The Canadian government sought relief from the Great Depression by implementing new policies aimed at improving the economy and putting people back to work.
On September 8, 1930, the Canadian parliament passed new tariff laws designed to help Canada weather what became the Great Depression. The laws were designed to exclude the importation into Canada of types of articles already being produced domestically, as well as products that Canadians might produce in the future. The 1930 laws by themselves were not critical; they were merely the first in a series of tariff laws passed between 1930 and 1932. The cumulative effect of these laws mitigated the Depression somewhat. For the most part, however, it was not until the onset of World War II that Canada recovered from the Depression.
Virtually every aspect of the Canadian economy went into a long-term tailspin starting in 1929. The worldwide economic downturn had a particularly adverse effect on the country’s balance of trade, because Canada was highly dependent on exports to fuel its economy. In fact, prior to the stock market crash in 1929, exports accounted for more than one-third of the country’s national income. The fact that many foreign countries, most notably the United States, reacted to their individual economic problems by curbing imports and raising tariffs hurt Canada enormously. Entire export-driven Canadian industries shut down. For example, industries based on lumber and pulp, commercial fishing, and mining practically ceased operations, throwing thousands of employees out of work. These displaced people flocked to the cities looking for work, only to meet competition from thousands of unemployed factory workers. To make matters worse, prices in the Canadian wheat market collapsed.
Price was only one of the farmers’ worries, however, as nature compounded their problems. A drought that affected Canada for almost ten years began around 1930. Making matters worse, clouds of grasshoppers destroyed the little grain that grew. The drought and the grasshoppers caused wheat to shrivel, cattle to die, and wind to pick up dirt and blow it in raging dust storms that could be seen for hundreds of miles.
The Canadian government had few, if any, social programs in place, in part because of constitutional limitations that prohibited the federal government from enacting unemployment insurance legislation.
Even though the Depression affected the entire country, citizens had to deal with it as best they could on a community-by-community basis. Even the provincial governments found themselves on the verge of bankruptcy. In Saskatchewan, for example, two-thirds of the province’s rural population was forced to seek public assistance. More than 95 percent of the province’s rural municipalities were at the brink of bankruptcy, and the provincial government could offer very little relief. Farmers lined up for a monthly allowance of flour and money to buy other food. As Canadians dependent on small-scale relief provided by communities and private charities searched desperately for a better answer, Richard Bedford Bennett offered some solutions.
Bennett, a self-made multimillionaire and member of the Conservative Party, was a New Brunswick native who had made his fortune as a lawyer and businessman, first in western Canada and later in the central section of the country. He became prime minister in 1930. Backed by worried eastern Canadian industrialists, Bennett campaigned on the promise that he would provide tariff protection for industry and badly needed jobs for workers. He also promised farmers that he would help Canada blast its way into the markets of the world. Once elected, he made good on his first promise, raising protective tariffs. Bennett moved partly to combat similar tariffs instituted in the United States, in particular the Hawley-Smoot Tariff Act of 1930,
Economists had pointed out to President Herbert Hoover all the drawbacks of the Hawley-Smoot Tariff. They suggested that the act would cause higher prices for consumers, destroy international trade, and make it difficult, it not impossible, for other countries to sell their goods to the United States. Additionally, they claimed, it would not help U.S. farmers, who were producing great surpluses at the time. Hoover ignored a petition, signed by a thousand economists, that asked him to refuse to sign the act.
Hoover believed that he could use the flexible provision the Hawley-Smoot Act contained to raise or lower rates up to 50 percent, on advice of the Tariff Commission. Other countries saw no alternative but to implement high tariffs of their own, the route Bennett chose. Bennett based his 1930 campaign for prime minister in part on the need for new tariffs. The Canadian Conservative Party argued that higher levels of protection were needed to preserve the Canadian market for Canadian businesses until other countries, primarily the United States, lowered their tariffs. The incumbent Liberals, on the other hand, led by longtime prime minister William Lyon Mackenzie King, advocated tariff adjustments designed to reduce duties on a few items while raising them on others. The difference in the two parties’ approaches to protectionism had a major impact on the outcome of the election.
Once elected, Bennett wasted little time implementing his protectionist program. He placed new duties on agricultural products and granted increased protection to virtually every industry of any importance. Overall, Bennett raised the general tariff level almost 50 percent. He also employed a series of special devices such as arbitrary valuations for customs purposes and arbitrary fixing of exchange rates in the case of depreciated foreign currencies. The end result was the most sweeping change ever in the Canadian tariff system. The results, however, were mixed.
The protectionist policy led to a heavy reduction in imports and increased Canadian manufacturers’ share of the domestic market, which eased unemployment. It did little, however, to increase domestic purchasing power and imposed higher costs on large groups of both producers and consumers. The tariff was of little help to the country’s basic producers unless used not as a barrier but as a lever to force trade concessions from other countries. Unfortunately for the Canadian government, such concessions were hard to come by, as most nations were experiencing economic downturns of their own. Bennett hoped, however, that protectionism would stimulate the Canadian economy in the short run. He was less concerned about the long term.
In general, Canadians did not believe the financial downturn prompted by the 1929 stock market crash would last long. For example, Edward Beatty, president of the Canadian Pacific Railroad, suggested that once the temporary adverse effects of economic problems had run their course, Canadian economic conditions would be more soundly based, with the way cleared for a vigorous forward movement. The economic downturn proved to be much more than temporary. Beatty, like many Canadians, failed to recognize just how widespread the problem was. Perhaps the country’s economy could have survived with minimal disruption if only one major sector had been hit. Because both the industrial and agricultural sectors were affected at the same time, the country as a whole suffered.
Grains, particularly wheat, provided Canada with one of its largest overseas markets in the early 1920’s. By the mid-1920’s, however, most European countries, in an effort to save their own farmers, began to raise tariffs. To make matters worse for Canadians, the Soviet Union began exporting wheat again after a suspension that began during World War I. The combination of protective tariffs and the Soviet Union’s reentry into the wheat exporting business drove wheat prices down and presaged problems for Canadian farmers. Prices dropped by more than half in some cases.
Canadian manufacturers were not as dependent on exports as were farmers; nevertheless, they could not absorb price reductions of more than half for pulp, paper, and mining products that beset them between 1929 and 1933. These four years were particularly trying as export markets shrank dramatically in the face of increasing tariffs imposed by other countries. Shrinking exports led to decreased purchasing power in Canada. Manufacturers cut back on production and started laying off their workers.
By the summer of 1930, more than 390,000 people were out of work in Canada, nearly 13 percent of the country’s labor force.
In addition to higher tariffs, Bennett established work camps in British Columbia to control moving gangs of unemployed men who were “riding the rails” across the country in search of work. Thousands of these men joined the Communist-sponsored Relief Camp Workers’ Union
Bennett increased payments to the provinces for the relief of unemployment and sponsored legislation establishing the Bank of Canada,
There were a few signs of abatement in the world’s economic problems in the mid-1930’s. In Canada, between 1932 and 1937, the wholesale price index rose by nearly one-third, and exports increased from $500 million to more than $1 billion. The minor improvements were not enough, and Bennett continued to seek ways to right the country’s economy.
As the Depression dragged on, Bennett revised his strategies. In 1935, without consulting his cabinet, he went on the radio to talk directly to Canadians. He revealed a new approach to ending the economic downturn, one patterned after Franklin D. Roosevelt’s New Deal. After addressing the nation, he presented Parliament with a package of hastily prepared legislation that provided for unemployment insurance, minimum wages and maximum hours for work, legislation for fair trade, and the establishment of a grain board to regulate prices. Unfortunately for Bennett, many Canadians thought of the measures as too little, too late. Later that year, Canadians ousted Bennett from office and returned William Lyon Mackenzie King.
King had no immediate easy answers either. He did refer Bennett’s new social legislation to the Canadian Supreme Court, which determined that most of its important provisions were unconstitutional. King’s government ratified a new trade agreement with the United States, the negotiation of which Bennett’s Conservatives had initiated. King did not push for any new social initiatives, but he did succeed in winning the approval of the provinces for a constitutional amendment giving the federal government the power to enact unemployment insurance legislation.
Canada’s economy did not improve as the 1930’s dragged on; in 1937, it worsened as a new depression materialized. The amount of personal suffering and the number of institutional bankruptcies grew. In response, King appointed the Royal Commission on Dominion-Provincial Relations,
In the interim, under King’s guidance, the federal government became more active in setting up social programs. By 1938, it was financing a variety of work projects, supporting a costly training program for youth, and contributing substantial subsidies to house building and other construction projects. By themselves, neither the increased number of social programs nor the Rowell-Sirois Commission’s efforts had much impact on ending the Depression. Government programs did not bring an end to the lengthy Depression; the end came only when war broke out again.
The onset of World War II did for Canada what nothing else had been able to: It spurred the economy and created a demand for Canadian products. Bennett and King perhaps had done the best they could under trying circumstances, but the depth of the Depression stymied them as much as it did their counterparts throughout the world. The war may not have been the solution that most governments wanted, but it did put the worldwide economy back on track. Canada regained its economic strength and put to rest the most frustrating decade in its history.
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Brebner, John Bartlett. Canada: A Modern History. Rev. ed. Ann Arbor: University of Michigan Press, 1970. A comprehensive, readable history of Canada. -
Brown, Craig, ed. The Illustrated History of Canada. 4th ed. Toronto: Key Porter Books, 2003. Easy-to-follow history of Canada features numerous photographs and other illustrations. -
Creighton, Donald Grant. Dominion of the North: A History of Canada. Rev. ed. Toronto: Macmillan of Canada, 1972. Focuses on significant events in Canadian history. Provides useful context and background for the events of the Depression years. -
McInnis, Edgar. Canada: A Political and Social History. 4th ed. New York: Holt, Rinehart and Winston, 1982. Focuses on the sociological impacts of historical events in Canada. -
McMenemy, John. The Language of Canadian Politics: A Guide to Important Terms and Concepts. 3d ed. Waterloo, Ont.: Wilfrid Laurier University Press, 2001. Collection of more than five hundred brief essays on a wide range of topics related to the Canadian system of government, Canadian political history, Canadian laws and legal history, and more. -
Riendeau, Roger. A Brief History of Canada. 2d rev. ed. New York: Facts On File, 2006. Concise history includes discussion of Canada’s difficulties during the Great Depression.
King Era in Canada
Hoover Signs the Hawley-Smoot Tariff Act
Bennett Era in Canada
Formation of the British Commonwealth of Nations
Ottawa Agreements
Canada’s First Major Socialist Movement
Reciprocal Trade Act