The Canadian Century. Brian Lee Crowley
tariff of the mother country. When the Corn Laws went, so too did protected access to our most important market. By the following year, the situation was dire in Canada and the decision was made, with imperial blessing, to seek reciprocity with the US as an alternative to the lost markets of Britain.54
While Canada was an ardent suitor, the Americans were a very discouraging object of our affections. They saw little benefit for themselves in such an arrangement, and Northern industrial interests were particularly leery. Moreover, the slave states, in this politically charged run-up to the Civil War, feared that reciprocity might lead to annexation and the reinforcement of anti-slavery forces in the Union. After all, slavery had been abolished peacefully by judicial fiat in Great Britain in 1772, and then throughout the Empire by simple act of Parliament in 1807, but America continued with what Southerners euphemistically called the “peculiar institution” until the issue was settled at the cost of many thousands of lives almost sixty years later.55 The promise of access to Canadian waters for politically powerful New England fishing interests, however, ultimately tipped the balance within Congress, and a reciprocity agreement was signed in 1854. America, always the reluctant partner, gave in to protectionist pressures a mere twelve years later, abrogating the hapless and unloved agreement in 1866. Faced with no privileged access to either US or British markets, the third option for British North America was Confederation. Impelled chiefly by this economic logic, the federal union of three British colonies occurred the following year.56
The expanded markets made possible by Confederation, however, remained small beer in global terms. Reciprocity with our southern neighbour remained the holy grail of Canadian politics; Sir John A. Macdonald pursued it energetically in the face of massive American indifference, until even Old Tomorrow had to resign himself to the evidence. To fill the vacuum, he came up with the National Policy, which even he regarded as a poor second best. The National Policy—high tariffs to protect domestic producers against American competition, plus the completion of transcontinental ties, and especially the railway—became his signature policy in 1878. But in an early precursor of R.B. Bennett’s boast that he would use high tariffs to “blast our way into the markets of the world or perish in the attempt,”57 Macdonald was clear that his policy ought not to be taken as an alternative to reciprocity with the US, but rather as a strategy for obtaining it:
The welfare of Canada requires the adoption of a National Policy, which, by a judicious readjustment of the tariff, will benefit and foster the agricultural, the mining, the manufacturing and other interests of the Dominion; that such a policy . . . will prevent Canada from being made a sacrifice market . . . and moving (as it ought to do) in the direction of reciprocity of tariffs with our neighbours, so far as the varied interests of Canada may demand, will greatly tend to procure for this country, eventually a reciprocity of trade . . . It is only by closing our doors, and by cutting them out of our market, that they will open theirs to us . . . it is only by closing the door that we can get anything.58
It was this policy that Laurier and his government inherited in 1896, that he moderated through tariff reform in the early days, and that he sought to subsume under a new reciprocity pact at the end of his reign. Surprisingly, the agreement Laurier negotiated would have left much of the protective tariff for Canadian manufactures in place but would have given free access for Canadian resources to US markets. A striking amount of the old National Policy would have remained intact. But the moment was not right. Laurier’s political skills were not equal to the task after the wear and tear of fifteen years in power, and this key part of Laurier’s vision became encrusted with a mythology of divisiveness and defeatism that would only be shaken off by slow degrees over the following century.
chapter two
A COUNTRY AND A CENTURY DERAILED
What happened? How was such a promising start to what was to be Canada’s century steered so quickly into the ditch?
In fact, the prosperity largely continued under Laurier’s successor, Prime Minister Sir Robert Borden,1 who, with the exception of reciprocity with the Americans, largely pursued Laurier’s economic policies. The rapid growth in population, for example, continued right up until 1921, at which time 8.8 million people lived in the Dominion.2 Under the later leadership of Laurier’s handpicked successor as leader of the Liberal Party, William Lyon Mackenzie King, Canada continued to enjoy good levels of prosperity through much of the twenties, even if the frenetic effervescence of the Laurier years had gone.
But big changes were afoot. There was the human slaughter and benighted leadership on a vast scale of the First World War. In its wake were left broken trading relationships, barriers to the movement of people, the economic dislocation of Germany, the breakup of the Austro-Hungarian Empire, and the exhaustion of Britain, whose dynamism had so contributed to Canada’s own. The Russian Revolution had let the genie of radical politics out of the bottle throughout the West, and it took the fall of the Berlin Wall more than seventy years later to put it back. This was part of a series of events that cumulatively, with the slowly gathering force of a locomotive, drove not just Canada but the entire industrialized world off course.
The big changes coming were perhaps masked at first by the return of prosperity in the decade following the end of the war.3 Then in 1929 came the Crash, and the thirties that followed brought a worldwide depression and a protectionist surge that undid much of the remarkably free
global movement of goods, services, capital, and people that had characterized the prewar years. Unemployed Canadians marched on Ottawa and queued for soup kitchens. The huge triangle of land in Alberta and Saskatchewan that the explorer and surveyor John Palliser had warned in 1863 was unsuitable for agricultural settlement had in fact been heavily settled during the Laurier years. Palliser had his revenge later when it turned out that “Palliser’s Triangle” was a major contributor to the dustbowl of the 1930s that helped drag down Canada’s economy.4
The Second World War, among other things, broke up this unhappy state of affairs in Canada as much as elsewhere, and the returning troops rushed into new jobs in a Canada determined to do better. Economically we entered an era of pronounced prosperity, as we reverted to a large extent to Laurier’s policies and enjoyed the energy thereby set free. Britain was finished as an imperial power and as a major market for Canada. America confronted no serious competitor as our main market, our main supplier of capital, and the main alternative destination for the skilled immigrants fleeing Europe’s postwar daze.5 While we still lacked an institutional framework and strong rules to bind America’s ability to run roughshod over Canada’s interests, we had a powerful shared history as allies in the recent war and were partners in the construction of the postwar order.
America sat astride the world and found in Canada a respected neighbour who shared its world view. That had to be enough for the moment, in large part because the trauma of Laurier’s defeat over free trade still lingered in the minds of the mandarins of Ottawa and the operatives of the dominant Liberal Party. Yet even in the face of this potent political bogeyman, it was only Mackenzie King’s personal objections that prevented a new reciprocity agreement being consummated in the immediate postwar era. In 1948 a deal was struck and ready for signature in both capitals; in Ottawa the Liberal caucus and the senior mandarins were on board. At the last minute, Mackenzie King’s still vivid memories of his political mentor’s political humiliation over the issue won out over economic logic.6
The people who ran the country were keenly aware that our success depended on remaining competitive with America on every front, and indeed we kept our tax load and our newly emergent welfare state under tight rein to ensure that neither the cost of government nor the allure of an easy dependence would distract us from building a country equal to the promise of the continent we shared. In the fifties and sixties we intentionally positioned ourselves, as Laurier had recommended, as a low-tax alternative to the US.7 Research comparing public spending over the three decades stretching from 1932 to 1963 show that over this period Canada remained