Causes of the Great Depression
Contributing Factors
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Export/ staple- based economy
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Over- production
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Foreign investment (American)
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Over- confidence
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Excessive use of credit
Export- Staple- Based Economy
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An export based economy is vulnerable because of its reliance on the economies of other
countries.
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Staple- based economies are vulnerable because they lack adequate diversification.
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Canada was an export & staple- based economy at this time, ex. Wheat in the west.
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The United States, Western Europe.
Over- Production
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In the late 1920’s Canadian wheat farmers grew record quantities of crops; in 1928 there
was a surplus.
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As a result of excess supply, wheat prices began to fall.
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There was also over- production in other sectors of the Canadian economy, such as farm
equipment and the automobile industry.
Foreign/ American Investment
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American investors supplied much of the capital/ money used to finance Canada’s
economic development during the 1920’s.
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American companies also established branch plants to serve the Canadian market but also
in order to avoid both freight costs and import duties.
Over- Confidence
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As late as 1929 Canadian bank Presidents as well as business leaders were confidently
predicting that international trade would rise to new heights and that there would be
“eternal prosperity”.
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Investors and speculators believed them and continued to poor money into the stock
market.
Excessive Use of Credit
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Many of these speculators and investors bought their stock shares with credit that they
had received from banks or “on margin”.
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“On margin” means that these speculators and investors made a down payment of onehalf or one- third of the price of the shares and owed the stockbroker the outstanding
balance.
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They intended to pay the balance by selling shares once they rose in value.
The Stock Market Crash
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As a result of the contributing factors- overvaluation of stocks, excess supply in the
economy, reliance on the strength of the economies of other countries and the beginning
of waning confidence- the stock market was vulnerable.
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In 1929 Canadian & American stock values begin to fall.
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Worried investors (Emotion) began to lose confidence in their shares & began to sell their
stocks in vast quantities.
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This perpetuated the fall in stock values and prompted more people to try and sell their
stocks.
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Wheat prices continued to fall and on the 24th of October the Winnipeg Grain Exchange
abruptly collapsed.
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On Tuesday October 29th (Black Tuesday) the New York, Toronto & Montreal stock
exchanges “crashed”.
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Many stocks became worthless & the stock values of respected companies such as Ford
Motor Company fell as much as 50 percent.
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Many were left financially ruined.
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What were the ramifications of this?
Poverty, Unemployment & Migration
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Throughout the 1930’s unemployed Canadians, desperate for work, travelled back &
forth the country on a personal trek in search of a job & a better life.
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They (Illegally) “rode the rails”.
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Some just did it for something to do when they realized that there was work to be found.
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Many Canadians helped one another during the Depression.
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Extended families supported each other.
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Neighbors shared clothes as well as food.
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Many Canadians assisted those trekking back & forth the country.
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Many people wound up living in “shanty towns”- (hobo jungles)- makeshift shacks &
tents that sprang up on the outskirts of towns & cities.
“Escaping” The Depression
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People sought inexpensive forms of escapism such as singsongs & family potluck
dinners.
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People played sports, such as pick- up games of curling & hockey on the local pond and
baseball games on empty fields.
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They also engaged in new fads such as roller- skating, miniature golf & new board games
such as Monopoly.
Movies
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“The talkies” replaced earlier silent movies.
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They served as a treat for children & a time of relief for parents & guardians.
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They portrayed exciting adventures in faraway places.
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Canada produced some big movie stars, such as Mary Pickford- “America’s Sweetheart”.
Newspapers & Magazines
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Newspapers & magazines, costing only 5 cents, were the cheapest way to get up- to- date
news, sports results and to find out about faraway places.
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When the paper was read it served as wallpaper, insulation & toilet paper.
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Canadians also read glossy magazines, which provided a glimpse of the wider world.
Radio
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People gathered around the radio for news, music, drama, comedy, sports and mysteries,
much like we watch TV today.
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The Happy Gang & Hockey Night in Canada with Foster Hewitt.
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“Hello Canada & hockey fans from the United States & Newfoundland”.
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“He Shoots, he scores”!
Fairs, Exhibitions & Revival Meetings
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Canadians went to any kind of public event that was available: travelling evangelical
preachers, agricultural fairs and large exhibitions like the Canadian National Exhibition
(CNE) in Toronto.
Government Reaction to the Great Depression
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Today, Canada has a system of government support for people who are ill, poor or
unemployed.
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In the 1930’s there was no such system.
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In fact, there was general opposition to the notion of approaching the government for
help.
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Many Canadians believed that if people were poor & unemployed that it was their own
fault.
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Many Canadians believed that people should help themselves.
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Many Canadians also believed that the Depression was merely a natural swing in the
business cycle & that the situation would eventually correct itself.
Tolerance & Intolerance
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Not all unemployed & poor people were treated equally during the Depression.
Single Women
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It was assumed that young women would live with & be supported by their family.
Therefore, Unemployed women with no one to support them faced great hardship.
Immigrant Women & Women from Visible Minorities
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These people were treated with prejudice when trying to find employment.
Jewish People
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Many industries refused to hire Jews. They were not welcome in some professions, could
not buy property in some areas & could not join certain clubs & organizations.
Immigrants
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Between 1929 and 1935, many foreigners who were forced to go on relief were deported
from Canada. The KKK continued to spread hatred against foreigners, Blacks, Jews, and
Roman Catholics.
Aboriginal Peoples
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Authorities assumed that native people could live off the land and therefore were not a
priority for relief. However, many had already given up this lifestyle while others were
prosecuted if they tried to live off the land.
First Political Response- Mackenzie King’s Government
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Believed the economic situation to be normal.
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“The Dominion is recovering from the seasonal slackness at the end of the year”.
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King believed that providing relief was the responsibility of provinces & municipalities.
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He believed there to be a Conservative attempt to embarrass him & therefore would not
help any Conservative provincial government.
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“I would not give them a five- cent piece”.
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King also increased tariffs on imported steel, fruits & vegetables.
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Reduced tariffs on British goods
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Neither of these efforts helped as a result of a collapse in both home industries and world
trade.
Private & Public Relief
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Churches & other charitable organizations ran soup kitchens to feed the poor.
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Some organizations provided clothing & shelter for the poor/ unemployed.
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Municipalities (city councils) began to run soup kitchens & provide a form of welfare
payment called the dole
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The dole
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Going on the dole was considered a disgrace.
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Government’s wanted to make the dole unattractive- forcing people to do everything
possible to find work, but there was no work to be found.
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Applicant’s had to prove they were poor; they could not own a car, radio, telephone etc.
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Relief was in the form of food vouchers, which made them stand out.
Richard Bennett
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In 1930 Richard Bennett defeated Mackenzie King.
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Bennett believed that governments should not interfere with the economy.
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By 1931 the Bennett government had passed two relief acts that directed federal money
to municipalities on the condition that they municipality & the provincial government
provide matching funds.
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Most of the money had to be spent on public works programs, such as building bridges,
dams & government buildings.
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Only a fraction of this money went to individuals directly for relief.
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Not only did these acts not go far enough but many municipalities had borrowed money
during the 1920’s to build roads, hospitals etc & therefore did not have enough money to
participate in the matching funds program.
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In 1932 Parliament passed a third relief act that abandoned public works projects &
focused on relief payments to needy individuals.
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The federal government paid one- third of the relief payments, the provinces another third
& the federal government loaned the provinces enough money to cover the municipalities
third.
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Relief was not guaranteed however & people still had to prove that they were destitute.
Relief Camps
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Various levels of government began to worry about the number of unemployed young
men roaming the country.
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Fearing mass protests& turmoil the federal government decided to set up a chain of relief
camps for unemployed young men.
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The camps were run by the Department of National Defense in a semi- military style.
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They were originally designed to house about 1000 men but eventually saw as many as
20 thousand.
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Workers were paid 20 cents a day.
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The work they did was sometimes useful but often times it was “busy work”.
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The camps did succeed in keeping young men out of cities where they could protest the
camps became centres of discontent.
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Camp residents took part in what became known as the On- to- Ottawa- Trek.
The On- to- Ottawa- Trek
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In April 1935, camp workers from British Columbia planned a peaceful trek to Ottawa to
present the federal government with a list of demands to improve conditions in the
camps.
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In June approximately 1800 men began the trek.
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Along the way they were joined by other protesters.
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People were protesting both the relief camps & government’s ineffectiveness in dealing
with the continuing Depression.
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Most protesters were peaceful & had the support of local citizens along the way.
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The federal government became increasingly alarmed & P. M. Bennett order the RCMP
to stop the trekkers in Regina.
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The trek leaders were allowed to continue on to Ottawa to present their demands to the
Prime Minister but eventually returned with no concessions.
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On Dominion day (now known as Canada day, also, Memorial day in Newfoundland)
violence broke out when the RCMP moved to break up a trek meeting organized to
appeal for funds.
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One policeman died and 130 trekkers were arrested.
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After the trek the Department of National Defense turned the camps over to the
provinces.
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The provinces changed the conditions at the camps, organized them around public works
rather than relief camps & increased pay rates.
Bennett, the Conservatives & The Depression
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On the wider economic scene, Bennett believed that high tariffs would protect the
domestic market for Canadian manufacturers.
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At the same time, the government promised to reduce its tariffs against any country that
in turn reduced its tariffs on Canadian products.
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At the imperial conference, held in Ottawa in 1932, Bennett won preferential duties in
trade with Britain & other dominions.
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These trade agreements had a negative consequence.
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Imperial trade was too small to cause economic recovery and the agreement angered the
United States, Canada’s largest trading partner.
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In response, the United States increased its tariffs on Canadian products.
Radical Proposals for Ending the Depression
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In 1934, Bennett hoped to establish some financial stability.
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He created the Bank of Canada to regulate currency & credit, provide financial services
to private banks, & act as a financial adviser to the government.
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Introduced the Prairie Farm Rehabilitation Act & created the Canadian Wheat Board in
an attempt to revive the wheat market.
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He also appointed a royal commission on price spreads.
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The commission’s job was to investigate the large profits being made by some large
retailers & the difference between the low prices they were paying for their products &
the high prices they were selling them for.
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In a vain attempt to emulate President Franklin Delano Roosevelt Bennett announced his
“New Deal” for Canadians prior to the election in 1935.
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The “New Deal” proposed unemployment insurance, a minimum wage law & a shortened
work week.
The Election of 1935
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Bennett’s Conservatives won only 40 seats losing to King & the Liberals, who won a
total of 173 seats.
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There were several explanations for the Conservatives defeat.
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First, Bennett may have waited too long before introducing dramatic reforms.
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The Conservatives had created an impression of helplessness in the face of the
Depression.
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Second, his reform policies did not match his tough response to protesters involved in the
On- to- Ottawa- Trek.
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Despite personally replying to letters for help from Canadians & often sending them
some of his own money, perhaps Bennett had failed to convince Canadians that he cared
about their personal misfortunes.
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Third, King was able to run a strong anti- government campaign without offering any real
alternative.
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King declared that Bennett’s reforms were a sham & that they would be struck down in
legal judgments as unconstitutional, which they indeed were in 1937.
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Lastly, even though the Liberals had won 173 seats they only won 45 percent of the
popular vote.
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New parties across the country had split the vote in many ridings, spelling defeat for the
Conservatives.
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Emergence of New National Parties.
Emergence of New Political Parties
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Despite the hardships of the Depression, the majority of Canadians continued to believe
in the capitalist system.
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They believed that private property & free enterprise were the best means of achieving
economic & social development.
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They believed that poverty & unemployment were the result of bad luck or poor
management, not of the capitalist system itself.
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Yet, some Canadians had serious questions about the system.
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Why had such a serious economic collapse taken place?
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Why had it not been prevented?
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Why was so little being done to end it?
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Why was there such obvious poverty in a country so rich in human & natural resources?
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Some Canadians concluded that the traditional parties, Conservatives & Liberals, were
unable to deal with the effects of the Depression.
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As a result of this some Canadians began to look for answers elsewhere.
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The CCF, the Communist Party, Social Credit Party & the Union Nationale.
The Cooperative Commonwealth Federation (CCF)
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Founded in Calgary in 1932.
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Formed by farm & labor groups who wanted social & economic reforms to end the
human suffering caused by the Great Depression.
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They were a national socialist party & their leader was J. S. Woodsworth.
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They supported the idea of both nationalized & private industries & wanted Canadians to
have – Pensions, Health & Welfare insurances, Family allowances, Unemployment
insurance & Compensation for injured workers.
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Many of the policies that they advocated were eventually adopted by mainstream
Canadian parties & influenced many aspects of Canadian life.
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Eventually became the New Democratic Party (NDP) in 1961.
The Communist Party
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Although they were not a new party, they gained more support during the Depression.
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Communism- Calls for all people to share equally in the work & prosperity of the society.
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Some Canadians turned in despair to Communism, while others felt that it was controlled
by the U.S.S.R. & that they wanted to overthrow the Canadian government & way of life.
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As a result of this fear the Federal government of Canada actually outlawed the
Communist Party from 1931 until 1936.
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It was again outlawed during part of the Second World War.
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The Communist Party failed to gain serious traction in Canada long- term but it did
managed to get Fred Rose elected to the House of Commons in 1945.
Regional Parties
Social Credit Party
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Formed the Government of Alberta in 1935.
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Their leader was Albert Aberhart, a school teacher & fundamentalist Christian preacher.
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Sought to reform, not replace the existing economic institutions & criticized the banks for
not increasing the supply of money.
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He argued that the Depression was caused in large part because people did not have
enough money to spend.
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During the 1935 election they promised to give Albertans prosperity tickets, which were
payments of 25 dollars per month.
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He believed that with the additional purchasing power that people would begin to spend
money again, which would lead to greater production & companies hiring more workers
(business cycle, etc).
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Prosperity tickets were eventually ruled unconstitutional by the courts since control over
banking & currency was a federal power, not a provincial one.
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Nonetheless, even though some of this “Funny Money” was never paid out they remained
in power for many years.
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They eventually became a federal party & won support in both Alberta & Quebec.
Union Nationale
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Founded in Quebec in 1935.
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Profoundly reshaped the political & social climate in Quebec & Canada.
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During the years following the end of the First World War Quebec experienced
significant industrial/ economic growth.
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Most of the money that financed this growth came from English- speaking Canadian,
British & American investors.
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Many French Canadians grew concerned about the domination of their economy by
English- speaking capitalists.
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They resented the control that Anglophones had over their “province”. (Homeland).
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When the Depression threw thousands of French Canadians (Canadiens) out of work, this
concern turned into anger against “foreign” owners.
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By the 1930’s many Quebecois were convinced that no political party understood or
cared about their needs.
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The Union Nationale was formed as a French Canadian nationalist party.
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It was led by former Conservative Maurice Duplesis.
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The party advocated social, economic & political reform in Quebec & Canada.
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The Union Nationale won the 1936 provincial election & retained power until 1939.
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Once in power, Duplesis soon forgot about many of his promised reforms.
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His agenda turned to Nationalist ideals, which following the Quiet Revolution in Quebec
in the 1960’s would significantly impact Canadian & Quebec politics until the present.
Conclusion
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Unfortunately, it took the outbreak of the Second World War to finally end the Great
Depression.
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This created jobs for many in the armed forces as well as in factories making vehicles,
munitions, etc.
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The Great Depression also embedded the notion of the “Welfare State” into the Canadian
political framework, which would take root following the Second World War.