of work, minimum wages, and working conditions for social security.

a.        They had little effect in gaining public opinion because people had no jobs to be improved.

16.    Shanty towns were called “Bennett boroughs” and makeshift vehicles pulled by farm animals were called “Bennett buggies”.

a.        People began to blame Bennett for their poor conditions.

17.    Ultimately Parliament was dissolved in July 1935. R. B. Bennett during his five years in office had lost the confidence of most Canadians in his party and in his government

MACKENZIE KING

1.       In the initial six months following the stock market crash, King took little action to address problems like unemployment. When asked where the proceeds of raised taxes would go, King answered “I would not give them (a Tory government) a five-cent piece.”

a.        King took a ‘hands-off’ approach to the situation because he believed the economy would fix itself.  He appeared unwilling to address the problems of the depression.

2.       He began a policy of freer trade. Within three weeks of taking office he had signed a trade agreement with the United States (1935). 

a.        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.

b.       A further trade agreement was signed three years later involving Great Britain as well as the United States.

3.       Soon after taking office King appointed a National Employment Commission, which was assigned to reorganize the administration of all relief expenditures, and recommend measures which to create employment opportunities.

a.        The NEC was ineffective. 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. 

4.       The 1938 budget included $25 million in additional expenditure after pressure from the NEC.

a.        This was a turning point in Canadian fiscal policy—for the first time a government had consciously decided to spend money to counteract a low in the business cycle. This was the application of Keynesian economics, which saw that governments should deliberately invest into the economy during times of depression in order to counterbalance the deficiency, because private enterprise was not in the position to do so itself.

5.       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.

“It’s not quite enough to live on, and a little too much to die on.” George Stubbs, Manitoba judge commenting on relief payments during Bennett’s term.

Barry Broadfoot, Ten Years Lost 1973 
“these carved up cars, named after [Bennett], a constant reminder that he’d been prime minister when the disaster struck.” Barry Broadfoot, Ten Years Lost 1973

JM Keynes, The Means to Prosperity. 1933. “multiplier effect”
When the economy has high unemployment, an increase in government purchases creates a market for business output, creating income and encouraging increases in consumer spending, which creates further increases in the demand for business output.  

“If a free society cannot help the many who are poor, it cannot save the few who are rich” JFK

“I never worry about action, but only inaction.” Winston Churchill

G. Blair Neatby, The Politics of Chaos. (1972)
Bennett believed that "what was needed in Canada was a psychological New Deal."

Ralph Allen, Ordeal by Fire: Canada, 1910-45. (1961)

"Weak positions were protected, high-cost producers were kept in production and obsolete equipment was preserved by rising tariffs."