Fidel Castro once told a joke to explain why Cuba’s economy disintegrated after the 1959 revolution. He said that he had told his advisers that he needed an economist. They thought he said he needed a communist and sent him Che Guevara.1 There was a cautionary note in Castro’s quip. That is, running a complex, modern, national economy is not for amateurs. While Bennett was a skilled and successful financial entrepreneur, businessman, and lawyer, he was not an economist. He had no experience in managing anything as complex as the Canadian economy at any time, let alone in a time of crisis. But there he was, both prime minister and finance minister, looking squarely into an economic morass that was becoming worse by the week.
Among the problems Bennett faced was a lack of specificity about the challenges he faced. In the fall of 1930 there was an absence of firm empirical data. Today, any teenager with a laptop has access to more detailed current economic data about her own country and others than the 1930s’ best-informed economist. Imagine a prime minister today making economic decisions without the instant digital communications that have killed time, the satellite communications and televisions that have killed distance, and the daily polling that has killed instinct. Imagine a prime minister considering options without guidance from a large bureaucracy that can base advice upon detailed, up-to-the-second statistical analysis of the Canadian economy’s various sectors and of even the most minor changes in foreign markets or policy shifts by other governments. Like his contemporaries, Bennett worked with the facts he had. But the facts available were, at best, guesses.
As an illustration of the fog in which Bennett had to operate, consider that before Statistics Canada, and even before the Labour Force Survey was created in 1945, information regarding unemployment was merely an estimate arrived at by collecting numbers from a few hundred businesses across the country. The Dominion Bureau of Statistics did the best it could to extrapolate patterns in the numbers and then declared regional and national unemployment rates and other financial trends. Because the data collection process was both time consuming and difficult, all economic statistics were released only once a year, in June. The numbers were obsolete the moment they were printed. Anecdotal evidence was far more reliable than the most carefully formulated data.
But no matter what method one used to reach conclusions about the problems Canadians were enduring, the conclusions were much the same. A slowly developing and distressing story was being told from one ocean to the other. The Great Depression was cruel. And it was not fair. It hit different parts of the country, different industries, and different people to different degrees, and in different ways. Women felt it more than men and ethnic minorities more than anyone. It proved that misery does not really like company after all.
For many Canadians, the Depression years were just fine. Those who managed to keep their jobs, even if hours or pay were reduced, benefited from low and in some cases plunging prices. From 1930 to 1934 there was an aggregate drop in retail prices of an astounding 24.8 per cent.2 But everyone was affected.
In the history of every family whose story goes back to those years, there are tales that illuminate the Depression era better than books or numbers. My grandfather, for instance, was one of the lucky ones. During the 1930s he had his hours cut but kept his job as a moulder in the Dofasco steel mill in gritty east-end Hamilton. He purchased a two-storey brick home in a good working-class neighbourhood for just over $4,000. He spoke fondly of my grandmother and him going to dances every Saturday night for a dime and the places being packed with men in suits and women in long dresses enjoying the latest in big band and swing tunes. He even saw Dorsey. Bread was four cents. A glass of beer was a nickel.
But my grandfather also told me of walking home from work along the train tracks in order to fill his lunch pail with small chunks of coal to help heat their Houghton Street home. He told of a neighbour who also managed to hold his job but saw his hours and wages significantly reduced. One winter the man’s picket fence slowly disappeared as it was brought inside, a few slats at a time, to feed the stove.
And closer to home, my home at least, one summer day two women came by saying that in the early 1930s the place had been theirs. They enjoyed the tour of the old house and related the story of their dad leaving home during the Depression to ride the rails and look for work. Their mother, meanwhile, dug up the entire backyard to plant vegetables to help feed her children. In the fall, though, the family was kicked out of their rented house because their mother had sought to augment her few meagre relief dollars by selling some of the vegetables at the local market. Someone turned them in for breaking the strict municipal relief rules. They were homeless.
No, the Depression was not fair. While many places in the country were hurt, the West was ravaged. Nowhere was it worse than Saskatchewan. The proud and hard-working people of that province were hit by a perfect storm of collapsing commodity prices and natural disaster. In 1928, the province produced 321.2 million bushels of wheat for a total value of $218 million. In 1931, total production had dropped to 132.4 million bushels and only $44.4 million. In 1929, Saskatchewan farmers earned $1.60 for a bushel of wheat, but by 1932 the price had fallen to twenty-eight cents. It cost more than that to grow the stuff.
But Mother Nature had also weighed in. By the end of 1930 fully one-third of Saskatchewan was suffering from drought, a rust infestation, and a grasshopper plague. The Biblical swarms of locusts were so massive that when in flight they would blot out the sun in a buzzing, chomping, ravenous eclipse. Entire fields representing a year’s work and investment would be devoured in minutes. One farmer told of the grasshoppers eating the leather belts, hoses, and seat from his tractor and another of them eating the corn bristles from a broom, leaving only gnawed hickory behind.3
And the rain stopped. The fields that had for decades drawn the desperate and adventurous from around the world — allowing them to fulfill their dreams while bringing forth harvests that had both built a country and fed millions — had turned to dust. The dark, rich soil became sand and blew away. Trains sometimes needed snow-removal equipment to move through blazing July afternoons. Dust storms were such that at midday people occasionally needed to switch on their headlights to navigate. There was a story told that one could tell how bad a dust storm was by throwing a gopher into the air. If it fell immediately to the ground then the storm was not so bad, but everyone was in for a mean one if he started digging a hole up there.
The joke was cute, but not for those who watched their dreams and those of their forebears vanish in a single season. In 1928, the net cash income per Saskatchewan farm was $1,614. This was good money at a time when the average per capita income in Canada in 1929 was only $471 and 60 per cent of male urban workers earned below $1,000. But by 1933 the average net income of a Saskatchewan farm had dropped to only $66. Banks stopped the traditional cycle of advancing money to buy seed with the bridge financing paid off in the fall. Companies selling fuel for machinery or coal for home heating began demanding cash on delivery. In many Saskatchewan municipalities more than 50 per cent of taxpayers were in arrears and as a result services were cut. With savagely reduced income and no one to buy their bonds, many prairie towns teetered on the edge of bankruptcy.
An argument regarding who had it worse was not worth winning, but Saskatchewan farmers could certainly have contested Maritime fishermen. The total value of all fish sold in the three Maritime provinces in 1928 was $19.8 million. In 1933, it had dropped nearly by half to $10.2 million. Meanwhile, the average annual income for the New Brunswick farm had dropped to a mere $20. That the people of the Maritimes had started poorer than the rest of the country and so their economic slide had, on percentage terms, not been as precipitous was of little comfort.
Companies as well as individuals suffered as the wheels of economic activity ground and slowed. Canada’s economy, then as now, depended upon exports, and from 1929 to 1933 export prices on almost everything fell by an average of 40 per cent. It was a dreadful spiral: as prices dropped, production slowed, causing wages to fall and spending to decline, and around and down it went. The spiral was felt by nearly all companies. Let one tell the tale. The Ford Motor Company of Canada had sales of $45.8 million in 1930 but only $17.2 million in 1932. The company’s declining sales led to reduced production and layoffs. The cuts rippled through small steel, tire, glass, base metals, and other companies that supplied Ford. At the same time, the myriad of service industries that were based partly on the wants and needs of the families who had worked for all those companies suffered.
These corporate and large and small business declines and collapses effected, and were affected by, tremors in the financial sector. Banks had begun to look at loans differently. Investment houses saw company after company losing millions as stock prices collapsed and shareholders received word that they would be earning no dividends for the first time in years. The manner in which stocks, shares, and bonds could be purchased on margin was ended. The unregulated financial structure of the postwar years, which had been based on avarice and starry-eyed assumptions, began to crumble as waves of causes and effects overlapped each other and drowned, even for companies whose fundamentals were sound.
Canada’s gross national product (GNP) fell from $6.1 billion in 1929 to only $3.5 billion in 1933. The country’s per capita income from 1929 to 1933 fell by 48 per cent. The unemployment rate from 1927 to 1929 was a low and consistent three per cent, but in 1931 it hit 30 per cent. Lawyers went hungry as fewer people divorced or bought houses or started businesses. Teachers and nurses took salary cuts. Doctors saw their incomes fall and many performed services for free or followed the practices of other professionals and began bartering.
Only 1,403 athletes competed in the 1932 Los Angeles Olympics, the fewest since 1904. Only thirty-seven countries could afford to send teams, nine fewer than four years before in Amsterdam. Even professional sport was affected. National Hockey League (NHL) players accepted a salary cap and teams agreed to cut their rosters to fourteen. The league shrank as previously successful franchises such as the Ottawa Senators folded.
In the summer of 1930, no one, including Bennett, could guess at the magnitude of the economic and social devastation that had just begun and would soon leave Canada scared, scarred, and tattered. The state was failing the nation. It was up to Bennett to make it right.
The prime minister’s office that Bennett proudly moved into was a large, dark oak-panelled room with a deep blue carpet and a large polished oak desk. When he settled himself behind that desk it was in the chair that Sir John had used in his Kingston and Toronto law practices and then as prime minister. Arthur Meighen, a keen amateur historian, had noticed the chair being taken to a dumpster during a redecoration of offices. He had saved the oak chair with the dark blue upholstery and presented it to Borden when he became prime minister in 1911. In July 1930, an amusing flurry of letters indicated that Borden, Meighen, and George Kingston of the Worker’s Compensation Board all claimed ownership of the chair, although at the time it rested in Borden’s library. The only thing all could agree upon was that they wished Bennett to have it.4 An oddity in Bennett’s office was a First World War German anti-aircraft gun that had been sent to him by a supporter, along with a box of live ammunition which he kept in a desk drawer. He took great delight in regaling all who asked with details about the gun’s history and capability.
As Bennett stood gazing out the bank of windows over the wide expanse of the Parliament Hill lawn below, he could, of course, not know all that was befalling the country at that time or predict all that would soon and forever alter the lives of the people he had just earned the privilege to lead. But he knew that things were bad and getting worse, and that the country deserved something beyond the false optimism of Mackenzie King’s wait-and-hope-for-the-best policies. Rather than waiting patiently for market forces, the very forces that had played an enormous role in causing the crisis in the first place, to eventually right things, it was time to begin the “blasting.”
Action began when he recalled Parliament for a special session on September 8, 1930. New MPs barely had time to set up constituency offices before heading to Ottawa and once there found little time to even locate the washrooms. Bennett set a punishing pace and demanded a furious amount of work from his staff and government departments.
Parliament began with one of the more unusual speeches from the throne in Canadian history. There was no flowery language or partisan jabs. Bennett simply had twenty lines read into the record, then got to work. He began the special session with words that could have been torn from the pages of his campaign stump speech. He promised to use the power of the state to provide relief, end unemployment, and increase trade through tariff manipulation. It was the strategy that Franklin Roosevelt would employ three years later: deal first with the human tragedy through immediate relief and attempts to spur employment, and then later restructure the relationship between the government and economy so as to prevent a similar crisis in the future.
The special session saw the passage of two important initiatives: the Unemployment Relief Act that sought to create jobs by shovelling money to Canadians in what would now be called a stimulus package; and amendments to existing customs and tariff laws that promised to promote business activity by protecting Canadian companies and increasing trade. The two were important in themselves but also for what they revealed about the new direction that Bennett was taking the country.
The relief bill came first. It pledged $20 million of direct aid for Canada’s unemployed. While the amount seems tiny by twenty-first-century standards, it was indeed a large sum at a time when the annual federal budget was only about $500 million. Of significance is that until that point in Canadian history, helping those hurt by economic conditions had been the role of municipal and provincial governments, charity groups, and churches. The federal government had played no significant part. This legislation represented an important step in the evolution of the collective consensus suggesting that social welfare is the responsibility of the federal government.
In the politician’s “handbook” The Prince, Machiavelli famously observed, “There is nothing more difficult to manage, or more doubtful of success, or more dangerous to handle than to take the lead in introducing a new order of things.”5 With the relief bill, Bennett was taking that risky leap and there were indeed dangers and challenges waiting to greet him. Among them was that the federal government’s constitutional power to involve itself directly in such a program was questionable. The desperate straits in which each of the nine provinces found themselves led all to put those questions aside for the moment and take the money — but that acquiescence regarding federal intrusion into areas of provincial jurisdiction would not last. A related problem was that there was no mechanism in place to disperse the money. Borden’s Union government had budgeted nearly $2 million for financial support and job creation during the postwar recession. But Borden’s bill had stipulated that the funds would be attached to infrastructure projects that the municipalities and provinces would choose, manage, and help to fund. While this spending created jobs, only 20 per cent of the allocated funds were reserved for direct relief to the most needy. Provincial governments had promised to use that 20 per cent to top up their already existing relief programs, but there was no oversight process to measure whether they actually used it as Borden had intended or, in fact, if they used it at all. Bennett ordered the creation of just such an oversight mechanism as he sought to ensure that the funds got from Ottawa into the pockets of the needy.
Besides being apprehensive about the money getting to where he wanted it to go, Bennett also worried about the enormity of expenditure. He did not want other levels of government or the Canadian people to surrender their own responsibilities or self-reliance. Further, he was concerned that the large outlay of money was throwing the federal budget into deficit. Consequently, the bill was clear in stating that the program was an emergency measure that would end when the economy recovered.
An Act to Amend the Customs Act, and An Act to Amend the Customs Tariff, were the special session’s second and third pieces of legislation. The acts were designed to protect Canadian jobs by protecting Canadian companies. They represented bold action in raising some 130 tariffs on nearly every domestically manufactured item. The boost in tariff levels was the largest increase since Macdonald’s National Policy in 1879. The acts also addressed the practice of many countries, especially the United States, that were dealing with overproduction and employment issues by dumping products into Canada at prices far below their true value, while at the same time raising tariffs to keep Canadian products out of their markets. Bennett defended the acts as not about blind protectionism, as some critics claimed, but rather about fairness to Canadian workers in a harsh and increasingly protectionist international economic environment. He also promised that the two acts were merely first steps in a greater overhaul of Canada’s tariff and trade policies that he would introduce in the next session. Bennett predicted that the acts would create at least 25,000 new jobs.6
Beyond their significance as economic tools of recovery and progress, the acts represented the reversal of a trend that had seen Canada moving away from the emotional and historical links to Britain and toward closer ties to the United States. After Vimy Ridge and Passchendaele, and after Borden had secured Canada’s place at the League of Nations, the country was seen, and saw itself, as moving from colony to nation. The trend continued in 1922, when Canada was asked by Britain to send troops to help with the trouble with the Turks at the seaport town of Chanak; for the first time the government said no. The 1923 Halibut Treaty saw Canada ink a fishing deal with the United States without Britain as co-signer — another first.
At the 1926 Imperial Conference, all of Britain’s dominions had met to discuss the future of the empire in light of the new nationalist pride that was puffing chests, especially in South Africa, the Irish Free State, and Canada. With an eye to much of the Canadian electorate that, like Bennett, wore imperial ties to Britain as a badge of honour, Prime Minister Mackenzie King worked to ensure that while Canada became more sovereign, the word “independent” was struck nevertheless from the final declaration. Instead, each of the dominions was deemed autonomous and equal in status. In what became known as the Balfour Report, even Britain was confirmed to be equal to all others.
As an expression of Canada’s growing independence, in 1926 Mackenzie King had bolstered the Department of External Affairs. Acting as his own Secretary of State for External Affairs, he worked with the brilliant Oscar Skelton to oversee the creation of a diplomatic corps, the expansion of the Canadian High Commission Office in London, and the establishment of legations, beginning with Paris and Washington.
Accompanying the country’s slow drift from Britain was the equally slow slide toward America. A number of American branch plants had been established or expanded in the 1920s and their fingers were reaching ever deeper into the Canadian economy. In 1922, American investment in Canada surpassed British investment. By the end of the decade, 68 per cent of Canada’s imports came from the United States, and Americans bought 46 per cent of Canadian exports. Further, American unions were organizing in the quickly developing Canadian manufacturing plants.
The growing influence of the United States was also felt in social spheres. American styles were pouring over the border as young Canadian women dressed like flappers and Canadian families listened to American jazz and radio plays. Canadians flocked to see American vaudeville stars. At the new movie houses they laughed at the antics of Chaplin and Keaton and commiserated with the latest hardships of compelling characters created by Toronto-born Mary Pickford, who had ironically been dubbed America’s Sweetheart. American magazines flooded the Canadian market and many Canadian newspapers relied on the American foreign wire service as their eyes to the world.
The combination of these two trends — toward greater Canadian sovereignty and independence from Britain, and an unconscious surrendering to the American sphere of influence — presented significant challenges for Canada. Britain unwittingly made the shift easier by making itself increasingly difficult to deal with. In the decade following the war, the country ripped through six governments and struggled with its own foreign and economic policies.7 Unfortunately, Canada’s relations weren’t any easier with its neighbours to the south. If dealing with Britain was growing tougher, substantive interaction with the United States was becoming nearly impossible.
In 1922, a protectionist and isolationist American Congress had fashioned the Fordney-McCumber Act. It raised tariffs and promoted a “Buy America” policy. America’s trading partners reacted by raising tariffs on American goods. Germany and Italy, for instance, raised tariffs on American wheat so high as to effectively end its importation, while France stopped the automobile trade by raising its tariff to 100 per cent. Canada, meanwhile, raised tariffs on products affecting 30 per cent of its American trade.
The actions and reactions were punishing and self-defeating but there was more to come. In the spring of 1929, Oregon Republican congressman Willis Hawley and Utah Republican senator Reed Smoot weaved the Smoot-Hawley Tariff Act through Congress. The act, which quadrupled tariffs imposed on over 20,000 imported goods, was protectionism personified. Thirty-four countries, including Canada, had sent letters of protest to President Herbert Hoover during the debate, and each had erected even higher tariff and non-tariff barriers to block the importation of American products. On June 17, 1930, two months before Bennett became prime minister, Hoover had signed the act to show that he was doing something about the Depression. The “beggar-thy-neighbour” policies adopted by all industrialized countries in reaction to Fordney-McCumber and Smoot-Hawley saw an astonishing two-thirds reduction in world trade from 1929–1933. Canada’s foreign trade, the basis of its financial prosperity, was to drop in those years by 65 per cent.
It was in this poisoned atmosphere, stuck between the closing doors of both Britain and the United States, that Bennett had campaigned for prime minister and promised to blast Canada’s way into foreign markets, and then enacted the amendments to the customs and tariffs acts. On a personal level, Bennett made no secret of his love of all things British. As prime minister, he brought to the office a realistic assessment that if Canada was to fight the Depression through increasing trade, the only option was to pursue a closer trade relationship with Britain. The American actions had left few other options.
In an interview with Maclean’s magazine in 1931, Bennett responded to those who accused him of American-style protectionism by reminding Canadians of his promise to deal with trade in order to tackle the Depression. He said that if the new tariffs were “. . . giving Canadians an equality of opportunity with others who are building up their country to enable us to build up our Dominion, and to give fair competition to the worker in Canada, be it a man or woman, then it is protection that we propose.”8
The special session ended with the bills passed easily by the large Conservative majority. While there had been perfunctory debate, few in the Opposition had done much to challenge the bills. Finally, it appeared, something was being done. In his speeches in the House and in comments later to reporters, the prime minister urged patience while the measures worked their way through the economy and slowly brought about their desired effects.
Despite the challenges and thanklessness of leadership Bennett was enjoying himself as prime minister. Stress and hard work were things that he had been used to for years and the sacrifices demanded by the job fit perfectly with his sincere belief in public service. As he noted in an October 1931 speech, “I am not interested in politics. I am here as Prime Minister today, and I may be gone tomorrow! I don’t care! Life has given me about everything a man can desire. I am sixty-one, old enough to sit back and enjoy what I have. But what I have, I owe in a considerable degree to Canada, and if I can do anything for Canada, that is what I want to do. When the Canadian people are finished with my services, I am also content.”9
Bennett’s cheerfulness was on display one sunny afternoon as he strolled along Wellington Street on his way from the Rideau Club back to his office with Herridge and two other colleagues. He was stopped by a First World War veteran named Hill, who was selling Legion raffle tickets and obviously did not recognize his prime minister. Bennett asked where Hill had served and, when told, asked if he had ever met General Stewart, who commanded the corps. Hill was surprised at the stranger’s knowledge, and Bennett smiled upon realizing that the man had no idea who he was. When Bennett revealed his identity, Hill just laughed and said he did not believe him. Hill insisted that he had seen the prime minister’s picture in the newspaper and he was certainly not him. It was then Bennett and Herridge’s turn to share a laugh. Bennett reached into his pocket, purchased tickets, and then gave them back to Hill with a wish for luck on the draw. Hill’s story made it to the Ottawa Citizen with his observation that Bennett was “. . . very nice, laughing and joking all the time.”10
Short walks such as that remained his only form of exercise while he continued to eat like two men and work like three. Despite his vigour and the joy which he brought to his work, he admitted to more than one correspondent that there were times when he grew quite tired.11 He was to become more tired still as he prepared for his first foreign trip as prime minister.
THE LONDON CONFERENCE
Bennett sailed for England on September 22, 1930, immediately following the end of Parliament’s special session. With him were Mildred and her new husband, Bill Herridge. Minister of Justice Hugh Guthrie and Minister of Trade and Commerce, the omnipresent Harry Stevens, were also there, along with a tiny contingent of aides and advisers including Lester Pearson. The ever-grumbling Quebec wing of the Conservative caucus grumbled some more over the fact that no one in the small group spoke French.
Bennett travelled first-class and enjoyed a large stateroom and sumptuous meals. He walked the deck each day for exercise, read, and engaged in lively discussions with those in his party and often with others he met aboard. Never really isolated, even at sea, Bennett sent and received cables dealing with government issues as well as personal and business affairs. He was in constant contact with Alice Millar who, in his absence, was afforded wide latitude in handling a good deal of his personal and business matters. She often merely reported to Bennett on actions she had taken on his behalf. The trust Bennett placed in Millar seemed to have no bounds. But to him she was always Miss Millar and to her he was Mr. Bennett. There was never even the hint of a crack in their professional formality.
Britain had arranged the conference two years earlier, in 1928. It was to be part of the process of affording greater independence to its dominions through negotiating what was to become the Statute of Westminster. Despite the progress that had been made by Borden and then Mackenzie King in codifying and deepening Canada’s independence, there was much left to be done. In order to end Britain’s legal ability to legislate for Canada, for instance, the Colonial Laws Validity Act needed to be repealed. The act had been passed by the British Parliament in 1865 and was meant to ensure that laws passed by a colonial government were consistent with British laws, while at the same time ensuring that Parliament still had the power to legislate within its dominions. The law was clever; it allowed for self-rule while keeping the British Parliament supreme. Canadian provincial governments liked the Validity Act because it restricted the Canadian federal government’s power. The premiers were unanimous, therefore, in the opinion that the Validity Act be retained. Bennett knew, of course, that it had to go if Canada was to join with the other dominions in the next step toward independence.
Bennett’s willingness to ignore the desires of the provinces and to exert federal power in order to accomplish what he deemed best for the country would place him in league with other centrist prime ministers such as Macdonald and Trudeau. Macdonald’s view of federal-provincial relations was seen in his locating the predominance of state power with the federal government and in his willingness to disallow provincial legislation. Further, when provincial premiers set up what was to be the country’s first federal-provincial conference, Macdonald simply refused to attend. Trudeau fought the provinces throughout his tenure. He later criticized Mulroney’s Meech Lake and Charlottetown accords’ constitutional amendments as reducing the power of the federal government and bolstering that of the provinces, leaving Ottawa to be nothing more than a head waiter catering to their whims. Bennett would have agreed.
The clauses and language of the Statute of Westminster were eventually hammered out, with Bennett playing an important role. His influence was unsurprising given his knowledge of constitutional law and that he was the first minister of the largest and richest dominion. When the statute was finally ratified in 1931, it granted the dominions full extraterritorial jurisdiction. No Parliament within the Commonwealth could pass legislation that would have any constitutional legality in any other dominion — including Britain.
Many analysts at the time and since have declared that the Statute of Westminster was of such significance that it would be more appropriate to celebrate 1931 as Canada’s birth rather than 1867. But the statute’s Section 4 still allowed for British laws to become legal in a dominion if that dominion approved. Further, upon returning to Canada, Bennett found premiers unanimous in their opposition to the Statute and the death of the Colonial Laws Validity Act. Bennett knew that he needed the support of the premiers to battle the Depression and so sought to put a favour in the bank by asking Britain for a special Canadian exemption. The British Parliament acceded and created an amendment in the Statute of Westminster allowing that nothing in the document could supersede any agreements made since 1867 between the Canadian provinces and the federal government with respect to minority rights. At little real cost Bennett had allowed constitutional progress to proceed while calming the always choppy federal-provincial waters that could have swamped that progress.
Something that would come back to haunt Bennett was that the Statute of Westminster allowed London’s Judicial Committee of the Privy Council to retain its power to overrule Canada’s Supreme Court. In the late 1920s, concerns had been raised by many in the Canadian legal community regarding the belief that the statute would mean nothing without a provision that rendered the Canadian Supreme Court Canada’s actual court of last resort. Bennett found no support for such an idea among his dominion colleagues, however, and so the idea was not tested at the conference.
Another reason that the statute did not do all that some claimed it had done was that the power to amend the British North America Act (BNA) remained with the British Parliament. Again, Bennett measured the political price that would be paid in terms of federal-provincial relations for even mentioning the issue at the conference and remained silent. Only Pierre Trudeau’s audacious actions that led to the 1982 repatriation of the constitution dealt with that last vestige of colonialism.
Even given these reservations, however, Bennett’s negotiating skills and political acumen moved Canada along the road toward fuller constitutional independence — but not too far and not too quickly. His accomplishment is even more impressive when one considers that, at the same time as he was negotiating delicate constitutional and imperial changes, he was also trying to get Britain and the other dominions to come to Ottawa for a conference devoted to establishing a Commonwealth trade preference arrangement.
Before recessing Parliament, Bennett had assured the House and his cabinet that he was sincere and steadfast in his belief that with the United States shutting its doors, new trade and tariff arrangements with Britain and other Commonwealth members offered the best avenue to renewed prosperity. He would, therefore, pursue them with vigour. He sincerely believed that only this form of action would protect Canadian industries from American protectionism and from the prices of American goods that were lower due to the economies of scale present in an economy ten times Canada’s size. Canada had to secure markets for its commodities and manufactured goods while Canadian businesses that extracted, grew, or made them were protected from unfair international competition. The playing field needed to be levelled. It was Macdonald’s idea being stirred back to life to meet new circumstances in an old way. The core of the old National Policy was being resurrected by another prime minister who was thoroughly convinced that an activist, progressive government using the full power of the state was the only vehicle through which economic prosperity could be created, then protected.
Bennett’s idea initially received a cool reception from conference delegates. Britain, for one, wanted something completely different. It was keen on having all of the dominions agree to another conference, but only to discuss the idea of a common defence plan. Bennett had to be quite careful to avoid being drawn into agreeing to such a conference or even to engaging in any in-depth discussion of the plan. He believed it would be bad for Canada, possibly entangling it in wars. At the same time, however, he had to promote the idea of the trade conference. The problem left him sitting taciturn through long deliberations when the notion of a common defence was being discussed. He was careful to commit to nothing.
One evening he was back at his hotel after a full day of talks about the common defence idea and grew angry when reading the minutes of the day’s sessions. He found that they reported his support for the establishment of a committee to investigate the idea of imperial defence and stated that Canada wished to be a member. He dashed off a note to committee secretary Maurice Hankey, stating unequivocally that Canada would never join and that the minutes were wrong in suggesting that he had agreed upon Canada’s membership. He demanded that the minutes be amended and, even more, that his and Herridge’s names be stricken from the record so that it would appear that Canada was not even there.12
Meanwhile, Bennett and his team continued to work the backrooms to sell the notion that a pan-Commonwealth trade alliance was in everyone’s interest. Herridge proved especially adept at such meetings and he impressed Bennett. Herridge met delegates in lounges, over coffee, in their rooms, and just before and after formal meetings. When comparing notes each evening, the two were pleased to see momentum gathering for Bennett’s idea. The negotiations progressed sufficiently well that Bennett felt confident enough to address the plenary session. He said, “I offer to the Mother Country and to all other parts of the Empire, a preference in the Canadian market in exchange for a like preference in theirs.”13 It was a bold challenge that caught all, especially Britain, by surprise in its being offered so openly. However, before the conference ended, Bennett had secured an agreement from every dominion that they would attend an economic conference in Ottawa dealing exclusively with imperial trade. Britain was left with no option but to concede. It was agreed that Bennett would organize the conference and then chair it.
That Bennett had distinguished himself at the Imperial Conference was seen in the fact that he was the only dominion prime minister asked to address the British people on the BBC. Of course, one can never ignore the influence of Beaverbrook in setting up such an appealing opportunity for his friend. Bennett jumped at the chance.
He began the radio address with some pleasant comments about English hospitality and the accomplishments of the conference, but quickly turned to the crux of his message. He spoke of the importance of a new imperial trade arrangement that would benefit the people of Britain as well as those in her dominions. Like a patient lawyer laying his case before a suspicious jury, he began with emotion. He acknowledged those who, due to the Statute of Westminster, feared the disintegration of old imperial ties. He then argued that trade and tariff agreements would be one way among many to ensure that those ties would never be broken.
Bennett then moved to facts and spoke of the possibility of a 10 per cent tariff on all goods to all countries outside the Commonwealth, but low or no tariffs at all on goods traded within. Bennett used wheat as an example. He spoke of the importance of wheat to the Canadian economy, explaining that wheat prices and sales were plummeting due to the recovery of European crops and the dumping of massive amounts of wheat and other food products on the world market by the Soviet Union. Many Commonwealth countries, especially Australia, he said, shared the Canadian farmers’ pain. A preferential Commonwealth tariff system would address the same pain felt by their brethren in lands around the world. But, he argued, Britain should never do something simply to help its Commonwealth partners without also helping itself. The preferential trade agreement would only work, and Britain should only accept it, if it was mutually beneficial. Bennett said, “But if there is an agreement, inspired by sentiment, and buttressed by definite, and lasting and mutual advantages, then it will not fail, for it will be our common wish, and for the benefit of each and all, to support and sustain it.”14
Without polling, as would be an inevitable follow-up to such a speech today, it is impossible to gauge the reaction of his audience. However, Bennett’s ideas had been bandied about at the conference, and he had more fully elucidated them with his radio address. They were well understood by members of the British public and cabinet. Cabinet secrecy being as it is, no one knows for sure what exactly was said at Westminster. But with leaks being as common over the pond as they are here, then as now, it became widely known that at least one British cabinet minister, Dominion Secretary J.H. Thomas, derided Bennett’s trade ideas as humbug. Whether that characterization represented cabinet consensus is not known. Regardless, the squabbling family was coming to Ottawa and that was all that mattered.
With the Imperial Conference over and the address completed, Bennett was free to enjoy London. It was late October and the weather was grand. He did some sightseeing and enjoyed multi-course dinners with some of London’s movers and shakers. He went shopping with Mildred, who helped him to choose some fine silk hosiery and a dapper new pinstriped suit. This was the second clothes-shopping expedition the two had embarked upon. On their first, they purchased a formal suit for Bennett to wear when, on October 17, he was sworn in as a member of the King’s Privy Council. Mildred had been on his arm.
Mildred was also there for the launching of the Skeena, a destroyer built for the small Canadian navy. She was given the honour of smashing a large bottle of champagne over the hull, gleefully splashing the Thorneycroft yards. Bennett was the guest of honour at the Cutlers’ Feast in Sheffield, Yorkshire, and later donned cap and gown to receive honorary doctorates from the University of Edinburgh, Queen’s in Belfast, and Dublin’s Trinity College. He also managed to hop the channel to be deeply moved by a visit to the Vimy battlefield and several Canadian cemeteries.
Bennett returned to Canada pleased with all that he had accomplished in London. At a federal-provincial conference that Bennett convened in April 1931, the premiers expressed disappointment in the end of the Colonial Laws Validity Act, but supported his refusing to even discuss imperial defence. A joint press release also stated that Bennett had been right in leaving issues such as the Supreme Court, repatriation, and an amending formula for another day. While all seemed pleased, no one’s smile was quite as wide as that of Quebec’s premier Louis-Alexandre Taschereau, who had been more vocal than the others in warning Bennett, before he had even set sail for the conference, about the importance of respecting provincial rights and responsibilities.15 In refusing to entertain some ideas to which the premiers objected, Bennett had maintained federal-provincial peace not so much for what he did but rather for what he had decided not to do. Further, meeting with premiers before he left, and then again on his return, had paid dividends. It helped maintain, if not the peace, then at least a temporary ceasefire.
While he was away, Bennett had read reports and received briefings from staff. Upon his return he heard more dispiriting stories from caucus and Opposition members regarding the growing despair felt by more and more Canadians. His perception about just how dark the skies had become was also shaped by the thousands of Canadians who wrote directly to their prime minister explaining their lot, pleading for help, or venting their rage. The letters are fascinating. There were hundreds of them over the years but a few tell the tale of a time when ordinary Canadians saw their prime minister differently than they do today and where contact was still not just possible but seemed natural.
A woman from Rose Bay, Lunenburg, Nova Scotia, sent the prime minister four small wool mats, explaining that she was making and sending them to people in the hope that they would return $7 to help feed her family. She had confidence in Bennett, she wrote, as it had been written in a Halifax paper that he was a good man who helped ordinary people out in small ways. Bennett sent Mrs. Risser a handwritten thank-you note and $7.16 A gentleman named W.W. Phelps from Port Hope, Ontario, wrote saying that he had terrific maple syrup. Bennett wrote back with an order for three gallons, which Phelps gladly sent along to Ottawa in return for Bennett’s cheque for $2.17
These warm responses were the norm, but to some Bennett revealed his thin skin and sarcastic wit. For example, radical labour leader and communist A.E. Smith wrote to take exception to several points Bennett had made in a recent speech. Bennett replied, in part, “I am sorry you feel my address open to so severe a criticism. . . . I fear that your prejudices somewhat obscure your vision, but at any rate I appreciate you have written me, for a word of condemnation to a public man is not unusual and to receive praise from you would probably be a shock.”18
Many other letters told of the Depression’s appalling toll. From an unemployed Edmonton accountant came a plea for a job as an income tax auditor. The fraught husband and father wrote, “I have come to the end of my resources, my daughter lies dangerously ill in hospital with spinal meningitis, my wife has [had] a nervous breakdown and my little son is getting no care. I must get an appointment. My last court of appeal is to you. . . .”19 Another man had held a job with the Manitoba Telephone System since high school graduation but was suddenly let go. He wrote to his prime minister,
. . . I have been unemployed for 26 months and am married and have three children all sick ages 4 years, 2 1/2 years and 14 months. We have lost our home, furniture and all. . . . On the 20th of February the city of Winnipeg refused to give me further assistance . . . the result is that we have had many a hungry day since then and now the landlord has placed us upon the Street and that is where I am now with my family. . . . We are hungry, tired and desperate and cannot hold out any longer . . .20
The times were such that nearly all personal letters were hand written. Some would apologize for having letters typed, as they appeared colder and less personal. It was a time when correspondents would beg forgiveness and sign off as humble servants. And it was a time of wrenching desperation. Many who touched Bennett’s heart would find a $5 bill slipped into the envelope with his response. Most letters were respectful in tone. But then there were others. A Sudbury man wrote, “Since you have been elected, work has been imposible (sic) to get. We have decided that in a month from this date, if thing’s are the same, We’ll skin you alive, the first chance we get.”21 The letter reflects the frustration felt by those who watch their dreams evaporate, their pride shrivel, and their families hurt by an enemy they cannot see. Many people reacted by seeking someone to blame. By the end of 1931 it was becoming evident that, for many, Bennett was serving as that someone. As prime minister, he was responsible for the amorphous ghosts that caused the problems plaguing them, their family, their community, and their country.
The Liberal press was only too happy to present Bennett as the focus of all anger and blame. This tendency was seen, for instance, in the Winnipeg Free Press, which hammered Bennett on a nearly daily basis with critical editorials and the withering wit of Arch Dale’s cartoons. In September, a Dale cartoon had shown Bennett with his suitcase, indicating that he was off to London, but hopping over an enormous wall inscribed with the words “high tariff.”22 A November cartoon showed French customs officials looking with dismay as a ship’s porter wheels a large barrel of blasting powder to their wicket, followed by a pompous-looking Bennett striding down the gangplank.23
It was not just the Liberal press that was harsh. Relations between Bennett and the entire press corps were cold at best and he sometimes said things that dropped the temperature even further. One afternoon, Bennett was sparring in the House with Mackenzie King over having been misquoted in the press. Bennett said that too often one newspaper would make an error in something he said and then other papers would reprint the error until finally what people were reading had little to do with what was originally stated. With respect to the instance to which Mackenzie King was specifically referring, Bennett said, he was pleased that the remarks were made on the radio as the reporter’s interpretation of his words could be corrected by all the others who had actually heard him. He noted the example as proving the extraordinary value of radio.24
No member opposite, many of whom had probably been misquoted from time to time themselves, thought to take him up on his comment. However, it ignited an indignant firestorm in the press. Reporters claimed to be insulted. A number of editorials slammed what they said was his attack on the veracity of the press. Bennett received letters and telegrams asking him to retract his statement. He ignored them.
Eight months later, Bennett was having lunch in the Château Laurier with the Liberal’s Senate Opposition leader after having heard Dr. Herbert Tory address a meeting of the League of Nations Society. A reporter from the Ottawa Citizen overheard Bennett repeating his preference for radio, saying again that newspapers often missed the main points of his speeches. The bold scribe approached the table and asked the prime minister exactly what he would write about the speech they had all just heard. Bennett smiled, snatched the young man’s pencil and pad and whipped off three paragraphs that summarized what Tory had said. He then returned the items and with a laugh dared him to print exactly what he had just written. The reporter thanked the prime minister and the next day’s paper had Bennett’s words just as he had written them. The Citizen bragged about having in their temporary employ a very distinguished journalist indeed.25
Another bright spot in the normally dark press coverage of Bennett and his administration came when Robert Borden composed and released to the press a long letter supporting the government’s fiscal and trade policies. He argued that the policies were not new, but had been Bennett’s and the Conservative Party’s for over twenty-five years. They were based upon a desire to build Canadian prosperity while promoting trade, and support the Empire while building Canadian independence. The letter concluded with praise for Bennett’s dedication to duty and with an acknowledgement that the former prime minister had known the current holder of that office for nearly three decades and had admired him from their first meeting.26 It was welcome praise from a still-respected figure. But it was almost the only positive note being sung about Bennett as Canadians waited for the economic improvement that he had promised. Their resentment toward him grew every day that the turnaround failed to materialize.
As the snows melted and the birds returned, Bennett continued to urge Canadians to wait for the changes he had made thus far to have their desired effect. But a great number of factors had conspired to take the economy further into depression than anyone had anticipated. The prairies continued to be hardest hit. The conditions were such that the three prairie wheat pools teetered on bankruptcy. The year before, pools had guaranteed farmers one dollar a bushel, but the price had since plummeted to only 57 cents. The pools borrowed several times to make up the difference, but finally banks refused to extend more credit and provincial governments found their coffers empty. If the pools failed, the entire western wheat and grain industry would collapse. While farmers suffered, more and more workers found factory gates locked, more miners saw hours cut, and more fishermen decided their catches were not worth catching.
Parliament was called back into session in March 1931. The Throne Speech was a longer affair this time and promised more action to deal with what for the first time was admitted to be a depression. The speech promised, and then the House soon began to debate, a number of new tariff initiatives designed to battle it. The most significant raised tariffs and laws involving automobiles. Taxes were raised on large luxury cars and it was made illegal to import used cars from the United States for sale in Canada. Also of significance to mining areas of the country — especially Cape Breton and other areas where most homes were heated and factories powered by coal — were tariffs raised significantly on imported coal, while subsidies were given to domestic producers.
The session saw Bennett struggling with an alarming fiscal crisis. The deficit for 1931–32 would end up at $114 million, and the next year it would rise to $221 million. In 1933–34, the last full year of Bennett’s administration, it was reduced to $134 million. The numbers are laughably low to modern observers used to measuring government accounts in the billions, but they were startling at the time. Bennett worried that while stimulative, the fiscal imbalance would erode Canada’s reputation abroad and ultimately slow the rate of recovery.27 The troubling situation was rendered much more difficult as revenues continued to fall, expenditures continued to rise, and most costs remained fixed. The annual payments to war pensions, for instance, were $46 million and could not be lowered or postponed. Bennett was left with the Gordian knot conundrum of hating deficits but needing to spend.
With the 1931–32 budget, Bennett attempted to minimize the deficit through reducing expenditures by $37 million. All departments were cut. Federal government civil servants’ pay was reduced by 10 per cent and the size of the bureaucracy was trimmed by eliminating all parttime jobs and vacant positions. All existing programs were examined to find inefficiencies that might lead to cost-saving changes. For instance, some direct payments to farmers such as the wheat bonus, which had never really worked as intended, were eliminated. Further, the position of comptroller of the treasury was created and afforded the power to oversee all expenditures and to report on waste.
Bennett also addressed the other side of the ledger by imposing tax increases. He raised corporate tax rates from 8 per cent to 10 per cent. In 1932, they were raised again to 11 per cent, then in 1933 to 12.5 per cent. The sales tax that corporations paid went from 1 per cent to 4 per cent, then in 1932 to 6 per cent.
As part of his efforts to address the growing fiscal problems, Bennett had Sir George Perley, as deputy prime minister, write to the premiers announcing reductions in relief transfers. The letter explained that the improving conditions of the economy made the move advisable, but the premiers were not fooled. To the expected backlash, Bennett explained that in future budgets he might have to further reduce the amount that the federal government contributed to relief. He said that he needed to be responsible with the peoples’ money and that the provinces should endeavour to do the same. The premiers saw Bennett’s action for what it was: the old trick of the federal government attempting to bring its books into balance by downloading fiscal responsibilities to the provinces. Premiers would recognize the trick again in the 1990s when Finance Minister Paul Martin promised to defeat the deficit come hell or high water and forced them to deal with both.
Although the ideas of John Maynard Keynes had been growing increasingly well known and more widely accepted for years beforehand, the Cambridge-educated economist would not write his seminal book, The General Theory of Employment, Interest and Money, until 1936. The book changed economics with its radical new idea that at a time of economic crisis governments needed to use the fiscal tools at their disposal and ramp up spending, going into deficit if necessary, to increase demand, spur inflation, and promote business activity.28 Bennett’s policies of accepting deficit financing while promoting interventionist economic and social policies were ahead of their time in that they reflected Keynes’s ideas. But, like his contemporaries, Bennett could never completely escape his pre-Keynesian fear of temporary stimulative deficits.
While he tried to ensure that the deficit would be no higher than absolutely necessary, Bennett did take a number of initiatives that showed he was a pioneer in moving Canada into the brave new Keynesian world. For instance, he tried to stop the bleeding in the agricultural sector. First, he appointed John McFarland as general manager of the Central Selling Agency, responsible for handling all wheat pool transactions. Second, he guaranteed lenders that the federal government would underwrite all wheat pool loans. The crisis abated and the farmers got their money. But the federal government’s budget, already tough to manage, was suddenly tied directly to the world price of wheat, and that price continued to fall. As it fell, borrowing became necessary to keep the whole scheme afloat. It was all a tremendous gamble. McFarland proved indispensable in managing the complexity involving domestic and foreign supply and demand. He was an intelligent and prudent administrator who had been the president of Bennett’s Alberta Pacific Grain Company and a friend. Few criticized the cronyism of the appointment, though, for McFarland did a brilliant job. While prices remained low, at least there was some salvation when the constipated financial pipelines opened and wheat was planted, harvested, and sold. If only he could have made it rain.
Spring also saw Bennett overseeing a number of new initiatives designed to battle unemployment. Among them was a public works program. The idea had come from a number of meetings in which Bennett had sought advice from many quarters. Cabinet had finally agreed that with the increase in the world price of gold, the federal government could afford to increase the number of dollars in circulation without causing dangerous runaway inflation or a collapse of the dollar. Besides, it was decided that with deflation having such a negative effect on the economy, the infusion of capital would artificially create a situation in which prices could recover and potentially spur growth. Money was used to hire companies to do work on roads, bridges, buildings, docks, and more. One project, for instance, involved the building of a waist-high stone wall around the Governor General’s property. Bennett’s initiatives employed Keynesian tactics and programs similar to those for which Franklin Roosevelt would later earn great praise.
Bennett also amended the Unemployment Relief Act, which had been passed during the special session only months before, so that the federal government would pay half rather than a third of the cost of infrastructure programs involving the four western provinces. Another $8 million in direct relief payments was also arranged and was soon on its way to the suffering people of the West. Meanwhile, by March the price of wheat had dropped to only thirty-nine cents a bushel. Bennett promised a five-cent-a-bushel federal subsidy for all farmers. It was a desperate gambit meant to help a desperate people.
Bennett also acted to fulfill a campaign pledge in making changes to what had been a totally inadequate old-age pension system. Payments went slightly up and qualifications were altered so that, unlike previously, nearly everyone was eligible at age seventy. Because other provinces had not and still did not partner with the feds to support the idea, the plan involved only Ontario and the four western provinces. Months later, when one at a time provincial governments declared trouble meeting their pension obligations, Bennett arranged to increase the federal government’s portion of the payments from 50 per cent to 75 per cent. He also altered the manner in which the money was transferred, getting it to them move quickly. Two years later, PEI signed on and the next year seniors in Nova Scotia welcomed cheques that offered a little more dignity to their retirement years. Too many seniors still lived with too little money, but even a small candle is welcomed to a dark room.
SAVING THE RAILWAYS
Both a symptom and a cause of the worsening economic conditions were the dire straits in which the railways found themselves. The railway has a romantic and mystical place in Canada’s ethos. Macdonald claimed with some justification that without the line to the Pacific, British Columbia would not have joined Confederation and the Americans would have claimed the West. From Pierre Berton’s inspirational books to Gordon Lightfoot’s towering “Canadian Railroad Trilogy,” the railways are a part of Canada’s culture. They reflect her strength, vision, and determined effort to audaciously forge a country against overwhelming odds. Even those untouched by the railway’s romantic allure cannot help but respect its presence and power. The 1896–97 Crow’s Nest Pass Agreement set rates and a formula for reviewing them that played a significant role in determining prices, products, and lifestyles for the whole country. From the late nineteenth century, railways were enormously important to anyone seeking to understand and develop the Canadian economy.
The 1920s were a time of exploding expansion for both Canadian railways. The Canadian National Railway had been owned by the government since the First World War, while the Canadian Pacific Railway was privately owned. Both were seduced by the decade’s frenzied prosperity and expanded services and laid track to handle more freight and entice more passengers. Both saw revenues rise. The CNR built luxurious hotels, purchased ships, and expended borrowed capital on money-losing passenger services. The CPR followed suit with similar hotels, while burning through even greater piles of money by extending lines and services of its own. The CPR, for instance, hosted fun but loss leader music and folk art festivals to attract guests to its hotels. And the money kept piling up. In the heady years of the 1920s, the CNR saw, for the first and only time, two years in which it earned enough profit to pay more than just the interest on the debt it had been carrying since its inception.
But the onset of the Depression and the concomitant reduction in passengers and freight hurt both overextended companies. As happened with corporations in the late 1970s and again in the early years of the twenty-first century, the easy money and unprecedented profits had hidden the gaping cracks in poorly thought through business plans, inefficient management styles, and profligate compensation packages. Good luck had been confused with brains. Clarity began to emerge when gross revenue for the two dropped 17 per cent from 1929 to 1930.29 Of the two, the CNR was on shakier ground and forecasted a deficit of $70 million in 1932, with predicted losses in 1933 of an astronomical $1 million a week.30 Most companies would have already been in receivership, but the banks, the Bank of Montreal in particular, continued to direct money to them through the sale of government-guaranteed bonds. The railways were too big to fail; their demise could have taken the banks and thus the entire country with them.
In the midst of the crisis, Bennett’s old crony, CPR president Sir Edward Beatty, accused the CNR of price-fixing and other fraudulent schemes intended to win market share. Beatty also raised a complaint that he had been voicing for years: the CNR was being kept afloat by taxpayers and, since his company paid enormous taxes, it was in the crazy position of actually subsiding its own competitor. CNR president Sir Henry Thornton shrugged off the arguments and accusations while denying any wrongdoing. Public statements made it clear that he and Beatty could not agree upon what was causing the problems with their companies, let alone solutions.
Arguments swirled around the future of the railways. Bennett feared that if they were saved through amalgamation, the resulting monopoly would see rates rise as service fell. Further, if the publicly owned CNR was allowed to fail or to be absorbed by the CPR, the government would lose its influence in the most essential of Canada’s essential services. In Bennett’s mind it was therefore in the interest of the country to save the railways and to have them continue as two competing companies. A consensus had not formed around Bennett’s ideas, but few doubted his beliefs regarding the gravity of the situation. Bennett said to a group of railway labour leaders, “No language would be too extravagant to describe the seriousness of Canada’s railway problem.”31
His years in Calgary with the CPR had rendered Bennett an expert on railways and their problems. He and Beatty had spent many quiet social evenings together, had travelled together, and had sat on the board of directors of the Bank of Montreal together. They also shared a mutual dislike of the CNR’s Thornton. Thornton was a charismatic man with a dominating personality, but he was also a bad manager with extravagant tastes.
Bennett worked with Minster of Railways and Canals R.J. Manion to establish the Select Standing Committee of Railways and Shipping. Chaired by Richard Hanson, it began its work in late 1931. But Bennett was pressured to amalgamate the two railways even before the committee reported its findings. Among those that pressed for amalgamation were the Bank of Montreal and the CPR. Bennett found himself in a sticky situation; not only was he friends with both company presidents, he also knew that he would need the same financial support that both had afforded his party in the last election in the next, in just a few years’ time.
The pressure on the prime minister was enormous and was recognized by friends and foes alike. He had stated in a number of speeches in the 1930 campaign that he stood for competition ever and amalgamation never. The Winnipeg Free Press ran an editorial cartoon that showed Bennett standing with a paintbrush before a sign that he had just doctored to say “competition Never and amalgamation Never.”32
The committee’s hearings aired both railroads’ dirty laundry with stories of wasteful spending and extravagant, outrageous upper-management salaries, especially those of the two presidents. The CNR’s Sir Henry Thornton came under particular criticism, for his company also provided him with a seemingly bottomless expense account and even a free mansion in which he and his family lived. Thornton was shattered by the investigation and public questioning of his character. He burned his papers rather than submit them to the committee. After a visit from a group of Conservative MPs that he dubbed the Wrecking Brigade, he tendered his resignation. Bennett was happy to see the back of him, but his departure solved nothing. Thornton died of cancer in New York City only eleven months later, penniless and broken. Bennett did not attend the funeral.
The committee tabled its final report in May 1932. Although it did not suggest amalgamation, Thornton’s public humiliation and resignation led Beatty, the Bank of Montreal, and others to renew public pressure in promoting just such an option. Bennett told Manion and the rest of cabinet that he maintained his belief that the two companies should not amalgamate but that he would change his mind if there were sufficient evidence to support his doing so. And so with Manion’s encouragement, Bennett created the Royal Commission to Inquire into Railways and Transportation to investigate all options. He appointed the Right Honourable Chief Justice Lyman Duff as chair.
The Duff Commission worked exceptionally quickly and reported to the House in late September 1932. It recommended the continuation of two separate companies but suggested that the two should cooperate with respect to schedules, machinery, facilities, and processes so as to reduce the operating expenses of both. It also recommended that the government oversee the transition and ensure that the savings were passed on to customers so that freight rates would drop and thus profits to farmers and manufacturers might increase. Bennett and Manion discussed, then approved, the recommendations, and the prime minister ordered that legislation be drafted to implement them.
While reaction to Bennett’s support of the Duff Commission recommendations was generally positive, there was still some opposition. Besides those who had wanted amalgamation, there was worry from others concerned about railway company job losses. Bennett met with representatives from the Railroad Brotherhoods on January 26, 1933. They presented much the same advice as they had given to a Senate committee that had been investigating the matter the previous fall. They wanted to see the establishment of a five-person board, including representatives from labour who would oversee the changes that were coming, so as to ensure that none of them would lead to more downsizing. W.L. Best from the Brotherhood of Locomotive Firemen and R.J. Tallon of the American Federation of Labor Railways Employees Department, stressed that 51,663 railway employees had lost their jobs since 1929, and that it would be better for their membership and, in fact, the entire country, if the government increased its subsidy to the railways. When Best had made the same point during the group’s Senate presentations, Arthur Meighen had responded that the government could not afford to continue to subsidize the railways at current levels, let alone increase the corporate welfare. Further, Meighen had explained, if the actions recommended by the Duff Commission were not implemented in whole or at least in large part, then there was a real possibility that one or both of the railways would go broke, resulting in far more unemployment among those whom Best represented.
Expecting to receive much the same response from Bennett, Best had brought along J.B. Ward from the Locomotive Engineers of the Canadian Pacific system and Frank McKenna, chairman of the CPR’s Federated Shopmen. It was a clever ploy, but Best misunderstood Bennett. He failed to realize that if Bennett could not be pressured by his old friends who ran and financed the CPR, he would certainly not be moved by those who ran the company’s unions. And he was not. Best and the others asked that Bennett consider “the human element” in the decisions he was about to make and not “further aggravate our social conditions.”33
Bennett politely heard the delegation’s complete presentation without interruption then paid them the compliment of a direct and honest response. Bennett said he agreed that the situation with the railways was threatening the stability of the entire Canadian economy. He explained that all the work being done to bolster international trade would be largely wasted without a healthy rail system to move goods across the country. He repeated Meighen’s point about the consequences of losing both railways, which he stressed was a real possibility, and said that the efforts of the government were focused on saving them both. He stated, though, that in rescuing the companies, there would be adjustments that would inevitably lead to more job losses. He said, “But it will be a common sacrifice, and everyone will have to suffer.”34 Best and the others left empty-handed, but they had been heard and their points of view had been validated and respected.
Even as the railway legislation was working its way through the House, Mackenzie King and Liberal newspapers continued to insist that it was a smokescreen and that Bennett was tricking the country. The prime minister was really just a slave to the Montreal business elite, he argued, and would eventually deliver the amalgamation that they so coveted. From the beginning, Mackenzie King had also believed that Bennett’s actions were motivated solely by a desire to get rid of Thornton and place Conservative people in charge of the CNR.35
Bennett and Manion believed Mackenzie King and the Liberals would do all they could to politicize and destroy, or at least delay, the railways legislation, and so Bennett gave it to Meighen to present through the Senate. In so doing, he robbed himself of the publicity and credit for something he had worked so hard to bring about. The legislation that passed the Senate and finally came to the House created a Joint Co-operative Committee to oversee both companies. It had representation from both and, in what must have made Best smile, a representative from labour. The committee was to see that responsible cost cutting and cooperation, especially with respect to passenger service, occurred in ways that helped the companies’ bottom lines while also helping the Canadian economy as a whole. Mackenzie King by this time had spun and claimed that Bennett was trying to wreck the CNR.36 But the Liberal caucus was split and so Mackenzie King retreated and gave only cursory opposition to the bill.
With the legislation passed and cooperative efforts beginning, Manion delivered two powerful speeches, first in Smiths Falls, Ontario, and then in Belleville, Ontario. In both he reviewed the crisis that had precipitated the Duff Commission and the government’s stepping in to force the CNR and the CPR to play nice. Manion said that the option of amalgamation had never been seriously considered. He concluded, without fear of contradiction, that the Canadian economy was on firmer ground due to actions that had saved the railways and kept the Canadian National in public hands.
Later, 1938’s Transport Act strengthened what Bennett had begun by rendering more of the Duff Commission’s recommendations law and amending some key regulations. Among the changes that Bennett’s legislation had introduced, but the Transport Act more firmly enforced, was the necessity for railways to negotiate freight rates so that all of one particular customer’s goods could travel on one line, thus reducing shipping costs. The legislation and regulations were important steps taken down the path toward economic stability and prosperity that Bennett had forged.
THE OTTAWA CONFERENCE
While balancing the various challenges that competed for his attention, Bennett prepared for the Ottawa Imperial Conference. Originally intended for 1931, it was finally scheduled to take place from July 21 to August 20, 1932. Its goal was to help each of the Commonwealth’s dominions to address their ravaged economies through reducing or eliminating trade barriers between members while raising them against the rest of the world. The notion of increasing trade with Britain and the Commonwealth through preferential tariff arrangements was something that Mackenzie King had been planning well before the 1930 election. On April 5, 1930, he had pondered the imminent election and confided to his diary that “. . . the Imperial Conference will lie ahead as something which [the] liberal Gov’t that favours free trade within Br. Empire & less with the U.S. I believe we can sweep the country with it.”37 While there is no evidence that he and Bennett discussed inter-Commonwealth trade, it was clear that both agreed on its necessity.
Bennett had sold the idea of the conference to his Commonwealth colleagues on his belief that with the United States having led the trend toward cutting international trade, the dominions had no choice but to turn to each other. It was to be an imperial circling of the wagons based not upon misty-eyed nostalgia but rather a clear understanding of the shifting tides of power that were buffeting all players on the world stage — including Canada. A Canadian nationalist, Bennett believed that he could react to American isolationism while exploiting the fact that Britain’s glory days were behind it and that Canada’s were yet to come. Indicating the degree to which he understood the shifting Canadian-British paradigm, he said:
The day of the centralized Empire is passed. We no longer live in a political Empire. I found people looking forward to the Conference in the belief that we will lay at Ottawa the foundation of a new economic empire in which Canada is destined to play a part of ever-increasing importance.38
Bennett’s proposed trade arrangement was a confluence of his faith in the power of tariffs to bring about economic benefits, his imperialist belief that the familial ties between Canada and the old Empire could be developed into a profitable synergy, and his nationalist fear of the growing power of the United States. The three were linked by his Tory inclination that the government must act to intervene vigorously in the economy.
Bennett had been expressing these nuanced and overlapping ideas for years. For instance, near the end of 1910, he had written a long letter to Aitken, stating: “In Canada the situation is really acute. We have gone on and made commercial treaties with the nations of the world and are now thinking of reciprocity with the United States. That means political union in 25 years because the West must be the dominating partner in the life of this dominion within that time unless we can maintain close commercial union between the East and West as confederation fails.”39 Bennett went on to express his yearning for a day when young men, supposedly such as he, would be able to take the reins of power and create what he called an “Imperial Federation.” Such an organization, he argued, could bring benefits to Canada while standing against the ever-present pressures of American domination or even annexation.
Before he left Canada to live and work in Britain, Beaverbrook had expressed similar ideas. In fact, he publicly admitted that his foray into the newspaper business was made primarily to promote the notion of an imperial free-trade arrangement.40 With his Empire Crusade, he had insisted to any and all who would listen, and old and trusted friend Bennett listened a great deal, that the scheme would render the newly created Commonwealth self-sufficient in terms of raw materials, finance, markets, and perhaps most importantly, food.
Beaverbrook burned through political capital in his relentless promotion of his rather simplistic scheme of imperial free trade. He and Bennett’s friendship slid into one of its periodic schisms when Bennett insisted that his complex preferential trade and tariff idea was more attainable and beneficial. During the 1930 campaign, a bitter Beaverbrook initiated Globe and Winnipeg Free Press interviews and expressed support for Mackenzie King. Bennett visited Beaverbrook in November 1930 after the Imperial Conference. They agreed to disagree.
Upon his return to Canada, Bennett had held a press conference and without prompting told reporters about Beaverbrook’s Empire Crusade. He explained it in some detail, noting that it was something he and his old friend had discussed for years, but that he could still not support it as the way to increase Canadian trade. Canada, he said, needed both the Commonwealth and the United States as trading partners.41 It would be a delicate balance.
Bennett’s thoughts on that balance were seen years before in his enthusiastic opposition to Laurier’s 1911 Reciprocity Treaty that promised free trade with the United States, and had been his first chance to sing on the national stage of his rejection of the pull of continentalism in favour of greater Canadian nationalism as expressed through stronger imperial ties. It was a song that he would pull from his repertoire often in the 1920s. For instance, in 1928, he had said in an exchange in the House with Mackenzie King, “I am for the British Empire next to Canada, the only difference being that some gentlemen are for the United States before Canada. I am for the British Empire after Canada.”42
In January 1932, Britain’s chancellor of the exchequer Neville Chamberlain, acting as the equivalent to Canada’s minister of finance, and reflecting Britain’s growing protectionism tendencies, had brought forward a revenue tariff bill which imposed a 10-per-cent duty on nearly all products imported into Britain. The bill made exceptions only for wheat, meat, and some other commodities. Bennett was upset by the bill, seeing that it so obviously contradicted his views on and hopes for enhanced imperial trade while it would also hurt Canadian producers and exporters. He wrote to Chamberlain expressing his displeasure. Bennett was pleased to receive a quick response stating that the bill would not come into effect until after July’s Ottawa Imperial Conference, which would afford him a chance to amend or even kill it. Chamberlain explained to his prime minister and cabinet that only Bennett’s letter and logic had resulted in the delaying of the imposition of the tariff.43
On February 3, 1932, accepting cabinet’s contention that he was stretched too thin, Bennett had appointed Edgar Rhodes to succeed him as finance minister. Rhodes was given the job of helping to prepare for the Ottawa Conference. He appointed respected Queen’s University professor Clifford Clark to assist in the effort. They worked with Stevens to organize staff to research and write preparatory reports and briefing books.
Among the more distressing documents that emerged from the process was a report regarding American branch plants in Canada. It was written by bureaucrats at the Dominion Bureau of Statistics. It noted that the first branch plants had appeared in 1860 and that by 1922 there were 259. The late 1920s had seen an explosion of new branch plants. The report outlined the magnitude of the economic issue with a list of 964 manufacturing companies that in early 1932 were located and operating in Canada but with head offices and majority shareholders in America. A report to the American Congress had indicated that at the end of 1929, American investment in branch plants in Canada totalled $540.6 million.
The Canadian report concluded that the two main reasons for the establishment of branch plants were to augment profits through jumping Canadian tariffs by having goods manufactured in Canada, and to use Canadian plants to export products to Britain.44 The report raised questions as to what exactly constituted a Canadian product. Bennett also read that, in 1930, American investment in Canadian manufacturing represented 17.74 per cent of the country’s total industrial investment and that branch plants employed 114,505 Canadians. That number meant that 24.3 per cent of all wages earned in the Canadian manufacturing sector was earned in American branch plants.45 This point raised questions about Canada’s economic sovereignty. The statistical analysis laid bare the limited manoeuvring room that Bennett really had in advancing Canadian trade. In many ways the report can be seen as the dawning of the intricacy of economic globalization forcing its way into public policy decision making.
Despite the hard work done by diligent men, some delegates were critical of the fact that while international conference agendas are usually agreed upon up to six months in advance, the Ottawa agenda was not wired until July 7. Many delegates had already left for Ottawa when summaries were cabled to them.
Finally, after a few hectic days of switching some lodgings and dealing with minutiae, the delegates assembled in the House of Commons and the gavel’s bang announced the conference was to begin. In London, Bennett had accepted the invitation to act as chair. He had also decided to lead the Canadian delegation. This dual role put him in the difficult position of having to mediate discussions and allow all opinions and delegations to be heard while also speaking for Canada. It was a balance that he did not always handle well. The brusque manner that had allowed him to succeed so spectacularly in both the worlds of business and politics was neither effectual nor well received in the tactful and sensitive milieu of international diplomacy.
As the conference moved slowly through its long agenda at plenary and breakout sessions, Bennett appeared to be everywhere and doing everything. Behind the scenes, though, he was delegating intelligently. When a British delegation complained about negotiations led by Commissioner of Taxation R.W. Breadner, Bennett had him replaced by Hector McKinnon and then was pleased to see him work out a schedule of reduced tariff rates with his British counterpart. Minister of Trade and Commerce Harry Stevens had been given authority to oversee all trade negotiations. His staff worked late into, and sometimes through, nights in hammering out agreements where possible and summarizing disagreements where they were not. They reported to him early each morning and he, in turn, briefed Bennett.46 In most cases, Bennett accepted what had been agreed to by Stevens and his staff. There were incidents, however, where Bennett rejected or amended draft agreements. For instance, Stevens brought him a deal involving British and Canadian steel and iron that Bennett thought gave too much while offering Canada too little. He rewrote parts of the agreement and insisted on a tariff on British boilerplates. The changed deal upset the British and irked Stevens and his staff. In the end, however, when the deal was signed according to Bennett’s new draft, it brought considerable benefit to an important Canadian industry.47
While the international press was present and working hard to bring news to their respective countries, the Canadian press found itself stymied by a prime minister who believed it in the country’s best interest to keep silent until the conference’s final communiqué. This decision frustrated Manion, who had been put in charge of managing the conference’s press relations. Manion delegated press briefings to Pearson. Quickly discovering that he was unable to extract any information from Bennett, the ever-resourceful civil servant turned to Malcolm Macdonald, a friend and his counterpart in the British delegation. At the conclusion of every session, Pearson spoke to Macdonald and then to the Canadian press.48 The trick allowed Pearson to give them only what they could have discovered through diligent inquiry but at least be seen to be giving them something.
While Bennett’s voice was the only Canadian one that mattered, and thus the Canadian delegation was a picture of disciplined unity, the British delegation was a feuding dysfunctional family. Both Prime Minister Stanley Baldwin and Dominion Secretary J.H. Thomas opposed imperial free trade in principle and Bennett’s preferential tariff ideas. But it was clear that the most powerful voice of the contingent was Chancellor of the Exchequer Neville Chamberlain, who was supported by British Board of Trade president Walter Runciman. Bennett was pleased by Chamberlain’s evident clout. In the reticent but crafty politician he had a fellow traveller who shared his views on the importance of pan-imperial trade preferences.
The matter of tariffs on meat and other food products was one of many important issues that split the British delegation. Baldwin worried about losing the support of his cabinet and caucus in London if taxes imposed on non-Commonwealth food resulted in higher domestic prices. He worried too that every rural riding would be lost in the upcoming election if food from the dominions were allowed in without tariffs, thereby affecting British food production profitability. Chamberlain later wrote that the conference’s turning point was August 15, when the Australians joined the British splinter group and refused to deal on tariffs regarding foreign meat.49 While product after product was agreed upon, food was always the point of departure at the end of every day and it was always the British that seemed to block genuine progress.
The conference ended with many bilateral agreements in hand but without the overall trade arrangement that Bennett had envisioned. Still, many were pleased with what was accomplished. At the conclusion of the conference, Bennett received a number of congratulatory letters from friends and political allies, as well as Canadian farm and business leaders. Warmly worded telegrams also arrived from the British and Australian delegations congratulating Bennett on his leadership throughout the difficult negotiations. He answered them all by making the same point in slightly altered phrasing: “It is my earnest hope that we have laid the foundation for greater Empire trade and that in the future we may see economic as well as sentimental ties binding the different parts of the Empire closer together.”50
Canadian newspapers experienced a rare moment of consensus as they found themselves in agreement regarding both the conference’s success and Bennett’s leadership throughout. Typical of the editorial comments from papers was one found in the St. Thomas Times-Journal which began, “Except for super-partisans who hate to admit that a political opponent ever does any good, the people of Canada must, metaphorically speaking, take their hats off to Rt. Hon. R.B. Bennett, Prime Minister of Canada. . . . Canadians should be proud of him. He has earned an imperishable place in the role of a builder of Canada and a builder of Empire.”51 The Globe’s managing editor Harry Anderson was effusive in his praise, noting in a private letter to the prime minister, “First let me send, very heartily, a handshake of congratulations on the achievement of the conference. Surely a sound and lasting foundation has been laid for great progress and development in Empire trade.”52
But all was not wine and roses, for a great deal of frustration furrowed the brows of participants as they boarded ships for home. Perhaps most importantly, Baldwin was angry at how things had worked out and returned to London believing that his party would blame him for not making more progress on trade. But his heart had not been in the negotiations from the outset. Upon arriving in Ottawa he had met with Mackenzie King and told him that he had hoped that simply raising tariffs in England would result in lower tariffs generally.53 He also predicted, correctly as it turned out, that his inability to see his way through the mire of conflicting interests in order to create a trade plan that would at least begin to address the issue of preferential imperial trade would lead to his downfall as party leader. In a vain attempt to save his political skin, Baldwin began a campaign to blame Bennett for his own failures in Ottawa. Baldwin’s manoeuvre was stymied, however, by his reputation for having only a casual regard for the truth.54 If indeed the conference frustrated expectations, there was blame enough to go around. Chamberlain later admitted to not understanding many of the financial issues under discussion, while the entire British delegation was so muddled and divided that Bennett needed to help and direct them from behind the scenes.55
Baldwin told British reporters that Bennett entered the room each day with a new brainwave that had little to do with what had been previously agreed upon and, in fact, led to agreements ending in shreds with no progress made. Chamberlain, it must be added, also blamed Bennett for the failure to make more progress. He found Bennett smug and irritable. Chamberlain wrote, “Most of our difficulties centred round the personality of Bennett. Full of high Imperial sentiments, he has done little to put them into practice. Instead of guiding the conference in his capacity as Chairman, he has acted merely as the leader of the Canadian delegation. In that capacity he strained our patience to the limit.”56 It should be noted that Chamberlain and Baldwin had similarly negative things to say about Australian prime minister Stanley Bruce who, like Bennett, worked tenaciously to bring benefit to his country.57
Canadian historians who have examined the Ottawa Conference have formed a consensus that seems to support Chamberlain’s critical statement and Baldwin’s condemnation of the event as a failure.58 Indeed, Bennett had organized the conference to create a system of preferential tariffs within a united Commonwealth and to bring economic recovery to Canada; neither happened. However, a fair analysis must concede that at least partly as a result of the bilateral agreements that were made at the Ottawa Conference, and Bennett’s obsession with increasing trade, Canada’s trade with Britain and other conference participants substantially increased in the period following the gavel’s final fall.59 Exports to Britain in the two years after the conference rose from 28 per cent to 38 per cent, and to all other Commonwealth countries from 36 per cent to 48 per cent of all exported goods.60 Other statistics told a similar story. From April to October 1931, aggregate imports totalled $64 million; by April to October 1934, imports from Commonwealth countries had risen to $68.1 million. From April to October 1931, aggregate exports to them were $105.3 million and from April to October 1934, they were $166.2 million.61 Even where unreliable statistics fail to inform, there remains a consensus that the conference spurred business and boosted employment through creating a renewed confidence among many business leaders that at last and at least something was being done to get Canada out of the economic mud in which it had been stuck for too long.62
CONTINUING TO BLAST HIS WAY
At the Ottawa Conference Bennett had managed to create a climate where progress on trade and tariff policy had been made without surrendering the protection needed for Canadian manufacturers and wheat producers.63 Further, the agreements signed and personal relationships forged at the conference also allowed for subsequent small, behind-the-scenes trade activities. For instance, Stevens discovered that while dried fruit from Australia was just as good and just as cheap as the same products from California, the Americans were much better at packaging their produce. Stevens made contact with his Australian counterparts whom he had met in Ottawa. The packaging issues were quickly addressed, and soon Canadians were enjoying dried fruit from down under.64
Stevens performed brilliantly before, during, and after the conference in pursuing trade opportunities such as these. That did not mean that he and Bennett did not clash from time to time. Months after the Ottawa Conference, for example, Bennett called Stevens to his office one day to report that he had been told that Canada’s trade commissioner in New Zealand had been acting in ways that were hurting the Canadian steel industry and that he should be fired. Stevens heard the prime minister out and then left to initiate an investigation. He discovered that the commissioner had, in fact, acted quite appropriately but in so doing had upset a couple of prominent Canadian steel men. When Stevens returned to tell Bennett of the situation, the prime minister exploded, saying, “Mr. Stevens, I am the Prime Minister of Canada, and as the Prime Minister I instruct you to dispose of the services of this man Cole in New Zealand.”65
Stevens wrote a letter to Cole that dismissed him, but stated clearly that in his opinion it was without cause. He apologized for simply following the orders of the prime minister, who did not fully understand the situation. He put Cole’s copy in a file and sent another copy of the absolutely inappropriate letter to Bennett, stating that he was awaiting Bennett’s final decision. The letter led to another meeting, which allowed Stevens to again explain the pertinent details. Bennett heard him out, then changed his mind. Cole served out his term. The incident demonstrated Bennett’s temper but also the degree to which he would listen and act upon advice from trusted colleagues and, as always, his willingness to take stands contrary to those demanded by big business.
Despite their occasional personal troubles, Bennett and Stevens continued to be an effective team in seeking new markets for Canadian goods. Stevens sent a number of messages through appropriate channels indicating his eagerness to deal in matters of trade with any country willing to negotiate a mutually advantageous arrangement. These entreaties led to trade deals being signed in late 1932 with Germany and France, and later with Poland and Austria. Bennett sent emissaries to Latin America and soon thereafter inked trade deals with Bolivia, Guatemala, Panama, Costa Rica, and Haiti. At the same time, more deals were made with Commonwealth partners Hong Kong, South Africa, Ireland, and India.
Given the meetings, speeches, travel, and conferences, the reports, debates, and arguments, and all the good press and bad, one is left to conclude that there was little Bennett had left undone in his efforts to increase trade. But while noteworthy progress had been made, it was not enough. Britain’s removing itself from the gold standard — something that will be addressed later — had destabilized global currency markets and negatively affected the previously widely accepted efficacy of tariffs. Commodity prices continued to plummet. And the only clouds over the prairies held not rain but grasshoppers. All of Bennett’s best efforts simply could not stabilize global prices or currency rates, or invent customers, or conjure rain.
By early 1933, it had become evident that the higher tariffs and trade deals were helping the manufacturing and mining sectors, which were located mostly in central Canada. Regardless of the positive effects of Bennett’s actions, however, Ontario’s average per capita income had fallen 44 per cent. That precipitous drop was painful, to be sure, but when compared with other regions where the tariff policies had more limited effects, incomes had fallen even more. Recall that Saskatchewan’s had dropped by 72 per cent and Alberta’s by 61 per cent.66
Farmers needed more help. In an effort to provide it, Bennett used the contacts he had made at previous international conferences to push for another. In August 1933, he chaired the World Wheat Conference. Delegations from wheat-producing countries hoped to do something about the collapse of world prices. Canada, the United States, Argentina, and Australia had agreed in advance that they would attempt to raise prices by reducing production. It was an old trick that relied on the older truth of supply and demand. At the World Monetary and Economic Conference held in London just the month before, Bennett had signed a deal with Australia, Peru, Mexico, China, India, Spain, and the United States to keep thirty-five million ounces of silver from the world market for four years. Bennett had ordered the federal government to begin purchasing Canada’s silver to meet its silver quota. Based on the silver precedent, participants agreed to another quota system that would reduce worldwide wheat production by 15 per cent. Bennett agreed to cap the amount of wheat Canada would place on the world market at 200 million bushels a year.
There was great consternation from many quarters within Canada when the conference’s communiqué was announced, much of it from Bennett’s own cabinet. There was an even greater uproar when Bennett explained that an emergency wheat control board would be created to oversee the limits to production and to enforce the 200-million-bushel cap. The most vocal criticism came from Charles Cahan. Once again he spoke from the perspective of a believer in laissez-faire economics who saw the agreement and the new government agency as anathema.67
Bennett listened to critics, but his belief in the necessity of the government to intervene in the market in order to combat the Depression, and in this case to try to raise the price of wheat, was not changed. He acted to blunt the ideologically based criticism. Before leaving for the conference, he had taken a politically intelligent step and fully briefed western premiers. He had their support in hand before making his proposals in London. The premiers helped sell the idea of manipulating production to farmers; consequently, Bennett had the only constituency that really mattered on his side.
In a sad irony, there was another reason that the criticism ebbed. Even before the regulations needed to be fully enforced, the combination of drought, grasshoppers, and rust had taken more than enough farmland out of production to ensure that the cap wasn’t exceeded. Meanwhile, many farmers had already done as Cahan and the free market advocates had argued would happen if government stayed out of the way. They had seen the price of wheat continuing to drop and switched to more profitable crops or left farming altogether. In the end, then, the wheat conference agreement was not painful for Canadian farmers. But neither did it bounce the price.
Just before Christmas 1933, Bennett wrote a long letter to each Conservative member of Parliament and senator and dozens of party officials. All said much the same thing. He began by thanking each recipient for his or her service to the country and party and acknowledged how difficult the year had been for all. He then noted the hurricane of criticism that had been endured for the previous three years by all members of the government and the Conservative Party. He wrote of hopeful economic indicators suggesting that there were signs of recovery ahead and that they needed to remain united. He wrote, “If our Party will act as a unit, forget differences and consolidate our efforts, bearing in mind that Conservative principles will endure as long as there is a world, and that loyal and devoted souls will always stand at the crossroads to ensure that our future is protected by the experience of the past, I am confident we will eventually succeed.”68
It was reassurance from a boss and a pep talk from a coach. Bennett received a number of thank-you letters in return, all expressing gratitude for his message of hope and encouragement. It was evident that support for Bennett and his government was slipping among Canadians, but caucus support was holding. This support held despite the fact that there had been a sex scandal brewing.
During the July-August 1932 Ottawa Conference a rumour had circulated. Mrs. Hazel Beatrice Colville of Montreal had told friends that she and Bennett were soon to be married. She was preparing her trousseau. The forty-three-year-old Colville was the daughter of Sir Albert Kemp, who had served with Bennett in Borden’s cabinet. She was attractive, intelligent, wealthy, and well connected. Mackenzie King discussed the rumour with Baldwin and others with the added speculation that following the wedding Bennett would resign as prime minister and move to England.69 The rumours turned to scandal when it was discovered that Mrs. Colville was Roman Catholic, had been twice divorced, and was known for her many romances. Bennett said nothing to the press, which, unlike today, respected his privacy.
Bennett and Colville had, in fact, begun a romantic relationship five months before. On the day the Ottawa Conference ended, she and Bennett met for a week’s holiday at her elegantly refurbished eighteenthcentury seigneurial house at Mascouche, Quebec. He spent much of his summer there. They continued to see each other when they could and a number of tender letters were exchanged. An obviously smitten Bennett wrote, for example, “I miss you beyond all words & I am lonesome beyond cure without your presence.”70
Rumours of the affair were fascinating to many Canadians who had grown used to the fact that both the prime minister and Opposition leader were bachelors. There were many jokes about it, including in the House. One afternoon there was a long and somewhat tedious debate led by a Conservative member who was upset about the apparent habit among some Doukhobor women of sometimes appearing naked on their isolated farms during torridly hot summer days. The member sought to draw Mackenzie King into the debate and asked what he would do if he were at his home enjoying a pleasant afternoon when he suddenly spied a number of naked Doukhobor women dancing on his lawn. Mackenzie King replied quickly, and to roars of laughter from both sides of the aisle, that he would send immediately for the leader of the government.71
In the spring of 1934, Colville ended the affair. Bennett wanted her to give up cigarettes, drink, and Montreal’s nightlife and she refused. The relationship demonstrated that Bennett was indeed capable and desirous of love but, alas, it was not to be. Shortly after the breakup, in September 1934, Bennett sailed for England. He combined political and business meetings with a much-needed time out. As usual, his leisure activities involved shopping in London with his sister Mildred and time in conversation about books, politics, and business with Beaverbrook.
Upon his return in early October 1934, Bennett was moved to comment in a speech that his travels had convinced him that while troubles and challenges remained, Canada had been faring better than almost every other country in the world. He credited the trade deals inked at and flowing from the Ottawa Conference as the primary factors in that success; they protected the country from ruthless competition and provided preferred markets for commodities. He noted, “The fact that Canadians avoided panic and kept their heads throughout the darkest days stands as a lasting memorial to Canadian character and sanity.”72
He was encouraged by the fact that since the end of 1932, unlike during the final years of Mackenzie King’s administration and the first two years of his, Canada was again in a positive balance of trade — selling more than it was buying. Bennett took pride in the new Commonwealth trade agreements, which helped with the turnaround. While overall economic recovery was frustratingly uneven and slow, trade numbers continued to improve. He had noted in a Toronto speech in April 1934 that imports and exports had gone up $132 million over the previous year and that 60 per cent of that trade had been within the Commonwealth. Exports of commodities from food products to minerals to newsprint were all up, some substantially. He summarized the statistical analysis on exports as astonishing.73 Similarly, Bennett expressed tremendous satisfaction with the additional agreements that his government had forged with other Commonwealth countries, singling out the substantially increased trade with South Africa and New Zealand.74 The progress was steady but unemployment and related hardships still plagued far too many Canadians. More needed to be done.
THE UNITED STATES
In the 1970s, Prime Minister Trudeau initiated actions that sought to promote what he called a “third way.” While acknowledging the importance of economic interaction with the United States, he sought to increase trade with the rest of the world so as to render the country less dependent upon, using his metaphor, the twitches and grunts of the elephant with which Canada was sharing a bed. Prime Minister Chrétien did the same thing with the many Team Canada trade missions that he led in the 1990s. Bennett understood the same thing that Trudeau and Chrétien did: while it is good for Canada to diversify its trade by increasing the number of partners, the essential trade relationship with the United States can never be forgotten.
Bennett had gone as far as he could in promoting and advancing Commonwealth and other international trade. While the numbers indicated success, and the manufacturing sector began to feel the warmth of recovery, a larger strategy to find markets for Canadian goods had to be developed. That new strategy had to ignore the protectionist walls that presidents Harding and Hoover had been erecting and directly engage the United States.
The year 1932 had witnessed transformative change in the United States. The November elections represented a repudiation of Hoover and the Republican Party’s handling of the economy. Democrats won a commanding congressional majority, taking an additional 97 seats in the House of Representatives and 12 in the Senate. The Democrats held the largest majority in the Senate since 1869 and in the House since before the civil war. Fifty-year-old former New York governor and former assistant secretary to the navy Franklin D. Roosevelt crushed Hoover to become the country’s thirty-second president. FDR won the largest portion of Electoral College votes in more than one hundred years and the highest percentage of the popular vote ever. Roosevelt’s sunny optimism, sparkling charisma, and promise to deliver a New Deal to Americans had inspired hope and optimism. Many Americans were convinced that with FDR in the White House, things would improve.
Like Bennett only three years before, Roosevelt came to office in the depths of an economic and moral collapse. He promised an activist administration that would seek innovative solutions to simultaneously help people while saving capitalism from itself. FDR’s core political beliefs were consistent with Bennett’s own ideas. The Canadian prime minister also shared the new president’s tireless energy and willingness, if not eagerness, to explore new options in the face of new problems. Franklin Roosevelt was America’s R.B. Bennett.
Roosevelt had campaigned on the promise to end the restrictive trade practices of the past, but regardless of the winds of optimism sweeping northward, Bennett continued to approach America quite warily. His misgivings were based not only upon the ties to Britain and the Commonwealth that were such an important part of Canada’s political culture as well as his personal beliefs and political imperatives, but also on a distrust of America’s power that he shared with many Canadians. In a speech delivered in October 1934, for example, he argued that the United States had taken it upon itself to establish a continental defence in which it protected itself by also protecting Canada from air and sea threats. He admitted that the American policy had benefits for Canadian security but asked how long Canada could accept that protection and still control not only its own defence and foreign policies but also its natural resources. Pondering the future of Canadian sovereignty, he wondered, “If the resources of this country of which we boast so proudly are to be ours to hand to those who come after us, it is time we begin to direct our thinking to the factors that are involved in their defence and security.”75
Despite these qualms, Bennett was realist enough to know that, regardless of all he had been doing with the imperial trade initiatives and in the face of the tit-for-tat tariff war that Smoot-Hawley had exacerbated, trade with Canada’s neighbour was an essential part of reinventing prosperity.76 Like FDR, who in his presidential campaign had expressed his support for trying anything, Bennett was willing to try everything.
Complicating attempts of all national leaders to address international trade issues, however, was the quickly developing corporate globalization that was rendering it increasingly difficult to determine the nationality of particular companies and thus how trade between countries could be influenced. For instance, Ontario’s Electro Metallurgical Company of Canada made graphite electrodes used by steel and chemical companies in electric furnaces. They were manufactured in Welland, Ontario, and sold in Canadian dollars through an agent called the Canadian National Carbon Company. In 1930, sales to the UK totalled a quarter of a million dollars. However, the British Customs office undertook an investigation and found that both the Electro Metallurgical Company of Canada and the Canadian National Carbon Company were wholly owned subsidiaries of the American Union Carbide and Carbon Company. As such, neither was deemed Canadian and so the products they were manufacturing and selling fell outside the parameters of the imperial trade regulations. The company would be forced to lose British contracts or pay about $60,000 in duties each year. With those contracts lost, Canadians jobs would be lost. The company’s vice-president wrote to Bennett, beseeching him to intercede on the company’s behalf by reducing Empire content rules on products manufactured by companies not owned wholly within the Empire.77 Bennett acted on the company’s behalf with letters to the British government. But the larger points are as clear today as then — the Canadian and American economies were inexorably linked, and while the United States needed Canada, Canada needed the United States more.
In those days, the new president took office not in January but in March. In February 1933, Bennett announced to the House of Commons that with a new president apparently willing to turn away from the protectionist trade policies that had been erected in the 1920s and willing to at least explore new opportunities, the Canadian government was initiating negotiations with the United States to see if mutually beneficial trade agreements could be signed. He sent Canada’s minister to the United States, Bill Herridge, to meet with president-elect Roosevelt. The ostensible purpose of the long-scheduled meeting was to discuss the St. Lawrence Seaway Treaty, but Herridge was instructed to also raise the possibility of new trade deals with the vibrant American leader. Herridge was pleased to report that FDR believed that new trade arrangements deserved attention.
After a number of discussions with American and Canadian officials about the possibility of increased Canadian-American trade, Bennett travelled to Washington to meet Roosevelt. He was there with a number of other heads of state for what was called the Washington Conversations: preparatory meetings for the upcoming World Monetary and Economic Conference to be held that summer in London. Bennett and Roosevelt met in the White House on April 27, 1933. Unlike after his meeting with Hoover in January 1931, Bennett encouraged the taking of a photograph. Roosevelt and Bennett were quite different in temperament but they got along well, as the president’s natural ebullience was joined by the grace and charm that Bennett could muster when necessary. Although the relationship was not nearly as warm as the one FDR would later establish with Mackenzie King, the two concluded business efficiently and agreed that increased trade was in both their best interests. A joint communiqué announced, “We have agreed to begin a search for means to increase the exchange of commodities between our two countries.”78
The American press afforded coverage of the meetings with Roosevelt. Typical was a front-page story in the Evening Independent which spoke of the two leaders seeking ways to attain reciprocal reductions in tariffs under the headline “Tariff Truce Discussed to Bring World Action to Restore Prosperity.”79 Bennett accepted an invitation to address Americans over the CBS radio network and in his speech he heaped effusive praise on the new president and spoke of the mutual advantages of greater trade and lower tariffs between the two countries.
Bennett then ordered Herridge to initiate low-level trade discussions with congressmen and the members of the executive branch. The two exchanged a number of letters discussing and debating the various meetings and tactics to be used. Despite his meeting with the president and his reaching out to American business and political leaders, Bennett remained hesitant to forge new trade ties with the Americans too quickly. At one point, Herridge responded to Bennett’s urging him to go slow with a letter that betrayed impatience with his brother-in-law: “We cannot afford to wait. For economic nationalism in Canada is just another name for economic ruin.”80
In June 1934, Roosevelt signed the Reciprocal Trade Agreements Act. He had been pushing congressional leaders for the bill for months, and throughout that time Herridge had been telling them of Bennett’s support. The act allowed the United States to offer any trading partner a mutual 50-per-cent reduction in tariffs on agreed-upon goods. Bennett gave Herridge the responsibility to approach State Department officials to test whether a mutually beneficial bilateral trade agreement could be reached on a number of products that would benefit Canadian producers. For months Herridge tried to negotiate in good faith, but he was perturbed by American officials who were inexplicably unwilling to deal.
On November 14, after months of getting nowhere, Bennett took the rare move of going over the heads of the lower-level negotiators and wrote directly to Secretary of State Cordell Hull. The letter, no doubt composed with the advice of, or perhaps even written by, Herridge detailed every sticking point that had been raised over the months of unproductive talks. Bennett explained that the Ottawa Conference had erected no barriers to Canadian-American trade and that Canada had never defaulted on loans held by American banks. The letter ended adroitly with the acknowledgement of the purpose of the Reciprocal Trade Agreements Act and the Senate’s Trades Agreement Committee, which, not coincidentally, was scheduled to begin talks on bilateral trade with Canada the very week that Bennett’s letter arrived.81 The letter was received and politely acknowledged. It led to more negotiations, but again nothing substantive was obtained. Bennett and Herridge nonetheless maintained their pressure and back-channel meetings.
Bennett had decided that progress on increasing trade with the United States had its best chance of being realized through closed-door negotiations away from the spotlight of public scrutiny. Lester Pearson, who had gained a great deal of experience in dealing with the Americans throughout the late 1920s and 1930s, agreed with Bennett’s decision in this regard. He later wrote, “Contrary to the popular belief that secret negotiations were evil and dangerous, especially for the weaker party, my own experience has been that Canada, in settling her differences and resolving her problems with the United States, usually did better through quiet, rather than through headline diplomacy. Indeed, the latter is not diplomacy at all, but international public relations.”82 Bennett’s decision to keep the details of the talks quiet was perhaps best for the country, but it eliminated the possibility of using them to demonstrate to Canadians that he was doing all that could be done to increase trade.
For two years the talks dragged on and on, bringing forth few substantive matters of agreement. Those months saw only slow and uneven economic recovery in Canada and a drastic reduction in Bennett’s popularity. Increasing numbers were blaming him personally for the slow recovery and some even for the onset of the Depression in the first place. In December 1934, Bennett delivered speeches that foreshadowed a new bluntness — a tone that he would use to explain changes he believed necessary to spur a speedier recovery and build a more secure future. And in January 1935, he famously delivered five radio addresses that outlined his ideas. The press dubbed his program Bennett’s New Deal. In the parliamentary session that immediately followed, Bennett oversaw the introduction of a number of bills designed to put those ideas into practice, as discussed in detail in Chapter 8.
While moving his legislative agenda through Parliament, Bennett decided that he had finally had enough of the glacial pace of the American trade talks. He needed to do something bold to get things moving. With an election on the way, perhaps in a matter of months, and with his popularity continuing to plummet, reminding Canadians that he was still attempting to increase trade with the United States was not a bad political move.
On February 16, 1935, he delivered a speech before the Canadian Society of New York City in which he explained his belief that greater trade and commerce between Canada and the United States would benefit both countries. He began by praising President Roosevelt and Congress for the actions being taken to combat the Depression. He stated that both in the US and Canada, emergency measures were adopted first and reform legislation was enacted later so as to avoid ever again experiencing the worst that the Depression had served up. He reminded his audience that in the first eleven months of 1934, American trade with Canada was greater than with any other country. He argued that he had always believed in the positive use of protective tariffs but that the tariffs between Canada and the US were currently too high. He argued that American tariff changes of the 1920s had not helped international trade or American workers. Bennett noted that when Congress passed the Reciprocal Trade Agreements Act of 1934, however, it had handed the president great latitude to deal with those tariffs and to negotiate new trade agreements, such as the one that he was proposing. He then stated that both countries would benefit from greater bilateral trade and investment, and so trade barriers needed to be addressed and tariffs needed to be lowered on wood, fish, wheat, and a host of other products. He dangled the hopefully tempting idea that Canadian natural resources were such that their wealth could not even be accurately measured and would be of great benefit to America.83 The speech led to more low-level trade talks but still no breakthrough.
In an interesting turn of events, Harvard University’s professor William Elliot unofficially visited Ottawa four months later and met with Mackenzie King. The State Department representative told the Liberal leader that his government was preparing to sign a treaty that would eliminate a host of tariffs in a unilateral action that would bring great benefit to the economies of both countries. Roosevelt had wanted Mackenzie King to know that the trade talks were going well and that he believed a deal would be signed before the upcoming Canadian election. He wanted the Liberals to prepare for the news to avoid being embarrassed by it. Mackenzie King asked Elliot to have the president wait until after the election to sign a trade deal to keep from helping Bennett. Elliot promised to do what he could but told him that it was believed that the Liberals would win the election with or without the trade agreement. Confirming that part of the reason for the American foot dragging in the trade negotiations was their anger at Bennett’s imperial preference ideas, Elliot told Mackenzie King that if the Liberals represented Canada at the next Imperial Conference, and did as the Americans wished, Canada could expect even more reductions in tariffs.84 This was not the last time that a Democratic president worked to help a Liberal leader. Kennedy did what he could to help Pearson and Clinton’s speech criticizing separatism helped Chrétien. It was proof that behind FDR’s charm and smile was a tough political operator who played politics as a contact sport. Unfortunately for Bennett, the Elliot visit proved that the game was on. The Democrat would not support the Conservative.
Unaware of the Mackenzie King–Elliot meeting, Bennett continued to encourage the talks with the same determination that the American negotiators used to stall them. Herridge became exasperated with the petty details that some of the talks were reduced to deliberating upon while avoiding main issues. In one report to Bennett, for instance, he complained about Americans wanting to talk about tariff reductions on items such as blueberries and cream while refusing to discuss fish or lumber. In another he wrote, “The impression was derived that the United States officials did not appreciate the sweeping character of their requests in relation to the limited number of valuable concessions offered to Canada.”85
Bennett again tried to move things along by submitting a list of products that Herridge could take to the table that he believed would help both countries.86 Herridge brought the list forward but nothing came of it. Bennett submitted a new list. It too went nowhere. Finally, on October 8 the American trade negotiators suspended talks until after the Canadian election.
In November 1935, just days after assuming office, Prime Minister Mackenzie King signed a comprehensive trade agreement with the United States. It gave Canada “most favoured nation” status and it dramatically lowered tariffs on over a thousand products, most importantly wood, fish, and wheat. The agreement was good for Canada. It was good for the United States. It was essentially the deal that Bennett and Herridge had been proposing for nearly two years.
Mackenzie King spoke proudly of a new day for Canada. It was a new day made brighter by more advantageous tariff and trade policies, numerous bilateral trade agreements, more direct trade with Britain and the United States, and four years in a row of rising exports and increasingly positive trade balances. As Canadians enjoyed the sunshine of those actions, Bennett watched from the Opposition bench shadows.