The Impact of the Great Depression on Canada Research Paper

The great depression was an economic and financial slump that occurred globally between the fiscal 1920s and 1939. The depression severely affected many countries and crippled world economies. Canada was not spared either. This country had its own share of mystery as a result of its affiliation with global and international trade.

The affiliations saw Canada being dragged into the tenets that appeared with the depression and the economy suffered a major setback with various government interventions proving futile in alleviating the problem. The depression took some time to abate despite its far reaching effects on Canadian residents and its economy as well. International trade that Canada depended on was shuttered while foreign financial markets were hit by a slump similar to that which crippled the U.S. economy.

All through that period, the Canadian government battled the effects of the depression that threatened to derail the lives of Canadians. The head of the Canadian government was by then King Mackenzie, who did nothing to abate the prevailing economic conditions^[1].

As a result, he was forced out of the prime minister seat and gave way to a more practical and result oriented Prime Minister, Richard Bennett. With the new prime minister, Canadian government embarked on several measures and adopted policies to ensure that the effects of the depression did not adversely affect the entire Canadian population.

Some of the measures that Bennett put in place included camps to support the old and sick as well as the distribution of aid to the unemployed and disadvantaged in the country. Although, charity organization existed even before the depression, they operated on low scale and were therefore caught unaware by the level of humanitarian aid that the depression effects needed. In fact, they could not cope with the magnitude of the crisis.

Besides, during the period of the great depression, the government prioritized charity to families and somehow neglected the unemployed and single individuals throughout the country. The mobility of unemployed people in search of charity made the Canadian towns and city dwelling rules to keep out the unemployed from other cities or towns. The government spent heavily on relief and charity work, lowered tax rates and offered subsidies to help spur economic growth.

The causes of the great depression in Canada

It is estimated that the depression had been long in coming and several warning signs had been present. Prior to the depression, Canada’s population had become a mass consumer society. Industries were venturing into the production of consumer durables and labor-saving equipment that were guzzled up by anxious consumers.

The onset of the advertising industry worsened the situation as it encouraged mass consumption. The upcoming and developing transport networks linked producers to consumers and offered easy access to consumer goods. It also linked industries to the consumers.

Moreover, Britain was replaced by the U.S. as the primary source of investment and became the basic foreign-exchange souk for the Canadian Republic. As the U.S. economy continued to do well and the Wall Street posted huge profits in the stock markets, Canada was poised to be one of the leading economies of the world. However, the extra-reliance on industries in Canada proved disastrous during the depression as governments efforts backfired and created far worse problems^[2].

The association of Canada with U.S. later on proved problematic in the build up for the crisis. Prior to the depression, the stock market was characterized by excessive and speculative buying of stocks. There were increased cases of buying in credit. This buying mania had earlier caused a global recession in the early 1920s although it was easily quelled.

The recession forced small banks and financial institutions to collapse. Therefore, the stock market crash in October 29, 1929 was not unprecedented, but had been looming. The economic boom created a volatile economic situation that could not last. In Canada alone, industries produced surplus of goods in anticipation of generating huge profits.

When the stock prices in the Wall Street slumped, over-priced shares in addition to massive trading in the shares led to unexpected plummeting of the prices. The results affected the Canadian foreign investments due to its connection with the U.S. Countries and people lost fortunes whereas global world economies especially Canada felt the full blow posed by the slump^[3].

Another major cause of the great depression in Canada was the lack of economic diversification. The Canadian economy heavily relied on two major economic activities to spur its economic growth namely agriculture and industries. Agriculture entailed the production of export wheat by the prairies farmers.

Periods prior to the great depression, the economic boom that the world experienced provided huge returns to the Canadian wheat farmers. Conversely, industries relied on the wheat proceeds to market their own goods. When the wheat prices were high, the industries indulged in over-production of luxurious goods and consumer deliverables.

The slump that followed shuttered the boom in the wheat price and consequently declined the foreign export of wheat. When wheat prices went down at an unprecedented rate, Canadian farmers lost most of their farms to the lending institutions that also went bankrupt. Wheat farmers became desperate and were soon forced out of their farms.

The industries that relied on these farmers shortly closed due to poor sales and excessive production. Jobs were lost in industries as well as in the agricultural sector and the unemployment rate became the highest for the first time in the Canadian history. Industries closed due to surplus production and lack of consumers, while greedy banks mortgaged their premises to recover their capital^[4].

After WWI, industries in Canada opted to seriously indulge in production. They were in dire need of capital. The industries could only access capital by going into debts with banks, lending institutions and trading in bonds and stocks. The resulting effect was high levels of shares and bonds in the market. The traders took the bait and in expectation of the prices rising, raised the prices to unrealistic levels that did not warrant such industries.

As traders run out of credit and industries promoted high consumption of unimportant and luxurious goods, credit buying was introduced. This tendency created a deficit in shares as traders moved into the profitable stock market, driving the share prices even higher. With the fall of the U.S. stock market, the Canadian investors felt the pressure and its share market plummeted to vey low levels.

The high dependency on the economy of the U.S. is also one of the leading causes of the great depression in Canada. Canadian economy prior to the depression relied heavily on export to the U.S. for the growth of its economy. It was also a government option that introducing high tariffs in the export industry could protect the local industries and stabilize the employment sector.

Failure by the government to deviate its economic activities meant that whether the tariffs were high or not, the whole employment sector depended on international trade. The onset of the great depression in America meant that Canadian economy was too going down.

When trade declined sharply, the unemployment rates in Canada rose. As most of the industries depended on export trade to finance and pay off their workers, a decline in international trade that reached a maximum of 50% in 1933, meant that industries had to lay off workers and others were forced to close down. The high tariffs had created a volatile job market and Canada was to face the music^[5].

In summary, the global recession in early 1920s set the stage for the onset of the great economic depression. It acted as an early warning of the consequences to follow due to the volatile economic and financial systems in place. The great boom was also a center stage that could have been acted on to prevent the depression.

The great crash of the New York stock market in October 29, 1929, ushered in the real recession and paved way for the global fall in financial and economic systems. The drastic fall in the stock prices that followed in the Wall Street and the global pegging and dependence on the U.S. stock market meant that international trade would face a similar fate.

After the crash in the stock market, the United States invoked Canadian export tariffs, leaving its goods locked out of the US market. The collapse of the economy ensued^[6]. Farmers suffered from crop failures and severe droughts. There were escalating levels of unemployment, considerable drop in commodity prices and weakening of the purchasing power.

The impact of the Great Depression on Canada

The resultant effects from the crash in prices in the U.S. stock market heavily affected Canada. Financial and economic adverse effects were experienced all over the world with Canada bearing the high effects due to its association with the U.S. The great depression continued well into the World War II, where the effects abated but never disappeared completely.

The historical effect

The great depression affected the Canadian population to varying degrees. The worst hit areas happened to be the agricultural and industrial areas. In the prairies provinces where farmers relied on wheat exportation to survive, the effects were severe.

The Great Depression in the prairies was coupled up with severe natural and climatical conditions that further added to the farmers’ mysteries. Long spells of drought, grasshopper plagues and inadequate rainfall coupled up with loss of lands due to mortgage loans too, dealt a fatal blow to the prairies dwellers^[7].

As industries lost their main markets in the U.S., high unemployment rates set in. It was estimated that by the year 1931, Canada gross unemployment rate rose to 30%^[8]. The poor policies of raising tariffs by Bennett aimed at protecting the indigenous industries and employment made Canada to further plummet to disastrous conditions.

Policies like high tariffs, subsidies and low government spending only served to worsen the conditions of the Canadians. Banks underground and various industries closed due to lack of markets for their goods. Canadians were transformed to beggars and the government cut down the tax rates to enable people affords basic needs. The government set up institutions to help the poor, needy, the sick and the impoverished.

The effect of the Great depression on the Canadian provinces

Canada relied heavily on international trade to propel its economic forward. Through international trade, Canada exported its industrial and agricultural goods mainly to US that generated 33% of the total Gross Domestic Product on the national scale. This stated an overreliance on international trade and a dangerous trade that thrive on forged relationship with the US.

After the US experienced the trade hunch, it invoked tariffs that existed with the Canadian government to protect its domestic market. The invocation meant that the Canadian industries lost their market and revenue. Additional, domestic market fetched low price for industrial goods that could not sustain the economy.

In the Saskatchewan provinces that relied on wheat export, the effect was adverse. The region was not only affected by the economic slump but nature provided a nasty scenario. Grasshopper plagues, droughts and long spells of reduced rainfall rendered the prairies useless.

The farmers were faced with unpaid mortgages and banks closed in on their lands forcing them out. Provincial income in Saskatchewan plummeted down by 90% and people were forced out to seek relief. Other provinces that relied on industrial production were also hard hit. The only remnants of the industrial provinces were Quebec and Ontario that relied on domestic industrial production^[9].

Other economic areas that were spared partly by the depression were fish, fruits and lumber markets but they somehow went low during the Great Depression periods^[10]. Among the Canadians, the depression was felt differently. Poor living standards characterized the unemployed while living standards for the employed and property owners went up plummeting merchandise costs^[11].

Effects on individuals, population and industry

As the great depression raged on, the rate of unemployment went higher to unprecedented levels. As industries lost their key market in the slump and consequently their revenues, they laid off a high number of workers. Consequently, there was no hope that the existing industrial workers could continue as industries halted their production due to low prices that could not even meet production costs.

The failure of the stock market and the continuing bite and worsening of the economic crunch provided no hope of industrial reawakening. Unemployment rates were high and families lost their sources of income^[12]. A lot of Canadians turned beggars as they relied on the government for relief food and charity organizations to make ends meet.

Furthermore, the immigration rates to Canada that offered cheap labor to the industries were cut off. This was essential to enable the government comprehend with the situation at hand. Immigrants were not allowed government relief and tax cut offs. The number of immigrants that Canada allowed into the country was drastically reduced and deportations of immigrants increased.

The situation was to remain this way until the depression abated^[13]. In this period also, Canada experienced the lowest population growth rate ever. The birth rate in Canada dropped to 9.7% in 1937 from 13.2% live births that were reported per one thousand in the year 1930. This persisted to be the least percentage up to 1960s^[14].

Industries received the full blow of the depression. Due to the heavy reliance on international markets, especially in the US, the plummeting of the international trade and revoking of the trade tariffs worsened the condition of the industries. Preceding the great depression, industries had indulged in excess production that the depression cut off its market. Some of the industries closed while other lay off thousands of workers.

Groups and expansion introduced in Canada as a result of the Great Depression

The Great Depression in Canada witnessed several regimes come up with various litigation measures to alleviate the condition of the Canadians and help spur economic growth. Starting with Mackenzie and Bennett ill advised policies, the Canadian government failed to make any impact on the economic and financial condition of the nation.

Bennett as well as Mackenzie thought that the introduction of government intervention like high tariffs, cutting off aid to some provinces and adjusted financial plans could abate the situation. These plans and policies backfired and only produced disastrous results for the Canadians. The failure of the latter plans and policies called for new transformations. The new alterations combined the social credit theories of inflation, the democratic socialism and the BC Premier Wages and Work program^[15].

On the political scene, the economic slump saw the alteration of the modernization party steered by Stevens and the advent of Herridge New Democratic drive party. Canada’s Communist Party was virtually proscribed starting from the year 1931 after nine of its associates were detained and imprisoned for being supporters of illegitimate associations till 1936. The Communist Party was also outlawed after the 1939 declaration of war.

Nevertheless, the National Unemployed Workers Association performed a critical role in the organization of the jobless and unskilled Canadians to demonstrate and protest against the Great Depression impacts and the reluctance of the government to take drastic measures^[16]. While it might be perceived that domestic effects of such organizations were negligible, the Great Depression finally gave rise to the extension of the Canadian government accountability as regards to social and economic prosperity

How the governments handled the crisis

The Canadian government started off by denying various projects and provinces financial aid to aid economic recovery in the belief that the slump was momentarily^[17]. During Bennett’s reign, the government initiated futile attempts but provided the needed aid to the struggling population. These futile attempts proved helpful in that they set the stage for other useful transformations like the Work Program and BC Premier Wages.

Conclusion

The unprecedented wave of the economic slump that hit the world in the early 1920s and ensued till the World War II proved so much for the financial and economic systems of Canada. From the over-reliance on industrial and agricultural export trade, the whole of Canada and its population felt the extreme effects of the depression.

Unemployment ensued and formerly employed Canadians relied on government relief and charity grants for survival. In essence, the great depression wrecked the whole system of life in Canada and disturbed the economic and financial system prompting a new inquiry.

Work Cited

Bordo, Michael and Redish Angela. “Credible Commitment and Exchange Rate Stability: Canada’s Interwar Experience.” Canadian Journal of Economics 23 (1990): 357–380. Print.

Bryce, Robert. “Maturing in Hard Times: Canada’s Department of Finance through the Great Depression”. Toronto, Ontario: Institute of Public Administration of Canada, 1986. Web.

Bryden, Penny. Visions: The Canadian History Modules Project: Post-Confederation, Toronto: Nelson Education, 2010. Print.

Granatstein, John and Norman Hillmer. “The Great Depression: Canada’s Century.” July 1999. Web.

Haubrich, Joseph. “Nonmonetary Effects of Financial Crisis: Lessons from the Great Depression in Canada.” Journal of Monetary Economics 25 (1990): 223–252. Print.

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

Irwin, Douglas. “The Smoot-Hawley Tariff: A Quantitative Assessment.” Review of Economics and Statistics 80 (May 1998): 326 -334. Print.

Maclean. “The Great Depression – Causes & Concerns”. 1934. Web.

Neatby, Blair. The Politics of Chaos: Canada in the Thirties, Toronto: Corp Clark Pitman, 1986. Print.

Romer, Christina. “What Ended the Great Depression?” Journal of Economic History 52 (1992): 757-784. Print.

Safarian, Albert. The Canadian Economy in the Great Depression, Toronto: Univ. Pr., 1959. Print.

Schwartz, Anna J. “Understanding 1929 -1933”. In The Great Depression Revisited, Boston: Martinus Nijhoff, 1981: 5-48. Print.

Sprinkling, Noah H. “Serving the Great Depression.” British Columbia History 31.4 (1998):2. Web.

Footnotes

1. Bordo, Michael and Redish Angela. “Credible Commitment and Exchange Rate Stability: Canada’s Interwar Experience.” Canadian Journal of Economics 23 (1990): 357–380.
2. Maclean, Mag. “The Great Depression – Causes & Concerns”. 1934. Web.
3. Maclean Mag. “The Great Depression – Causes & Concerns”. 1934. Web.
4. Maclean Mag. “The Great Depression – Causes & Concerns”. 1934. Web.
5. Maclean Mag. “The Great Depression – Causes & Concerns”. 1934. Web.
6. Irwin, Douglas. “The Smoot-Hawley Tariff: A Quantitative Assessment.” Review of Economics and Statistics 80 (May 1998): 326 -334.
7. Neatby, Blair. The Politics of Chaos: Canada in the Thirties (Toronto: Corp Clark Pitman, 1986) 23.
8. Bryce, Robert. “Maturing in Hard Times: Canada’s Department of Finance through the Great Depression”. Toronto, Ontario: Institute of Public Administration of Canada, 1986: 1.
9. Schwartz, Anna J. “Understanding 1929 -1933”. In The Great Depression Revisited (Boston: Martinus Nijhoff, 1981): 5-48.
10. Safarian, Albert. The Canadian Economy in the Great Depression (Toronto: Univ. Pr., 1959) 27.
11. Romer, Christina. “What Ended the Great Depression?” Journal of Economic History 52 (1992): 757-784.
12. Granatstein, John and Norman Hillmer. “The Great Depression: Canada’s Century.” July 1999: 48. Web.
13. Haubrich Joseph. “Nonmonetary Effects of Financial Crisis: Lessons from the Great Depression in Canada.” Journal of Monetary Economics 25 (1990): 223–252.
14. Sprinkling, Noah H. “Serving the Great Depression.” British Columbia History 31.4 (1998):2. Web.
15. Romer, Christina. “What Ended the Great Depression?” Journal of Economic History 52 (1992): 757-784.
16. Bryden, Penny. Visions: The Canadian History Modules Project: Post-Confederation (Toronto: Nelson Education, 2010) 298.
17. Horn, Michiel. The Great Depression of the 1930s in Canada (Ottawa: Canadian Historical Association, 1984) 34.