2 The causes and effects of the

Depression in Canada
Key question: What were the causes and effects of the Great
Depression in Canada?

How far was the onset The causes of the Great Depression
of the Great
Canadian prosperity in the 1920s, while real at the time for those who
Depression based on
weaknesses in the enjoyed its benefits, was based on weak foundations. There was an over-
Canadian economy? reliance on staple exports such as wheat, industries began to overproduce
and supply exceeded demand. In addition, the stock markets were involved
in the same unstable practices as in the USA and the effects of the Wall
Street Crash soon spread over the border, leading into depression. In this
section we will consider the underlying causes of the Great Depression:
l over-reliance on staples for export
l overproduction
l stock market collapse.

KEY TERM
Over-reliance on staples for export
Staple exports Exports of Canada depended on a reasonable price level and active demand for staple
primary products such as exports. In the 1920s, 25 per cent of Canadian gross national product (GNP)
wheat and timber. was derived from exports. The collapse in the price of and demand for wheat,
for example, hit Canada hard. Already it was facing increased competition
from Australia and Argentina at a time when global demand was falling due
to on-going economic problems resulting from the First World War. As a
result, the global surplus was 12,000 million bushels in 1934, a rise of more
than 50 per cent since 1925. Moreover, attempts in fascist countries such as
Italy to develop self-sufficiency in food production also drove the value of
Canadian exports down. The reduction in demand was compounded by the
prohibitive Hawley–Smoot Tariff in the USA in 1930 (see page 65). As
countries looked to protect their own economies, countries such as Canada
that relied heavily on exports were particularly badly affected.
Wheat production in Canada had peaked at 567 million bushels in 1928; by
1934 it was down to 276 million bushels. Prices meanwhile fell from $1.66
per bushel in 1929 to 33 cents in 1932. Many farm incomes fell by 75 per
cent. As we will see (page 152) this was compounded by a series of natural
disasters such as the Dustbowl, drought and crop failures.
Indeed, part of the wheat crop of 1928 had been stored rather than sold in
the hope that prices would rise. The ploy failed: all this meant in effect was
that buyers bought wheat from other countries such as Argentina.

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Overproduction
Canada suffered from the same overproduction problems as the USA (see
page 35). Studies show that increasingly the working classes could not afford
to meet the demand for the volume of goods being produced as incomes
lagged far behind the availability of new goods. This meant that firms had to
cut production and lay off workers, thereby adding to unemployment and
exacerbating the problem.

Stock market collapse

Canada had suffered from the same issues in the stock market as the USA
– such as buying on the margin and bull pools (see pages 32 and 41). The
collapse of the US stock market quickly spread to that of Toronto. The
Toronto market had been volatile for months: on 4 October 1929, for
example, it recorded losses of $200 million. On 24 October 1929, mass selling
KEY TERM
began at 11a.m. and six minutes later the market had collapsed. Canadian
bluechip stocks lost $5 billion. The smaller exchange at Montreal which Bluechip stocks Shares in
usually saw 25,000 shares changing hands saw 400,000 transactions that day. the biggest companies.
During the course of 1929, Canadian stocks lost $5 billion. By mid-1930,
the value of the stocks in the leading 50 companies had fallen by a further
50 per cent.

The effects of the Depression How serious was the

Canada was particularly hard hit by the Depression because it relied so much impact of the
Depression in
on the exports and trade, which diminished rapidly. The Depression led to Canada?
significant fall in demand. By the early 1930s, automobile sales, for example,
had fallen to 25 per cent of the 1929 levels. This collapse in overall demand
led to millions losing their jobs: unemployment rose to 27 per cent by 1932.
The two main railroad companies alone laid off 65,000 employees. In terms
of overall figures this meant an increase from 116,000 unemployed persons
in 1929 to 826,000 by 1933. These statistics, however, did not include farmers
or fishermen who were classed as self-employed, or their families – although
food producers may have been able to feed themselves. They also omit those
underemployed on short-time working and those engaged in menial jobs
below their qualifications and skills.

Fall in the value of the Canadian dollar

By September 1931 the value of the Canadian dollar had fallen to such an
extent that the New York financial markets refused to make any more
Canadian loans and indeed began to call in existing ones. The result was the
collapse of three major Montreal financial concerns, and the Sun Life
Insurance Company found itself on the verge of bankruptcy. So many
companies were technically bankrupt that the federal government and even
competitors agreed to accept the theoretical value of their assets, even
though in reality they were actually worth far less, in order to stave off their
collapse.

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 Fall in demand
The collapse in demand for wheat had significant knock-on effects: the
income from railroads for example fell by 50 per cent and the annual deficit
in the Canadian National Railway rose to $560 million. This was largely for
two reasons:
l The collapse in demand for wheat meant railways were not carrying so
much freight.
l Increasing poverty in the prairie states meant there was less demand for
goods so less for the railroads to carry out to consumers.
Demand for consumer goods plummeted because of increasing poverty and
unemployment. By 1932 industrial production fell to 58 per cent of that of
1929. Unemployment stood at 33 per cent; in 1929 it had been three per
cent. Worse, when Canada was a developing nation during the nineteenth
century, if people were thrown out of work in the cities during cycles of
economic downturn, they could return to their rural roots in the hope of
finding employment; with depression throughout all sectors in the 1930s,
this was no longer possible.
Source A

Rewrite Woodsworth’s Extract from a speech by the radical MP J.S. Woodsworth in the House of
statement in Source A in Commons. Woodsworth was commenting on the hopelessness
your own words. engendered by the Depression.
In the old days we could send people from the cities to the country. If they went
out today, they would meet another army of unemployed coming back from the
country to the city; that outlet is closed. What can these people do? They have
been driven from our streets; they have been driven from our buildings; and in
this city [Ontario] they actually took refuge on the garbage heaps.

The human cost of the Depression

The effects of the Depression were far reaching and touched both rural and
urban populations. By 1935, 10 per cent of both the rural and urban
populations were on some form of relief. In the western province of
Saskatchewan this rose to 66 per cent.

Farmers
In the 1930s farmers were effectively crippled by the combination of two
factors: the collapse in wheat prices and crop failures. Wheat exports
dropped by 75 per cent and the prairies became a barren, windswept
landscape. The drought had begun in the 1920s; much of the soil was already
fine and dry. As in the USA (see page 115), the Dustbowl struck: high winds
blew the topsoil away, leaving many farmers destitute. The problem was
compounded by an epidemic of grasshoppers for which the hot, dry
conditions made ideal breeding conditions. There are tales of poor families

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living off gophers; the provincial government even offered bounties on

gopher tails to offer children some small incentive whereby they could
augment the family income.
The period from 1931 to 1941 saw 250,000 people migrate from the prairies
to cities such as Alberta, Regina and Calgary or to more fertile areas to the
north. Saskatchewan was particularly badly hit. Between 1928 and 1933, its
income from farming fell from $363 million to $11 million; relief costs
exceeded £62 million, far beyond the ability of the provincial government to
pay. The 1930s saw boy-scout and girl-guide groups in Winnepeg organizing
clothing parcels to the victims of the Depression in Saskatchewan and the
federal government running 100 railway cars filled with relief food supplies
including cod, cheese and fruit.

The need for relief

Even with 10 per cent of the population needing some degree of relief, there
was little organized welfare in Canada. Although Mackenzie King had KEY TERM
introduced old-age pensions in 1926, welfare provision was mainly the
responsibility of provinces, municipalities or private charity. Clearly these Municipalities Smaller
lacked the resources to tackle the extent of the problem. Moreover, relief areas within provinces, for
would not right the economy. example towns and their
hinterlands.
Most urban workers depended on wages, and without wages they lacked the
resources to buy the goods whose sale might set the wheels turning again.
So relief might prevent starvation, but it would not increase demand for
manufactured goods.
Many politicians, moreover, lacked any sense of co-operation to deal with
the crisis. In a studied piece of partisan politics, on 3 April 1930, Mackenzie
King made a speech which has become notorious (see Source B and
page 156).
Source B

An excerpt from Mackenzie King’s speech in Parliament, 3 April 1930. What can you infer from
Every winter in this country, ever since there was a winter in Canada, there has Source B about Mackenzie
been unemployment and there always will be … we have no right to say there is King’s attitude towards:
any national unemployment problem in this country … I might be prepared to a) the Depression in
go to certain lengths possibly in meeting one or two western provinces that have Canada?
progressive premiers at the head of governments. With respect to giving moneys b) the possibility of federal
out of the federal treasury to any Tory government in this country for these relief programmes?
alleged unemployment purposes, with these governments situated as they are c) co-operation with other
today with policies diametrically opposed to those of this government, I would political parties?
not give them a five cent piece.

The provinces initially tried new forms of taxation such as a tax on company
profits. By 1940, every provincial government did this and four had
introduced the income tax. Provincial taxes on petrol rose by 50 per cent.

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 However, it was insufficient to meet the demand for relief. In effect,
therefore, the provinces passed on the burden of welfare to the
municipalities. Their tax revenues had fallen because of unemployment but
they were expected to find more from diminishing returns to give relief to
the growing numbers of unemployed. As a result, they faced financial
problems: the municipality in Burnaby, British Columbia was facing tax
arrears of 72 per cent of taxes levied, while North Vancouver District
overspent by 144 per cent. By 1933 one and a half million Canadians were
dependent on some form of direct relief.
In Newfoundland, semi-independent from Canada, it was even worse. In
1933, bankrupt and with a government that was hardly functioning, it had to
submit to an emergency commission administered by Britain as the colonial
power.
As a result there were thousands of homeless, unemployed people.
Source C

What are the advantages and
disadvantages of the kind of
oral histories as seen in
Source C?
Extracts from two accounts of life in Vancouver in the 1930s, from The
Chuck Davis History of Metropolitan Vancouver by Chuck Davis published
in 2011 (see also www.vancouverhistory.ca). This book contains primary
sources from every year in the history of Vancouver.
About 1,000 homeless people occupied four east-end hobo jungles. One jungle
bordered Prior Street, close to Campbell Avenue and the Canadian National
Railway yards. Another existed under the Georgia Street viaduct, a third was
located on the harbour at the end of Dunlevy Avenue, and the fourth was
situated at the Great Northern Railway sidings. Shacks were built from boxes,
boards and old cars.
The Great Depression had settled like a sodden shroud on the city. Thousands of
us were on relief (34,000 at the peak), and hundreds more were riding the roads
into town on every freight train. (The author’s father was one of them.) The
Sun’s Alan Morley counted 1,250 men in the breadline at First United Church.
The city’s relief cost for the 1931–1932 year was over $1.3 million. A symbol of
the economic downturn: the unfinished form of the Hotel Vancouver.

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 Chapter 5: The Great Depression in Canada

Collapse of prices for staple exports

Overproduction
Causes of the
Depression in
Canada
Stock market collapse

Fall in industrial production

Fall in the value of the dollar

Fall in demand
Effects of the
Depression in
Canada
Human costs

Need for relief

Natural catastrophe in agriculture –

the Dustbowl
Made worse by
Summary diagram
Lack of relief measures
The causes and effects of the
Depression in Canada

3 Federal government responses

to the Depression 1929–34
Key question: How effectively did federal governments respond to the
Depression?

Federal governments were slow to respond to the crises occasioned by the

Depression. In this section we consider the policies adopted by Mackenzie
King’s Liberal regime (1925–30) and R.B. Bennett’s Conservative government
(1930–5).

Mackenzie King’s government 1925–30 How effective was

King’s initial response
Mackenzie King felt it was best for the federal government to do nothing;
to the Depression?
essentially a believer in laissez-faire, he believed the economy would right
itself if left alone. As a politician, King believed vehemently in balancing the

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