The Great Depression of the early 1930s was a worldwide social and economic shock. Few countries were affected as severely as Canada. Millions of Canadians were left unemployed,hungry and often homeless. The decade became known as the Dirty Thirties due to a crippling drought inthe Prairies, as well as Canada’s dependence on raw material and farm exports. Widespread losses of jobs and savings transformed the country. The Depression triggered the birth ofsocial welfare and the rise of populist political movements. It also led the government to take a more activist role in the economy.
(This is the full-length entry about the Great Depression in Canada. For a plain-language summary, please see Great Depression in Canada (Plain-Language Summary).)
Causes of the Great Depression
Economists still debate whether a specific event, such as the 1929 Wall Street stock market crash, sparked the Great Depression. However, there is consensus that the Depressionwas the result of widespread drops in world commodity prices and sudden declines in economic demand and credit.These factors led to rapid declines in global trade and rising unemployment.
In Canada, the changes were dramatic. Between 1929 and 1933, the country’s Gross National Expenditure (overall public and private spending) fell by 42 per cent. By 1933, 30 per cent of the labour forcewas out of work. One in five Canadians became dependent upon government relief for survival. The unemployment rate remained above 12 per cent until the start of the Second World War in 1939.
Did you know?
Economists distinguish between depressions and recessions based on the length and severity of the decline. A recession usually lasts less thanone year. When it lasts longer and the economic decline is severe, it can be called a depression. Though there is no strict definition of a depression, it is generally a long period of mass unemployment, falling prices and low incomes.A persistent lack of confidence in the future of the economy also marks such a downswing.
Uneven Burden on the Country
Several key factors aggravated the Depression’s effects in Canada. Different regions of the country were impacted to different degrees. The country’s social-welfare structure proved woefully inadequate. And government attempts to address problems throughpolicy proved misguided.
A third of Canada’s Gross National Income came from exports. Therefore, the country was hit hard by the collapsein international trade. The four western provinces depended almost exclusively on primary-product exports. They were therefore the most seriously affected.
The economic problems were made worse on the Prairies by years of drought. Plagues of grasshoppers andhailstorms also caused huge crop failures. Saskatchewan experienced the lowest price for wheatin recorded history. The province’s income plummet by 90 per cent within two years. Sixty-six per cent of the rural population was forced onto relief. The other western provinces were technically bankruptfrom 1932 onwards.
Ontario and Quebec also experienced heavy unemployment.However, they were less affected because of their more diversified industrial economies. Both provinces produced goods and services for the protected domestic market. The Maritimeshad already entered into severe economic decline in the 1920s and had less distance to fall.
The burden of the Depression was also unequally distributed between classes. Although wages dropped throughout the 1930s, prices declined even faster. As a result, the standard of livingof property owners and those with jobs increased. Farmers, young people, small businessmen and the unemployed bore the brunt of economic hardship.
Impact on Population
Demographic changes were a revealing index of hardship in Canada. Immigration and birthratesplummeted. Population growth throughout the 1930s reached the lowest point since the 1880s. The number of immigrants accepted into Canada dropped from 169,000 in 1929 to fewer than12,000 by 1935. It never rose above 17,000 for the remainder of the decade. During that time, European Jews fleeing Nazi Germany were denied sanctuary in Canada. (See also:Refugees; MS St. Louis). The number of Canada’s deportationsrose from fewer than 2,000 in 1929 to more than 7,600 just three years later. Almost 30,000 immigrants were forcibly returned to their countries of origin over the course of the decade, primarily because of illness or unemployment.
Canada’s birthrate dropped from 13.1 live births per 1,000 in 1930 to only 9.7 by 1937. This was the lowest ratio until the 1960s. During the 1930s, 50 years of urbanizing momentumwere reversed. Canada’s rural population (outside of Saskatchewan) grew more rapidly than its urban population. For many of the unemployed, “going back to the land” was preferableto a miserable existence on urban relief.
Government Aid Efforts
Canada did not have an adequate system of dispensing welfare to the jobless. Although unemploymentwas a national problem, the federal government refused, for the most part, to provide work for the jobless. This was equally true under ConservativePrime Minister R.B. Bennett (1930–35) as it was under his Liberal predecessor andsuccessor W.L. Mackenzie King (1921–26; 1926–30; 1935–48). Instead, they insisted that caring for the public was a local and provincial responsibility. King, whowas prime minister when the Depression started, was reluctant to even acknowledge the economic crisis. This stance led to his defeat at the hands of Bennett in 1930. (King andhis Liberals were re-elected in 1935.)
Federal reluctance to tackle unemployment contributed to fiscal collapse in the four western provinces and in hundreds of municipalities. It also led to a haphazard, low standard of care for the jobless. Monthly relief rates for a family of five variedfrom $60 in Calgary to $19 in Halifax. Although there were no official accounts of starvation, reports of scurvyand other diet deficiency diseases were common throughout the decade.
Local governments refused to aid single, homeless men. Between 1932 and 1936, the federal government established unemployment relief camps. Run by the Department of Defence,the camps paid the men a meagre $0.20 a day for construction work in the bush. In 1935, a protestagainst conditions in the camps culminated in the Regina Riot. This was Canada’s most violent episode of the Depression. One policeman was killed, dozens of men were injured and130 people were arrested. It was followed by the similar Bloody Sunday confrontation in Vancouver on 19 June 1938. (See also: On to Ottawa Trek.)
Changed Political Landscape
The Depression changed the way Canadians thought about the economy and the role of the state. The prevailing opinion was that a balanced budget,a sound dollar and changes in the trade tariff would allow the private marketplace to recover. This view was shared by both the Bennettand King governments and most economists.
A variety of political reform movements arose in response. These occurred particularly at the provincial level, which advocated the use of the state to initiate recovery. The reforms included the inflationary Social Credittheories of Alberta Premier William Aberhart, the “Work and Wages” program of British ColumbiaPremier T. Dufferin Pattullo, and the democratic socialism of J.S. Woodsworthand the Co-operative Commonwealth Federation (CCF). The Union Nationale inQuebec, led by Maurice Duplessis, H.H. Stevens’sReconstruction Party and the New Democracy movement of W.D. Herridge were also triggered by the Depression.
The Communist Party of Canada was virtually outlawed from 1931 to 1936. Nine of the party’s leaders were arrested and convicted under the Criminal Codefor being members of an “unlawful association.” The party was banned when the Second World War was declared in 1939. However, affiliated groups played a significantrole in organizing the unskilled and the unemployed in protest marches and demonstrations. These groups included the Workers Unity League, the League for Social Reconstruction,the Relief Camp Workers Union, Jeune-Canada and the National Unemployed Workers Association.
Government Intervention
The national impact of these organizations was minimal. However, the Depression did result in an expansion of state responsibility for the economy and social welfare. In 1934, Bennett’s government passed the Bank of Canada Act.This established the Bank of Canada in 1935. The bank was charged with regulating monetary policy.Also in 1935, the Canadian Wheat Board was created to market and establish a minimum price for wheat. In 1940, the federal government assumed responsibility for the joblessby introducing a national unemployment insurance scheme and employment service.
The Depression also legitimized the economic theories of British economist John Maynard Keynes. He argued that, if private investment failed to produce full employment, thestate must initiate public investment through deficit spending to create jobs. Keynes’s ideas influenced the National Employment Commission report (1938) and the report of the Royal Commission on Dominion-Provincial Relations(1940). The latter was important in generating the idea of equalization payments from Ottawa tothe provinces.
Not until war broke out in 1939, however, did Keynesian economics become a deliberate part of government policy. The massive state expenditures necessitated by the war finallyreduced unemployment to minimal levels by 1942.
See also: History Since Confederation; Business Cycles;Bennett’s New Deal; Industrialization in Canada.
