Great Depression in Canada

The Event Large-scale economic downturn

Dates 1929–1941

The Great Depression marked a significant change from the economy that had characterized the 1920s. During that decade, business had boomed, Canada’s exports rose to previously unknown levels, and investment soared. The break, marked by the collapse of the stock market in New York, ushered in a decade that was, in many respects, the opposite of the decade of the 1920s.

One of Canada’s major twentieth century historians, Harold Adams Innis, famously characterized the country’s economy as a “staples economy.” By that he meant that in the world economy, and especially in world trade, Canada was a major producer of raw materials and that these products were then exported to other countries, where they were manufactured into products that ordinary people could use. Canada’s major export, wheat, was turned into bread and other food products by other countries. Canada was a major producer of aluminum ore; other countries turned the aluminum ore into more elaborate manufactured goods. Canada was one of the world’s major miners of gold, and the trees that it harvested from the woodlands in northern British Columbia provided the raw materials for a large number of the houses built in the United States.

These products earned a return only if they were in demand elsewhere in the world. All of them—even the wheat cascading off the Prairie Provinces—depended on a vibrant world economy. Many of them could find a consumer market only if there were businesses able to take the raw materials and fashion them into products consumers needed.

During the 1920s, vigorous investments had been made in many industries, predicated on the availability of the raw materials needed for manufacturing; as a result, many businesses carried a heavy load of debt. As long as demand kept rising and financing continued to be available, these businesses prospered; but with the collapse of the stock market in the United States, demand for the raw materials that Canada produced fell dramatically. When the 1930s began, the entire world market declined to a fraction of what it had been in the 1920s. In 1930, the Canadian economy descended into the Great Depression. It continued to decline until 1933, after which it began a modest recovery that lasted until 1937. That year a major drought occurred in the Prairie Provinces, and the collapse of the wheat market hurt the economy. The Canadian economy began a slow recovery in 1938, but only with the outbreak of World War II, in 1939-1940, did a full-scale recovery occur.

Regional Effects of the Great Depression

The Maritime Provinces—Nova Scotia, New Brunswick, and Prince Edward Island—were less affected by the Great Depression than other parts of Canada, but this was largely because they had not shared as much in the prosperity of the 1920’s. Nova Scotia lost some of its ocean trade simply because there was less of it; the demand for the coal and iron deposits in Nova Scotia and Cape Breton Island dropped sharply, resulting in a rise in unemployment. Prince Edward Island was largely agricultural, and it remained so; however, farms were small, and their owners fell back on subsistence. For the most part, New Brunswick had small businesses except for the newsprint industry, which had grown dramatically in the 1920’s because of the small trees growing in the local forest. During the Depression, this industry had to scale back its output dramatically, often to only 50 to 60 percent of capacity.

The central provinces, Quebec and Ontario, had more diversified economies than the Maritime Provinces. Quebec’s French farmers went on with their subsistence agriculture, but other jobs, especially in the textile industry, were hard to come by. Ontario had become an ally of the US auto industry, and the job shortages there led to considerable unrest. However, Canadian auto workers earned a major victory when a strike against General Motors in Oshawa led to recognition of the auto workers’ union as the legitimate representative of those workers; this matched the achievements of the US auto workers.

The most drastic effects of the Great Depression were felt in the Prairie Provinces. During the 1920s, Canada had become one of the five great wheat exporters in the world—the others were the United States, Argentina, Australia, and the Soviet Union. World demand for wheat plummeted in the 1930s, and Canada, whose wheat farmers produced far more wheat than could be consumed at home, lost out enormously. Wheat that had sold for one dollar per bushel in the late 1920s fell in price, first to fifty-three cents, and then below that figure. At the same time, the wheat farmers were hammered by persistent droughts, especially in 1933 and in 1937. Farm income fell by at least one-half and by as much as four-fifths in the three Prairie Provinces. In parts of southern Saskatchewan, planting or harvesting wheat became impossible. Many of the prairie farmers had made significant investments in agricultural machinery in the late 1920s, and they became saddled with debts they could not repay. Significant numbers gave up their farms and joined a great army of unemployed all across Canada.

With so little agricultural land, British Columbia was chiefly affected by the decreased demand for wood products and some minerals. Because of this, left-wing activism flourished in the province, attempting to energize either the provincial government or the national government into doing something about the economy.

Government Response to the Great Depression

As unemployment rose, so did the readiness of the government to respond. Among local, provincial, and national levels of government, disagreement existed over responsibility toward the poor and unemployed. In the end, relief was provided for families but not for individuals. The dominion government made substantial loans to the provinces, which in turn passed on the financing to the municipalities. The latter struggled throughout the Depression, because the cost of relief had to be borne at a time when local income, which came largely from real estate taxes, was itself depressed. Many families feared the social impact of relying on relief payments and relied on them only when desperate.

In the first half of the 1930s, the national government was dominated by the Conservative Party, which was headed by Richard Bedford Bennett. He felt his responsibility was to cement the national foundations of the country, and relief in some of the early efforts he sponsored was a by-product. Under Bennett, the dominion government took responsibility for projects that appeared to enhance Canada’s national reach, sponsoring such programs as the creation of a national airline and the establishment of what later became the Canadian Broadcasting Corporation.

When the dominion government had taken over the privately owned eastern railroads and formed them into the Canadian National Railways during the 1920s, it had guaranteed the group’s debt. During the 1930s the government had to pay the interest charges on this debt, which rose from 1/3 of federal revenues in 1929 to 33 2/3 by 1933–4; it had even tapped the provinces for part of these payments. Given Canada’s immense geographic size, the railroads proved to be both national integrators and sources of employment.

As the decade progressed, the fact that the Great Depression was far more than a temporary phenomenon became clear. Prime Minister Bennett felt great pressure to adopt more detailed measures to help the unemployed. The dominion government shepherded through parliament a Minimum Wages Act, the Limitation of Hours of Work Act, the Weekly Rest in Industrial Undertakings Act, the Unemployment and Social Insurance Act, and the Natural Products Marketing Act. These efforts proved unavailing, because the British Privy Council, which had granted self-government to Canada in 1931, declared all these acts to be unconstitutional.

Local authorities refused to assume economic responsibility for single men. As the Depression worsened, this army of vagrants generated widespread unease, and the federal government created some “relief camps,” more or less army camps, for these single individuals. The bulk of these camps were located in the West; and unrest grew among the residents during the summer of 1935. Some of the leaders organized a march on Ottawa that managed to get from Vancouver to Regina, Saskatchewan. There they were confronted by the Royal Canadian Mounted Police and forced to disband. The William Lyon Mackenzie King government closed the camps in early 1936.

The one financial instrument still available to the dominion government was the tariff. The US government had responded to the enormous falloff in economic activity by passing the infamous Smoot-Hawley Tariff, which sharply reduced Canadian exports (especially of agricultural products) to the United States. European countries had raised their duties on wheat, so that Canadian exports to the continent dropped off dramatically. Even Great Britain resuscitated an earlier tariff that taxed imports of agricultural products and raw materials. Canada responded to these measures by increasing its own tariffs, but because its economy was a net exporter, it lost more than it gained. In 1932, at the Ottawa Conference, Great Britain gave Canada preferential treatment for a number of major Canadian exports, notably wheat, lumber, apples, and bacon. The United States-Canada trade agreement of 1935 returned the duties on major Canadian exports to the US to the levels at which they had been before Smoot-Hawley.

Impact of Business and the Growth of Radicalism

Although the Great Depression impacted all parts of Canadian society, it affected businesspeople the least. Businesses that had made substantial investments during the 1920s experienced difficulties, and some were forced to go out of business. However, if they were able to retrench and had not acquired too much debt, they were able to survive. Their chief problem was a significant decline in prices, which impacted their ability to secure a profit. Workers who retained their jobs benefited from the decline in prices. Estimates indicate that of those who managed to keep their jobs, as many as 20 percent had incomes of at least $1,500, and such people survived well. Canada’s economy had started the conversion to service jobs, and for those who had entered the service economy, the downturn was survivable. The chief victims were the wage workers and those whose careers depended on their own labor, such as farmers.

By the mid-1930s, the Depression had generated a significant labor movement. The unions, some of which were represented by the Trades and Labour Congress of Canada, began organizing a series of strikes in 1936 and 1937. Although most of these union actions were directed at preventing wage cuts by industrial employers, the strike called against the General Motors operation in Oshawa led to recognition of the union’s right to represent the workers.

The distress of the unemployed provided a healthy stimulus for radical ideas. Formal adherence to communism was banned in section 98 of the criminal code, and some agitators were jailed under this provision. There was a fear of the danger of communism in the business community. The majority of Canadians who found radical ideas attractive professed allegiance to the socialism advocated by the British Labour Party; drawing on the interest of many farmers in cooperative organization, these forces found formal expression in the program of the Social Credit League, chiefly in Alberta. In August of 1935, the voters of Alberta elected the Co-operative Commonwealth Federation to lead the province. However, when the party attempted to enact legislation to put some of its ideas into practice, the dominion government disallowed the legislation. The Liberal Party repealed section 98 of the criminal code, so that advocates of communism could no longer be prosecuted under it, but otherwise they did little to put into action some of the socialist theories that had won a radical following.

Impact

The period of the Great Depression in Canada has sometimes been referred to as “the lost decade.” Although its impact was felt throughout the country, the most dramatic effect was seen in the Prairie Provinces, where the wheat economy was battered by a loss of foreign markets and by devastating drought. Canada was capable of producing far more wheat than the world was prepared to buy, and the loss of that business reverberated throughout the country. Things reached their lowest point in 1933. In 1934, a slow recovery began, which took a hit when drought struck the prairies once more in 1937. In the end, only the outbreak of World War II, and the resulting need for agricultural products and raw materials, restored the Canadian economy to health.

Bibliography

Campbell, Lara. Respectable Citizens: Gender, Family, and Unemployment in Ontario’s Great Depression. Toronto: U of Toronto P, 2009. Print.

Creighton, Donald Grant. Dominion of the North: A History of Canada. Boston: Houghton-Mifflin, 1944. Print.

Finkel, Alvin. Business and Social Reform in the Thirties. Toronto: Lorimer, 1979. Print.

Horn, Michiel. The Great Depression of the 1930s in Canada. Ottawa: Canadian Historical Assn., 1984. Print.

‗‗‗‗‗‗‗, ed. The Dirty Thirties: Canadians in the Great Depression. Toronto: Copp Clark, 1972. Substantial compendium of events related to the Great Depression.

Marr, William L., and Donald G. Paterson. Canada: An Economic History. Toronto: Macmillan of Canada, 1980. Fact-filled account of Canada, with a plethora of economic details, graphs, and lists.

Safarian, A. E. The Canadian Economy in the Great Depression. Toronto: University of Toronto Press, 1959. A statistics-based account of the Great Depression in Canada.

Watkins, M. H., and H. M. Grant, eds. Canadian Economic History: Classic and Contemporary Approaches. Ottawa: Carleton University Press, 1993. This volume contains articles by numerous scholars on various aspects of twentieth century Canadian economic history.