Chapter 8. The Economy since 1920
Two weeks after the start of the Great War the Panama Canal opened. In the 1920s, new grain elevators appeared along the Great Lakes and on Vancouver’s waterfront, a sign of the expanding market the canal created for the foremost of Canada’s staple exports: wheat. In the same decade, new processes enabled the growth of the pulp and paper industry and hydro-electricity became an industry in its own right. The suburbanization that would characterize the post-WWII years was evident in the 1920s as well, as new houses and early electric appliances took the place of wood and coal stoves and ice-boxes. Ownership of the newest communications innovation — the telephone — leapt from one-in-four households in 1921 to three-in-four by 1931; the electric radio very nearly kept pace. The 1920s also saw an increase in Canadian trading with the United States. One consequence of this trading was the acceleration of the automobile industry and the extension of car-ownership to more and more Canadians. Governments borrowed heavily to build the infrastructure needed to support automobile ownership, and cities started reshaping their streets to facilitate private transportation — often at the expense of public transportation. The 1920s were, in many respects, the defining decade of the 20th century.
It is easier to speak with confidence about events nearly 100 years ago than in the last decade or two. Historians demonstrate a reluctance to weigh in on the recent past because the questions it raises are unsettled, the sources one needs to tap are as yet unavailable, and the measures one might apply not fully clear. This is nowhere more the case than in economic history. What can be said for sure about the Canadian economy since 1920 is that it experienced three major watersheds: the Depression, the post-war boom, and the disruptions associated with the post-industrial era. Some constants remain throughout this period. The Atlantic provinces continue to struggle economically; for them, Confederation has not paid off as well as it might have. Dependence on staple products has not gone away; for every BlackBerry or graphic arts design studio, there is a boxcar of coking coal headed to a ship bound for Japan or China, a pipeline full of oil coursing its way to the American Midwest, and millions of bushels of grain — or perhaps rapeseed or soy — heading into the Atlantic or Pacific. Consumerism, which appeared first as a hopeful engine of growth, defined the 20th century and continues to assert itself in the 21st. Although blue-collar wages have not continued their mid-century growth, the need for highly technical skills has redirected students into fields where their post-secondary education may secure them middle-class salaries, or at least will acculturate them to middle class values and spending habits.
The role of population in this story is quite possibly the most critical piece. The impact on Canada of two World Wars was serious but nothing as bad as it was on Britain, Germany, the USSR, and Japan. What’s more, as a thriving economy in a world of badly ruptured economies, Canada was once again a highly attractive destination for immigrants after 1945. Without the sort of food and fuel shortages that bedeviled other nations, Canadians were well fed and warm. The baby boom, however, rounds this out. Without prior planning and largely by serendipity alone, the baby boom provided a market for family-oriented products like suburban homes and washing machines, bicycles, and station wagon cars. More than that, the timing was ideal in that all but the latest of the baby boomers came into the job market during a rising economy. They could access high school and higher education like no previous generation, and these advantages paid out in better wages and salaries. Working people also could find work from an early age in the resource extraction industries. This created a generation with disposable income and the ability to fire up the consumer economy. Their accumulation of wealth over a lifetime continues to have a rising effect on the Canadian economy, even as they pass those savings onto their heirs. It takes little to imagine what a baby boom born into a declining economy would look like. (Indeed, one gets a sense of what might have happened in Canada by looking at baby boomers in the underperforming economy of Great Britain in the 1950s.) Doug Owram has written that, in terms of opportunities, the baby boomers were “born at the right time.” As regards the needs of the economy, the same is true.
Auto Pact: The Canada-US Automotive Products Agreement was signed in 1965. It removed tariffs on vehicles and automotive parts traded between Canada and the United States, creating a much more dynamic Canadian automobile sector and improving the trade deficit in that sector.
Bank of Canada: Canada’s central bank, introduced by R.B. Bennett, January 1935, as part of a federal government economic intervention.
Battle of Ballantyne Pier: 18 June, 1935; a violent confrontation between striking Vancouver dockyard workers and a force made up of city police, provincial police, and RCMP.
Black Tuesday: 24 October, 1929 (a Tuesday) was the day the New York Stock Exchange crashed, beginning the decade-long Great Depression.
Bloody Sunday: Sunday at daybreak, 19 June, 1938, while the Vancouver Police peacefully evacuated the Art Gallery (occupied by unemployed protesters), the RCMP stormed the Post Office with tear gas and truncheons. A window-smashing campaign followed, and hours later, a demonstration of support took place at an East End park where 10,000 to 15,000 locals gathered. Many were hospitalized that day.
boondoggles: Meaningless routine work, associated with “work relief” for the unemployed, intended to keep them busy but not necessarily productive.
Bretton Woods: Established in July 1944, a system of institutions, principles, and processes by which the international monetary system could be managed. The Bretton Woods system lasted until 1971 when the United States ended the convertibility of the dollar to gold.
brownfield projects: Civic projects that re-purpose (sometimes at enormous cost) or rehabilitate industrial spaces for post-industrial use.
Canadian Wheat Board: Canada’s Marketing Board for wheat and barley was introduced by R. B. Bennett in July 1935 as part of a federal government economic intervention.
Capital markets: A combination of institutions that enable the buying and selling of money through instruments like loans and securities.
cellular: A telecommunications system involving a wireless connection. Cellular telephones first became available to the public in the mid-1980s.
centrifugal federalism: Federalism as a dynamic process of decentralization and recentralization, or centrifugal versus centripetal forces.
command-led economy: An economic order in which government is the principal buyer of goods produced, for itself or for distribution. See demand-led economy.
commercialization: In late 20th century post-secondary education, the search for opportunities to develop revenue streams by taking new ideas to market.
consumer durables: Products that last a long time and which consumers do not have to buy often, for example, cars, furniture, and appliances.
Corn Laws (1794-1846): A result of population growth and an economic downturn at the end of the Napoleonic Wars; tariffs and restrictions were imposed on imported grain (to Britain), which increased prices in an attempt to give domestic producers an edge.
creative economy: In the late 20th century, the idea that the economy was shifting away from an industry-dominated model to one in which ideas and creativity would matter more.
deindustrialization: The process of moving away from an old-style industrial order, which typically involves the shuttering of declining industries.
demand-led economy: An economic order in which the free market dominates and in which industries and consumers are the principal buyers of goods, thereby determining what goods will be produced. See command-led economy.
dole: Colloquial term for “relief” or welfare payments.
dot-com bubble: A late 20th, early 21st century investment frenzy based on advances in Internet-based commerce that burst with the collapse of the market in 2000, which crippled growth in the sector for several years.
Dust Bowl: Describes the drought conditions that occurred across the prairies and plains of North America in the 1930s and the concurrent poverty associated with the economic depression.
equalization: Refers to programs and policies geared to redistribution of wealth between provinces to ensure a comparable level of services and quality of life in all parts of Canada.
forward linkages: Other industries are developed or expanded to help to link a product or staple export from the suppliers to the customers, as part of the distribution chain, for example, transportation, grain elevators, and port facilities.
Free Trade Agreement (FTA): Between Canada and the United States; signed in 1988, and brought into effect in 1989, the FTA created a single market for most goods and services.
garden city: A movement among city planners beginning in the late 19th century imposed order on new communities, including extensive greenspace and boulevards. A garden city is simultaneously modernist and antimodernist.
gold standard: In monetary policy, the linking of a nation’s currency to the value of gold, which is also called the gold exchange standard. Canada (and Britain) abandoned the gold standard at the start of the First World War, resumed using the system in 1926, and then left it permanently in 1929.
Gross Domestic Product (GDP): The value of all goods produced in a country during a specified period of time.
have-not (provinces): As opposed to “have” provinces, the prosperity of “have-not” provinces is below the average for the country as a whole; equalization payments were designed to address these inconsistencies.
hobo jungles: Homeless men’s camps, usually in marginal spaces in cities and towns, proliferated during the 1930s Depression.
information age: A view of the post-industrial economy in which digitized information is the basis of a new economic order.
International Monetary Fund (IMF): Created at Bretton Woods in 1944 to work with the World Bank to reinvigorate post-war economies by achieving currency stability, stimulating international trade, and rescuing national economies in distress.
Keynesian economic principles: Named for the British economist John Maynard Keynes, it broke with orthodox thinking by advocating government spending during downturns so as to stimulate the economy; these principles also encouraged aggressive taxation during times of prosperity to offset recovery-era spending. Resisted and rejected by orthodox economic thinkers and conservatives who deplore the idea of a large, bureaucratic, and interventionist state.
knowledge economy: In the late 20th century, the trade in intellectual property and educational property; the preeminence of technological and other kinds of knowledge and information as economic drivers.
Laurier boom: The period of economic and demographic growth that coincided with the coming to office of the Laurier Liberals in 1896; it concluded in the period 1912-1914.
Maritime Rights: An interwar-era political common front of New Brunswick, Prince Edward Island, and Nova Scotia that argued for greater federal support for the regional economy.
Marshall Plan: Also called the European Recovery Plan (ERP); an American program giving billions of dollars of aid to rebuild European economies after WWII, in part to restore markets but also to offset the appeal of Communism.
mercantilism: The system of economic relations established between European empires and their colonies; emphasis is on the use of merchants in the home country to establish production in a colony of largely unprocessed goods that would be shipped to the home ports; leaves colonies economically dependent and underdeveloped.
monetarism: In macroeconomics, the theory that the money supply and central bank policies are key to understanding inflation and fluctuations in GDP. By controlling the money supply, monetarists argue, one can contain inflation. One instrument for achieving these goals is to raise interest rates — making money more expensive — and thereby reducing its velocity. Monetarist policies were introduced along with austerity measures in Britain under the Thatcher government from 1979. Similar efforts (without austerity) were attempted in the United States under Ronald Reagan. Both were influential on Canadian fiscal policy.
National Energy Program (NEP): Controversial legislation introduced under Pierre Trudeau’s administration in 1980-1985. The thrust of the policy was to secure Canadian oil for Canadian markets in eastern Canada (hitherto dependent on cheaper — but, in the context of the second OPEC shock, insecure — imported oil). Prices for Albertan oil in Quebec would be lower than in the United States (to which most of Canada’s oil was sent), which meant lower profits in the oil patch.
neo-liberalism: An ideological position that favours smaller government, deregulation, freer trade, and lower taxes; and is tied to monetarism.
New West: Term used to describe the Prairie provinces following their move from a monocultural economy based almost entirely on grain production and export to an economy with diverse and more valuable bases.
North American Free Trade Agreement (NAFTA): 1994; trade pact with the United States and Mexico. Expands on the Free Trade Agreement (FTA) signed in 1988.
North Atlantic Treaty Organization (NATO): Established by the North Atlantic Treaty of 1949 that brought together the Treaty of Brussels nations (Britain, Belgium, Netherlands, Luxembourg, and France), Canada, the United States, Iceland, Denmark, Norway, Italy, and Portugal as a mutual defense league — an attack on one would be an attack on all.
off-shore production: Manufacturing of goods or parts in another country.
oil patch: Shorthand for Alberta’s oil industry, from mining and processing to sales and financing, from the field to the head offices in Calgary and Edmonton.
On-to-Ottawa Trek: Beginning in June 1933, the Relief Camp Workers’ Union mobilized the unemployed in British Columbia to abandon the camps and put their issues directly before Prime Minister Bennett, travelling across Canada on railway boxcars. The Trek started in Vancouver but was stopped in Regina and culminated in a riot.
Organization of Petroleum Exporting Countries (OPEC): Established in 1960 as a regulating body for the oil industry’s biggest producers, most of which were located in the Middle East and Africa. By 1970 decolonization had advanced so far that emerging countries sought greater control over the value of their oil exports. OPEC responded by setting higher prices, which triggered the first “oil shock” of the decade.
outsourcing: The export of jobs; part of the process of deindustrialization.
post-war settlement: A suite of agreements between employers, unionized workers, and the state in 1946; allowed for “responsible” labour activity while prohibiting excessive militance; committed employers and the state to recognizing unions and supporting the checkoff of union dues. See Rand Formula.
Privy Council Order PC 1003 (1944): Allowed unions for the first time to engage in widespread organization and to bargain collectively for job contracts.
province building: The strategy pursued by some provinces to become more substantial players in their jurisdictions by investing in economic expansion and engaging in a growing number of social programs. Associated with the post-WWII period.
Rand Formula (1946): Based on a landmark legal ruling by Mr. Justice Ivan C. Rand, the Rand Formula provided unions with a pathway to gain legitimacy and long-term stability if, but only if, they agreed to conduct themselves “responsibly.”
Reaganism: Also Reaganomics; associated with the neo-liberal (also neo-conservative) goal of reducing the size of government, expenditures of government, and size of personal and capital gains taxes; tied, as well, to monetarism.
recession: Generally a down-cycle in economics characterized by price inflation, rising unemployment, industrial failures, and lower household income.
Regina Riot: 1st of July 1935, at the conclusion of the On-to-Ottawa Trek, a rally called by the Relief Camp Workers’ Union in Regina’s Market Square culminated in a confrontation between the Trekkers and their supporters and the RCMP.
relief camps: The federal government‘s response to the massing of unemployed single men in Vancouver early in the 1930s Depression; in 1932, a nationwide system of generally quite isolated camps run by the Department of National Defense that became hotbeds of radical opposition to government inaction on the economic crisis.
reparations: At the end of the First World War, Germany accepted responsibility for acts of aggression leading to the conflict; the Treaty of Versailles (1919) ordered Germany to make extensive payments as a consequence. Both the idea of war guilt and reparations became a contentious issue in Germany; the country’s inability to pay the enormous reparations fees led to severe international economic instability, particularly when Germany sharply devalued its own currency to pay the debts more easily.
rust belt: Former heavy manufacturing regions that have experienced deindustrialization.
service sectors: Those parts of the economy that support the financing, governing, feeding, administering, training, and health of the rest of the economy and the population. Examples include government bureaucracy, education, restaurants, police, and financial services. Also called the “tertiary sector,” as distinct from the primary (resource extraction) and secondary (processing and manufacturing) sectors.
Silicon Valley: Term used to describe the concentration of high-technology industries in the Bay Area of California, particularly after the 1970s.
stagflation: Stagnant economic growth coupled with persistently high rates of inflation.
staple economy: The staples theory argues that an economy dominated by valuable and traditional commodities will be shaped — in terms of the larger economy, the polity, and the society — by the needs and nature of the primary staple(s). Also a model for understanding the political economy of a country in which staples are fundamental to the export economy. An approach developed by historians Harold Innis and W. A. Mackintosh.
superpower: A leading economic and military power with a nuclear arsenal; a cold war era term applied mainly to the USSR and the United States.
Thatcherism: Simultaneously the approach taken by and leadership style of British Conservative Prime Minister Margaret Thatcher, and the array of anti-trade union, pro-free market policies and economic philosophies that were popular in the Conservative Party from the 1970s through the 1980s; contains some elements of neo-liberalism and what has been described as Reaganomics.
trickle-down effect: In neo-liberal economics, particularly Reaganomics, the idea that reducing taxes on the wealthy and corporations will result in their increased profits “trickling down” to lower socio-economic classes. Referred to also as “free market economics” and “voodoo economics.”
VE-Day: Victory in Europe Day, 7 May 1945; marked the end of WWII in Europe.
western alienation: The growing sense from the mid-20th century of the four western provinces that Canadian political machinery and culture favoured Ontario and Quebec and that federal economic policies were devised to favour central Canada over the West.
“wildcat” strikes: Labour disputes launched by workers without the authorization or permission of the union leadership; an unofficial strike that does not follow the established procedures for taking industrial action.
World Bank: Created at Bretton Woods in 1944 to work with the International Monetary Fund to reinvigorate post-war economies. Dominated by the United States, it was used also as an instrument to reduce communist influence in western Europe.
World’s Fair: Alternatively, World Exposition, hence “Expo”; first organized in the mid-19th century to showcase industrial and technological advances; the first “Expo” was hosted in Canada in 1967 at Montreal, by which time the fairs were more about national showcases and culture; Canada’s only other Expo was held in Vancouver in 1986.
World Wide Web: A network of information connected via the Internet; emerged in the late 1980s.
Short Answer Exercises
- What is the staples economy and why does it matter in Canadian history?
- What are capital markets and how were they organized in Canada in the 19th and 20th centuries?
- What causes economic upturns and downturns? What were the most significant peaks and troughs in Canadian history to the 1940s?
- In what ways was the “New Economy” a continuation of the old economic order in Canada?
- What major changes occurred in shipping, fisheries, and fossil fuel production?
- What were the major differences between the economy before and after WWII?
- What was the Post-War Settlement and how did it impact the Canadian economy?
- To what extent was 20th century Canada not one economy but several?
- What is neo-liberal or neo-conservative economics? Why did it arise when it did in the late 20th century?
- What indicators suggest that we have left the industrial age behind?
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Forbes, Ernest. “Consolidating Disparity: The Maritimes and the Industrialization of Canada during the Second World War.” Acadiensis 15, no. 2 (1986): 3-27.
McInnis, Peter S. “Planning Prosperity: The Debate on Postwar Canada.” In Harnessing Labour Confrontation: Shaping the Postwar Settlement in Canada, 1943-1950 (Toronto, ON: University of Toronto Press, 2002). 47-85.
Marchildon, Gregory P. “The Prairie Farm Rehabilitation Administration: Climate Crisis and Federal–Provincial Relations during the Great Depression.” Canadian Historical Review 90, no. 2 (2009): 275-301.
Srigley, Katrina. “Stories of Strife?: Remembering the Great Depression.” Oral History Forum/d’histoire orale 29, Special Issue (2009): 1-20
Wright, Miriam. “‘Building the Great Lucrative Fishing Industry’: Aboriginal Gillnet Fishers and Protests over Salmon Fishery Regulations for the Nass and Skeena Rivers, 1950s-1960s.” Labour/Le Travail 61 (2008): 99-130.