Chapter 8. The Economy since 1920
History has not been kind to the Maritimes. The liberal, progressive vision of an environment in which men and women would be freed from arbitrary government (and thus able to better pursue their fortunes and best interests) didn’t play out as hoped. In the case of Nova Scotia, historians Ian McKay and Robin Bates have pointed to “the province’s frustratingly non-linear history”:
[Nova Scotia’s] nineteenth-century enlightenment did not (at least by most conventional measures) eventuate in a twentieth-century liberal society of contented and prosperous individuals, but in a de-industrializing province scarred by mass unemployment, poverty and out-migration.
Even so, in the 20th century, Nova Scotia was the most successful of the Maritime provinces. The addition of Newfoundland in 1949 to what was thereafter the “Atlantic Provinces” did nothing to change that. It just meant there was one more province going to Ottawa with cap in hand.
Early 20th century changes in the Atlantic Rim economy took a heavy toll on the Maritimes and Newfoundland. The decline in shipping using wooden ships was compounded by falling markets for (and retreating sources of) lumber. The region’s traditional sources of trade were simultaneously undergoing change. The West Indies were not the source of cane sugar and rum that they once were, having been overtaken by sugar beet production in the United States, Canada, and Continental Europe, and the opening of distilleries closer to markets. With less to trade, the Maritime connection with Britain’s Caribbean colonies declined. Other changes in the marketplace worked against the Atlantic provinces as well, the foremost of which was the opening of the Panama Canal. British Columbian (and American West Coast) timber, paper products, and tinned salmon could now reach the major markets of the American East Coast more directly, faster, and cheaper than they could by rail via Montreal, Moncton, and Halifax. Even the Annapolis Valley apple industry was affected: with very good sales to Britain after the war, local producers saw no reason to diversify their crop away from an inexpensive but not very versatile variety; the arrival of Okanagan species along with other competitors’ hard fruits forced the Maritime orchardists to undertake an expensive and time-consuming readjustment, which involved tearing out older trees and replacing them with newer varieties.
The Great War provided a boost to the regional economy, but it sank severely thereafter. British demand for fish sagged, as it did in other markets; worse news, some Scandinavian countries were making headway into traditional markets for Maritime fish. Newfoundland fleets kept their costs razor thin (possibly to their own detriment) and thereby outcompeted their Maritime rivals for a while. Then, in 1921, the Americans established a tariff on imported fish. There was some recovery in the fisheries in the two decades that followed, particularly in the fresh fish market, but this can be read as a bad sign: American buyers were scooping up Atlantic region fresh fish for packing purposes. Processing and canning opportunities were thus being exported to the States, as Maritimers and Newfoundlanders failed to build the forward linkages of canneries and packing houses.
Nova Scotia’s industrial leadership in coal and steel production also began to suffer after the Great War. Demand for steel was down in peacetime; there was a postwar surplus of shipping capacity, and the railroad-building sector on which the industry was founded was no longer crying out for rails and rolling stock. Jobs in the sector fell by 85% between 1919 and 1921. Coal output shrank as a consequence, and was further hit by competition from natural gas and oil as home-heating fuels, and by electricity as a fuel for lighting. Employment levels in Cape Breton’s industrial hubs began a long-term decline, which affected the province and the Atlantic region as a whole.
A large part of the Atlantic economic crisis was structural. The industrial economy of Nova Scotia was geared toward large corporate consumers during wartime, such as railways and government. This was much closer to a command-led than a demand-led economy. The same could be said of the fisheries that produced tons of material purchased for processing elsewhere. Local urban markets were very small compared to the many cities of central Canada. Even Halifax, hit hard by the 1917 harbour explosion, slipped out of the list of the top 10 largest cities in 1921. Thus, local demand for manufactured consumer goods was negligible, and shipping costs to central Canadian markets (especially in the face of iniquitous freight rates) made a transition to consumer manufacturing nonviable without subsidy.
Regional sentiment also was bitter at the apparent advantages Ontario and Quebec had horded for themselves. By annexing large chunks of what had been Rupert’s Land, the two provinces achieved their current shape and access to a multitude of natural resources. Likewise Manitoba and the two new prairie provinces had been gifted with large chunks of the North West Territories. Nothing similar came the way of the Maritimers who were obliged to work with the resources they had to hand in 1867.
As their options narrowed, so did their strategies for recovery. Workers in Cape Breton waited for mine owners to improve their conditions, for markets to recover, and for governments to intervene. None of those prospects was likely in the 1920s, and especially not likely in the 1930s. Weakened before 1929, the regional economy was crippled by the Depression.
One bright spot in the region was the silver fox fur industry in Prince Edward Island. Beginning in the 1890s, the raising and processing of captive foxes made fortunes for some in PEI and provided small farmers with the means to survive the Depression. Sales were divided between American urban markets and all of Western Europe. The outbreak of war, however, closed the European option, and wartime austerity took a bite out of North American demand. Subsequent changes in fashions meant that the fox industry never fully recovered.
A fleeting but vocal Maritime Rights movement caught on in the interwar years, but resulted in few concessions from Ottawa. As chance would have it, the prime minister in the earliest and worst years of the Depression was R.B. Bennett, a native of New Brunswick. He may have been more sympathetic to the Maritimes’ plight than Liberal leader Mackenzie King, or at least he understood the language of the regional economy. Incremental improvements in Atlantic heavy industry could be seen, but this recovery was from a very deep nadir. The election of King’s Liberals in 1935 did little to change matters significantly before the return of war.
As was the case elsewhere, the Second World War brought a return to prosperity. Or at least relative prosperity.
Demand for steel and iron increased dramatically. Ship construction grew at a startling rate, and Maritime shipyards struggled to meet the need for supply. Naval vessels and convoy ships were being sent to the bottom of the Atlantic by German submarines and had to be quickly replaced. Even agriculture recovered nicely in this command-led economy, as did the federal government-sponsored efforts to industrialize food processing. However, the coal sector did not recover fully, and Cape Breton remained the site of conflict between miners’ and owners’ interests, despite federal intervention. The presence of military personnel in the region — in huge numbers — was another economic driver. Army, air force, and naval demand for services and resources provided rare opportunities for Atlantic Canadians. It also strained relations between locals and troops when they were in competition for basic resources like water and food. Those tensions boiled over in Halifax when Victory in Europe Day (VE-Day) celebrations turned into riots. Some of the 18,000 naval personnel stationed in the city looted liquor outlets and smashed store windows while scuffles broke out and civilians took advantage of the confusion to stock up on shoes and clothing.
The Rowell-Sirois Royal Commission on Dominion-Provincial Relations reported, in 1940, that greater efforts were needed to rebuild and redirect the Maritime economy. The outbreak of war put those recommendations to one side, although there was widespread acknowledgement that the WWII wartime prosperity (as in WWI) would not survive the peace. To avoid a return to desperate times, the federal government introduced a package of initiatives, which would not have been conceivable in the political climate of the 1920s or 1930s. What had changed was this: Keynesian economic principles had found widespread support in Canada. Conventional economic wisdom had argued against deficit spending and relief to unemployed Canadians, but the 1930s and the Second World War obliged political leaders to consider a more activist role for government.
There was hope in the Maritimes that this new enhanced role for Ottawa would include transfer payments, improved social welfare grants, and investment in economic stability, if not growth. The relative position of the region was poor by many measures. Despite a greater density of universities than any other part of Canada, primary and secondary education facilities were poor, school completion was low, and literacy levels were dragging down the national average. There were, for example, believed to be 473 schools on PEI, 405 of which were single-room schoolhouses, and 69 of which were in terrible condition. Unemployment rates in the Post-War era were consistently higher in the Maritimes than in any other region. The outmigration of younger people meant that the demographic aging of the remaining population was accelerating. Infrastructure was underdeveloped in much of the rest of the country, but there were no plans in the Maritimes to change that situation, and certainly no means to do so. In short, per capita incomes, education, opportunities, and security were all grossly uneven across Canada and consistently the worst in the East. Measured by virtually any standard of living or quality of life indicator, the Atlantic region fell significantly below any national average.
Addressing Regional Disparities
Two things changed the economic prospects of the region from the mid-1950s (which now included the new province of Newfoundland). The first was the economic boom that Canada as a whole was enjoying in the Post-War era. The Ottawa treasury was in a good position to fund programs that might alleviate the worst problems in the East, and perhaps set some of the economy on an even keel. Regional equalization programs appeared first in 1956. An Atlantic Development Board (ADB) followed in 1962 under Diefenbaker and continued under Pearson. It invested $188 million before being subsumed within the Department of Regional Economic Expansion (DREE) under Pierre Trudeau in 1969. From a Maritimes perspective, Trudeau’s initiative started strongly, but it was quickly sucked under the wheels of counter-separatist politics in Quebec. From a high of 51% of DREE’s expenditures in 1969-1970, the Atlantic Provinces’ share fell to 38% by 1973-1974. Quebec’s share rose in the same period from 12 to 39%.
Second, the Atlantic provinces were responding, mustering, and presenting their case more effectively. The Atlantic Provinces Economic Council (APEC), established in 1954, was led by non-partisan, and largely private, individuals (that is, not politicians). The APEC coordinated much of the information and argument behind a more comprehensive and strategic approach to remedying the region’s continuing malaise. East Coast politicians followed APEC’s lead and mounted what has been described as the “Atlantic Revolution.” What changed the most in this regard was the tenor and effectiveness of political lobbying, although economic performance measured by GDP barely budged.
There was, to be sure, new investment in the regional economy. Hydroelectricity projects were the main target of the ADB and DREE grants, including the massive Churchill Falls Dam in Labrador (which opened with much promise but was instantly locked into a money-losing contract with Quebec). The principal problem was that the economic strategy was backward-looking: with the exception of pulp and paper mills, most of the growth took place in 19th century sectors like mining, fishing, agriculture, and lumber. Tourism was the exception, the one newish sector that became increasingly important. There was change as well in the farming sector, which was marked by a trend toward consolidation, as smaller and less financially viable operations were sold to make way for larger and more mechanized properties. Something similar was happening across Newfoundland as “resettlement” initiatives resulted in the depopulation (and effective extinction) of about 300 small and marginal outports between the 1950s and the 1980s.
Larger centres were thought more capable of meeting community needs than the small and isolated outports. As well, the shrinkage of the inshore fisheries meant a reorientation toward offshore resources, which were tapped by larger fleets operating out of bigger ports. Similar moves were taking place in Labrador as the Moravian missions consolidated their work with the Inuit. Formal relocation programs ended in the mid-1970s (and there has since been a small but significant reversal of this migration).
In the 1960s and 1970s, Nova Scotia enjoyed something like a surge in industrial diversification. French tire manufacturer Michelin set up works in Granton, near New Glasgow, and expanded production in the late 1970s against a backdrop of labour relations controversy. Swedish automobile-maker Volvo opened an assembly plant in Dartmouth, and began production in 1963. This initiative depended heavily on provincial and federal subsidies, which provoked a diplomatic and legal battle with the United States as a consequence. Nevertheless, Volvo remained a small but significant part of the regional economy until the late 1990s.
Another attempt at secondary manufacturing came in the early 1970s when a “safety sports car” aimed at a specialty market was built in a disused shoe factory in Saint John, New Brunswick. The Bricklin suffered from many design and manufacturing problems, and it failed to make the necessary breakthrough into the American market. The plant closed in 1976. The fate of the Bricklin was echoed in several other regional attempts to build manufacturing capacity. These failures drew a great deal of media attention and criticism, but it was the continuing troubles of the coal mining and steel industries that imparted the most instability to the regional economy.
Newfoundland suffered similar bad luck. An oil refinery opened at Come By Chance in 1971 and closed a little over two years later due to bankruptcy, despite heavy federal and provincial subsidies. The province seemed to catch a break in the late 1970s, however, with the discovery of oil in the Hibernia Field, 300 km southeast of St. John’s on the Grand Banks. Offshore oil exploration had been underway since the 1960s, but it took two oil shocks in the 1970s to make development economically viable. Production would not come online, though, until 1997. In between, efforts to map the field were underway, one of which ended in disaster. In the early hours of 15 February 1982, a drilling platform — the Ocean Ranger — capsized in high seas, resulting in the death of all 84 personnel on board. The findings of a subsequent Royal Commission inquiry into the tragedy were damning as regards personnel training, safety measures, and vessel design. A 20 million dollar legal settlement followed, as did an overhaul of safety practices in the sector. (This event has been the subject of at least two films and a novel, February, by St. John’s writer Lisa Moore in 2009.) Efforts by Newfoundland Premier Brian Peckford to establish exclusive provincial control over offshore resources failed a 1984 test at the Supreme Court, although some ground was regained the next year in the Atlantic Accord. The Come By Chance refinery reopened two years after, a sign of things to come.
Prince Edward Island’s economy diversified in the post-war era, but the gains it made were initially very small. Fox farming collapsed and potato farms dominated the agricultural sector. Although PEI came to lead the potato market in Canada, capturing as much as one-quarter of annual production, this is a high volume and low value crop, exactly the opposite of the fur industry. Reflecting the limited opportunities available in the province, the Islander population failed to grow at a rate comparable to the rest of the country; in fact, it fell from a high point of 109,000 in 1891 to a low of 88,038 in 1931, and recovered slowly through to the late 1960s. Two sectors showed some improvement in the 1950s, and have come to define much of the shape of the PEI economy. The first is the lobster fishery. Lobster meat had to overcome several obstacles to achieve a significant market value, not the least of which was its reputation as poor people’s food. Canned lobster was sold in a variety of markets into the interwar era until the shipment of live lobster to major American urban markets elevated it to the status of a luxury food. The economic downturn of the 1930s impacted the lobster fisheries, but the industry recovered in the 1940s with the availability of more regular air and sea shipment, and advances in refrigeration. Starting in the 1960s, the value of lobster output doubled every 10 years; from 1980 to 2000 it doubled every five years.
The other sector to experience revolutionary change in PEI was tourism. Many factors were involved but perhaps the most important and enduring was the success in Japan of Lucy Maud Montgomery’s novel Ann of Green Gables. Adopted as part of the school curriculum in 1952, the book spawned a globe-straddling tourist industry. An improved car-ferry infrastructure was a further and related advantage in the tourism sector so much so that three new vessels, running from 1969 to 1997, were named the Lucy Maud Montgomery, the Holiday Island, and Vacationland. The fleet was effectively replaced in 1998 by the opening of the Confederation Bridge, connecting PEI to New Brunswick. However, none of these developments did much to alleviate PEI’s relative poverty compared to the other provinces of Canada. At the end of the Cold War, the Canadian Air Force abandoned bases on the Island and these facilities were subsequently exploited by a growing aerospace industry which now claims to have captured a quarter of the value of all exports from PEI. Given the low baseline for exports and the prominence of spuds in that equation, this may not yet constitute a full-blown economic transformation.
The Atlantic region as a whole suffered through turmoil and loss in the fisheries. Although Canada in the 1960s and 1970s finally began to define and patrol its national boundaries at sea — some 340 km from shore — the cod fisheries was already in trouble. Over-harvesting had been underway since the 1950s, and it was believed that a larger Canadian zone would enable conservationist measures to take hold. Instead, foreign competition was replaced by Canadian over-fishing; Canadians were now using larger and more lethally efficient trawlers. A brief collapse in cod numbers in the mid-1970s was followed by a sharp recovery, leading some authorities and fisheries into overestimating the ability of cod to rebuild its numbers. In 1992 the cod population utterly collapsed. The fishery was closed for what was intended to be two seasons to allow for a recovery, but that turnaround did not occur — and still has not occurred to date.
The impact on the Newfoundland economy in particular was disastrous. In excess of 35,000 people worked in the fisheries and processing; it was the largest sector in the economy, and the source of much local culture and identity. The population peaked in 1991 at 586,000, and by 2005, more than 80,000 had moved away, many of them heading to the oil patch of northern Alberta. The cod fisheries crisis and the shift to the crab and shrimp fisheries continues to affect the Atlantic region.
Although the federal government made repeated commitments in the post-WWII era to the idea of regional development, equalization payments, and diversification, its track record has not been very good. An acknowledgement was made in the 1940s that the three Maritime provinces had suffered from discriminatory freight rates and the westward focus of the National Policy. Ottawa began to act on the need to compensate for the disadvantages the region had suffered, and under Diefenbaker (who was, significantly, a Westerner with influential support in the Maritimes), steps were taken to strategically change the situation. Even after the political centre of gravity shifted back to central Canada under Pierre Trudeau, the Liberal ideal of mitigating what were called regional disparities enjoyed support. By the 1980s, however, Quebec separatism and increasing signs of trouble in the manufacturing heartland of Ontario changed the rhetoric and reality of regional economic development. Ottawa concluded — prematurely — that the West and the East were rising on a tide of oil revenues and that the federal focus needed to be on Ontario and Quebec. It cannot be said, therefore, that the Atlantic region enjoyed so much as a single generation of sustained support of the measures designed to retool, redirect, and repurpose the four Atlantic provinces’ economies.
- The Maritime provinces and Newfoundland struggled against external economic factors in the first half of the century, including the loss of markets, technological change, and reorganization of the modern economy.
- Although almost all other provinces directly benefited from the Canadian capture and disbursement of Rupert’s Land, the Atlantic provinces did not.
- WWII economic growth did not outlast the war, and demands were made for equalization or transfer payments.
- Outmigration from the region was made easier in the second half of the 20th century, which drained off a workforce and taxbase.
- Active efforts to reposition the Atlantic region’s economy and to achieve greater equity in Confederation met with limited successes and some prominent failures (including the Bricklin project).
- Newfoundland’s foray into oil production did not begin to produce significant returns until the late 1990s.
- Tourism became an important sector in the region as a whole, but was not large enough to offset major losses in the fisheries.
- Changes in national politics and in the manufacturing heartland of Central Canada in the 1970s and 1980s served to postpone further a coordinated response to Atlantic Canada’s economic shortcomings.
- Codfish, “Newfoundland currency” by Canada Post Corporation, Library and Archives Canada (MIKAN no. 2256000) © Public Domain
- Pit pony and miner in a mine in New Aberdeen by John F. Mailer, National Film Board of Canada. Photothèque, Library and Archives Canada (PA-116676) © Public Domain
- Blue fox ranch, Montague, Prince Edward Island, 1913 by Canada. Patent and Copyright Office, Library and Archives Canada (PA-030116) © Public Domain
- Time series for collapse of Atlantic northwest cod by Wikipedia user Epipelagic © CC BY-SA (Attribution ShareAlike)
- Ian McKay and Robin Bates, In the Province of History: The Making of the Public Past in Twentieth-Century Nova Scotia (Montréal and Kingston: McGill-Queen’s University Press, 2010), 40. ↵
- Margaret R. Conrad and James K. Hiller, Atlantic Canada: A Concise History (Don Mills, ON: Oxford University Press, 2006), 165. ↵
- Ibid., 187. ↵
- Donald J. Savoie, Pulling Against Gravity: Economic Development in New Brunswick During the McKenna Years (Montreal: Institute for Research in Public Policy, 2001), 49. ↵
- Dimitry Anastakis, “Building a ‘New Nova Scotia’: State Intervention, the Auto Industry and the Case of Volvo in Canada,” Acadiensis, 34, no.1 (2004), 3-30. ↵
- Della Stanley, “The 1960s: The Illusions and Realities of Progress” in The Atlantic Provinces in Confederation, eds. E.R. Forbes and D. A. Muise (Toronto: University of Toronto Press, 1991): 421-459. ↵