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Canada's Great Depression

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My Buddy posted on Thu, Apr 12 2012 2:26 PM

It is generally agreed around here that the proper way to combat a depression/recession is to cut spending and wait, with the US in 1921 being the example of this working.

However, Canada has no real equivalent to the New Deal during the Great Depression, and PM Bennett's attempts to cut spending didn't improve the economy at all. Canada didn't come out of the depression until WW2 arrived (whereupon worker wages began to increase drastically due to more union leverage with high demand for war materials).

Does anyone know the details of this?

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My Buddy:
It is generally agreed around here that the proper way to combat a depression/recession is to cut spending and wait, with the US in 1921 being the example of this working.

I wouldn't put it exactly like that, but okay...

 

However, Canada has no real equivalent to the New Deal during the Great Depression, and PM Bennett's attempts to cut spending didn't improve the economy at all. Canada didn't come out of the depression until WW2 arrived (whereupon worker wages began to increase drastically due to more union leverage with high demand for war materials).

According to the Wikipedia article on this, the Bennett Government "eventually gave in and started a Canadian "New Deal" type of relief by 1935."  There's actually an entire sub-section on it there.

However, in a review of Bob Murphy's book, George F. Smith does actually say "there was no 'Canadian New Deal'"...which I can only gather that he means there wasn't anything on the scale of Roosevelt.  Either way, Murphy does point out "During Hoover's years, US unemployment was, on average, 3.9 percent higher than Canada's, and during Roosevelt's tenure it got worse, with the gap increasing to 5.9 percent (p. 104)", and

"Comparing [Canadian unemployment statistics] year by year with the official US figures, I discovered the following interesting factoid: From 1930 to 1933, the US unemployment rate averaged 3.9 points higher than the Canadian rate. Yet from 1934 to 1941, the US rate averaged 5.9 points higher. (Both rates tended to fall over time from their 1933 peaks, but Canada's fell faster.) Why is this significant? It shows that not only did the US economy recover from depression under FDR more sluggishly than at any other point in US history, but it also recovered more sluggishly compared to Canada's experience during the Great Depression itself."

 

I'm not familiar with all the details, but from what I do know, I don't think it would be fair to say "attempts to cut spending didn't improve the economy at all."  As shown by Murphy, Canada (possibly by all accounts) faired better than the US, and I would think it could be argued to the extent that it did experience a downturn, it could largely be pointed to the inter-reliance on other countries (i.e. if you are used to a standard of living that is the product of a vast amount of trade and division of labor, and your trading partners suffer distortions, it will certainly affect your own economy/standard of living).

 

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Suggested by Autolykos

http://en.wikipedia.org/wiki/Great_Depression_in_Canada

"The Liberal Party lost the 1930 election to theConservative Party, led by R.B. Bennett. Bennett, a successful western businessman, campaigned on high tariffs and large-scale spending. Make-work programs were begun, and welfare and other assistance programs became vastly larger"


Afaik the depression started in 1929.


 

 

... just as the State has no money of its own, so it has no power of its own - Albert Jay Nock

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Also, ending a depression faster doesn't mean that the situatino was handled better.

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The government of Canada did implement the American policy.  Everything done in Canada was copied directly from the U.S, including the founding of the Bank of Canada in 1934.  Despite the prior lack of BoC, the "depression" effect in Canada was simply fallout from trade with the U.S.  Right now something like 1/3 of GDP in Canada is trade with U.S.  So, the U.S. Government via the New Deal probably had more effect on the Canadian economy than the Government of Canada.  Analyzing the two in isolation does not work.

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