The Second World War had a more profound and long-lasting effect on Canadian federalism than the Great War. With the exception of Premier Duplessis in Quebec, the provinces enthusiastically supported the war effort and, as in the First World War, provincial politicians came to Ottawa to help. Parliament passed a War Measures Act, effectively suspending the constitution and giving the federal government all the power it needed to manage the economy, produce the needed war material, and control the population. The provinces were left with whatever Ottawa chose to let them administer, and Canada became a de facto unitary state for the duration of the war plus one year. Under that Act, over six thousand Orders-in-Council were issued, decrees that had the force of law. They were issued by a civil service that ballooned from forty thousand to more than 120,000 employees. Unity proved short-term, however, and Mackenzie King soon faced crises with Quebec, which believed the government would abuse its enormous power, and with Ontario, which believed Ottawa would not do enough with that power.
Before those political battles opened, Finance Minister James Ilsley brought down an emergency budget to launch the war effort. Federal spending would jump over 300 per cent, from around $600 million in 1938–39 to over $2 billion in 1939–40. It was financed by huge tax increases, massive borrowing, and the creation of money by the Bank of Canada. Ilsley explained the new policy of creating credit: “We can create additional supplies of money and use it to purchase what we need . . . Instead of taking money in the form of taxes or loans, we can put our new money into competition with . . . old money . . .” That was what Alberta’s Social Credit regime had tried to do, the laws that Ottawa and the Supreme Court had vetoed. Ilsley financed the war mainly by taxation, but the credit that was created was twenty-five times as much as Ottawa loaned or gave to the provinces during the Depression and was spent in half the time.
Quebec and Ontario Challenge Ottawa’s Wartime Policy
Quebec’s Premier Duplessis soon found reason to be concerned with a wartime government in Ottawa. Quebec had been borrowing heavily on the New York market, but under the War Measures Act Ottawa vetoed Quebec’s next bond issue, a clear indication that Ottawa now controlled the economy. Duplessis had fought a number of battles with Ottawa, and he believed that Ottawa would try to use the war to make a permanent shift in the balance of power in its own favour. To protect Quebec’s interests as he understood them, he called an election for October 25, 1939. A new mandate would clearly threaten the war effort, and Ottawa could not allow the election of a provincial party on an anti-Ottawa and anti-war platform. Federal Minister of Justice Ernest Lapointe and three other ministers threatened that, if Quebec re-elected the Union National government, they would resign, leaving the province with no representation in the federal cabinet. And they promised that if Quebec elected a provincial Liberal government, the federal Liberals would not introduce conscription. With that intervention, plus ample federal funds, Adélard Godbout was elected and Ottawa’s Quebec flank was secure.
By 1942, it appeared that conscription might be necessary to maintain the military effort. King was saddled, however, with the promise to Quebec not to introduce it and with the promise of his Quebec ministers to resign if he did. His solution was typical of the political genius that made him Canada’s longest-serving prime minister. He decided to hold a national referendum on the question of releasing his government from its promise, though the promise had been made to Quebec, not to Canada. Predictably the referendum was approved by 64 per cent of Canadians, while in Quebec it was rejected by 72 per cent. One of the Quebec ministers, P.J.A. Cardin, resigned as promised; the others accepted King’s reinterpretation of their promises and did not. Duplessis had argued that Quebec could not trust Ottawa, and the referendum proved him right. That helped him gain re-election in 1944, but during the war all was quiet on the Ottawa-Quebec front.
Ontario threw itself solidly into the wartime effort but in the opinion of Premier Hepburn and many others, Ottawa did not demonstrate a similar degree of enthusiasm. On December 18, Hepburn introduced a motion criticizing Ottawa’s commitment to the war. A federal election was due in 1940, and King used Hepburn’s challenge to call it immediately, with the main issue being his government’s competence to fight the war. The federal Liberals were returned with a strong majority, and Canada was politically, financially, and constitutionally ready for the major war effort that would follow.
On July 10, 1940, one of Ottawa’s favourite goals from the Depression years was realized. Alberta, New Brunswick, and Quebec dropped their opposition to federal control of unemployment insurance, and King obtained unanimous agreement for an amendment to the BNA Act, making UI a federal responsibility. This made no difference to unemployment as wartime demand was now resulting in labour shortages, but it would be useful in any future recessions. Significantly, this was the first amendment that affected the most important part of the constitution, the division of federal and provincial responsibilities.
Agreement on Financing the War, Disagreement
on Changing Federalism
Everyone understood that Ottawa needed more money to fight the war. At a conference in the summer of 1941, Ottawa offered the provinces tax agreements by which Ottawa would collect all personal and corporate income taxes until one year after the end of the war. In return, Ottawa would provide payments to compensate the provinces for their losses. These agreements worked extremely well, and federal revenue rose steadily from around $600 million to $2.2 billion. By comparison, between 1939 and 1945, provincial revenue and expenses remained almost static at around $150 million annually. All the provinces accepted that the war was the top priority, and there was relative calm in federal-provincial relations from 1941 to 1945.
In January 1940, King received the report that the Rowell-Sirois Commission had been labouring over for four long years. It recommended that the federal government collect all taxes and return a fixed amount to the provinces without conditions so that they could maintain a national minimum of standards in social welfare. It also recommended equalization payments so that the poorest six provinces could provide services similar to those of the richest provinces. Co-chair Joseph Sirois disagreed with the recommendations but was persuaded to sign the report. Ottawa did not accept the idea of unconditional grants to the provinces, and adopting the report would require amending the constitution, a course King did not want to pursue. The report was clearly no longer urgent, but King called a conference for January 14, 1941, to consider it.
Manitoba, Saskatchewan, Nova Scotia, and PEI were in favour of the recommendations. Alberta and BC were opposed, and Ontario’s Hepburn was predictably furious since he had strongly disagreed with the very idea of a federal study of provincial matters. He saw the report and the conference as an attempt by Ottawa to use wartime nationalism and patriotic fervour as levers to effect a permanent transfer of provincial power to Ottawa. Mackenzie King said they needed to settle the issues raised in the report in order to fight the war; Hepburn pointed out that the report addressed the Depression, which was over. King said that the changes did not endanger provincial autonomy; Hepburn said that they did. Hepburn also pointed out that the War Measures Act gave Ottawa all the power it needed to prosecute the war. Finance Minister Ilsley repeated King’s argument that the changes would not affect provincial autonomy, an argument Hepburn called “ridiculous.” The conference was a failure but did little lasting damage to political relationships.
The Welfare State: Federal or Provincial Responsibility?
Shortly after the war began, some rather optimistic and far-sighted civil servants and ministers began planning for the adjustments that would be required after the war. They did not want a repeat of the chaos, unemployment, strikes, riots, and recession that had followed the First World War. A core of highly trained and ambitious bureaucrats was assembled, centered on graduates from Queen’s University who had studied the theories of John Maynard Keynes. Those theories, called Keynesian economics, postulated that during boom times, government should collect more money than it spent in order to take some of the pressure off inflation. Then, when the economy slowed, government would spend more than it collected to stimulate spending, production, and employment. The civil servants concluded that after the war, Ottawa should launch a comprehensive program of spending on health and welfare to maintain a minimal level of economic activity and avoid a recession. There was nothing new in the concept of the welfare state, and European governments had begun crafting them in the 1880s. What was new in the thinking in Ottawa was the idea that the federal government should implement welfare, rather than the provinces who had constitutional responsibility for it. The civil servants did not seem to appreciate that the Fathers of Confederation had given “exclusive” control of health, welfare, and education to the provinces for good reasons, and those reasons had not changed.
In fact, the differences between English and French Canadians had widened since Confederation. In 1864, neither group wanted welfare managed by any government. By the 1940s, however, many English-speaking Canadians wanted their governments to be heavily involved in providing welfare services, especially the federal government. In Quebec, on the other hand, the vast majority still wanted welfare to be provided by the Church they trusted, rather than their provincial government or especially by the English-dominated government in Ottawa. French-Catholic views of the objectivity of the federal government were also affected by the fact that they did not hold one of the important economic portfolios or one of the top twenty positions in the civil service, and the priorities Ottawa identified were not those of most French Canadians.
Since the provinces were all developing their welfare systems to suit their own circumstances, there was in fact no need for federal involvement. The argument of the civil servants was that federal action was required in order to establish minimum levels of welfare, to establish “national standards” of service, and to implement Keynesian economics. All three arguments were flawed. There was always a minimum level for any program, namely that of the poorest one. The argument that standards had to be the same across Canada ignored the fact that circumstances were different in every province, and Canada had a federal constitution because of those differences. In a country overwhelmingly English-speaking, “national standards” also meant English-Protestant standards. And Keynesian anti-cyclical economics could not be implemented by fixed welfare payments, because such payments could not be adjusted to reflect periods of boom or bust.
In late 1942, the left-leaning economist Leonard Marsh was directed to draft a study on a federal welfare state. His report hit the cabinet with a thud on March 15, 1943. He argued that the federal government should have a major role in ensuring that people were healthy, educated, and employed. The proposed programs included health insurance, enhanced UI, workman’s compensation, family allowances, and public works. The estimated cost was $900 million, almost twice the annual federal budgets of the 1930s. King sensed the political dangers of proceeding with the proposals as did some of his most powerful ministers, including Ilsley, T.A. Crerar, and C.D. Howe. However, the new left-wing party that had emerged during the depression, the Co-operative Commonwealth Federation, or CCF, had strongly endorsed the concept of a federal welfare state, and its popularity was surging. In 1942, the federal Conservatives adopted the welfare state and added the adjective “Progressive” to their name. That same year, the Ontario Conservatives adopted a similar program, which was key to their victory over Hepburn’s Liberals in 1943.
Mackenzie King was not one to ignore such omens, and he was infinitely flexible in terms of principles and policies. His cabinet reversed itself and promised the welfare state in the January 1944 Speech from the Throne. It would deliver a national minimum of social security, full employment, broadened unemployment insurance, contributory old age pensions, insurance against accidents and sickness, and assistance for families and housing. Canada was now officially heading for a federally dominated welfare state and its political sequel—fierce and continuous battles between Ottawa and the provinces.
Although most of the programs of the new welfare state would be within provincial jurisdiction, Ottawa did not wait for discussions with the provinces to launch them. One of the first building blocks for the system was the family allowance, popularly known as the baby bonus. The payments would be $8 per month per child under sixteen for the first four children and $5 for additional children, a very large amount for a poor family. The estimated cost was $250 million annually, 50 per cent of Ottawa’s entire pre-war budgets. King’s Quebec lieutenant, Louis St. Laurent, argued that it did not violate the constitution because Ottawa could give money to any individual. This was the “spending power” argument that the courts had struck down with their rejection of the Bennett New Deal. It also reversed the position Mackenzie King had taken on the 1927 Pension Act, when he stated that a welfare program financed entirely by Ottawa required a constitutional amendment, the policy he had followed with UI in 1940. Duplessis had been right to argue that Ottawa would take advantage of the war to permanently increase its power at the expense of the provinces.
St. Laurent also said that Ottawa was responsible for general economic activity and had a moral duty to do more for people. The BNA Act assigned no such responsibility to Ottawa, and by St. Laurent’s interpretation, Ottawa could launch programs in almost any provincial field of jurisdiction. That statement and the defence of the spending power were, in fact, denials of federalism as a form of government. In Parliament, the Conservative Opposition challenged the constitutionality of the program and pointed out that it was seemingly aimed at voters in Quebec and the upcoming election. But the baby bonus was literally a motherhood issue, and the bill passed by a vote of 139–0.
Ontario’s Premier George Drew was outraged. Ottawa’s action was clearly an invasion of provincial jurisdiction, and Ontario was still the main defender of provincial rights. In 1942, his party had adopted a comprehensive and coherent program covering the entire span of welfare issues and had begun to implement it after winning the 1943 election. Ad hoc federal programs like this one threatened to weaken Ontario’s capacity to set priorities and manage the overall issue of welfare. The main factor slowing the implementation of Ontario’s programs was financial constraints that reflected the 1942 wartime tax agreements, which Ontario had accepted so Canada could fight the war properly. Now, with the war still raging and Ontario’s revenue frozen, Ottawa was diverting a substantial portion of its revenue into provincial matters. The Ontario Conservatives were fully aware of how political King’s action was. A majority of his MPs came from Quebec and their re-election was crucial to King’s. Quebec had a higher birth rate than Ontario, and the new program would transfer money from Protestant Ontario to Catholic Quebec.
A year later, the government was still elaborating its overall plan to establish the welfare state. In February 1945, the plan went before cabinet, where it received a mixed reception. Some ministers such as Crerar were still strongly opposed and said it would lead to serious problems with the provinces. St. Laurent somewhat disingenuously and incorrectly replied that any proposal for federal action would meet the objections of Duplessis, who had just been re-elected with a large majority. A divided cabinet decided to proceed, no one being quite sure where Mackenzie King stood, possibly including himself. The federal government finally had a clear and unified set of policies covering taxation, spending, economic growth, the government’s role, politics, and the means to avoid constitutional restraints. It would make some reductions to taxes and the debt, but it would maintain tax rates far above what was necessary to cover its own responsibilities.
Ottawa certainly did not plan to reduce its level of taxation sufficiently to allow provinces to raise theirs. Maintaining the tax rates would perpetuate the inability of the provinces to provide sufficient welfare and justify the continued federal role. It would also perpetuate the degree to which power had shifted in Ottawa’s favour during the war. One crucial element in this integrated plan was the retention of the wartime tax agreements, with complete federal control over the collection of personal and corporate income taxes and succession duties. By 1945, Ottawa was collecting 85 per cent of total federal and provincial tax revenue. Whether clothed in the rhetoric of welfare, the good of the people, or the need for national standards, the real issue was power.
On April 12, 1945, C.D. Howe presented the House of Commons with a white paper on welfare. Accordingly, Ottawa would take responsibility for maintaining a “high level” of employment and a good standard of living, to be achieved by increased support for health and welfare, transportation, natural resources, housing, public works, rural credit, increased coverage for UI, and maintaining minimum prices for agricultural products and fish. Four days later, Mackenzie King called an election for June 11. The Progressive Conservatives and the CCF had endorsed programs as comprehensive as that of the Liberals, so the public’s choice was which party they trusted to introduce the federal welfare state. The Liberals entered the fray having demonstrated that they could control the economy, keep the country united, produce an enormous military arsenal, avoid inflation, and manage problems with the provinces. In spite of this record, the baby bonus, the platform, and all the advantages of incumbency, Mackenzie King’s Liberals received only 40 per cent of the vote. It was, however, concentrated in the constituencies that mattered and translated into a slim majority of 125 out of 245 seats in the House of Commons.
The 1945 Conference on Taxes and Welfare
With his renewed mandate, Mackenzie King’s government proceeded with what was essentially the bureaucracy’s vision of a modern welfare state as endorsed by its Liberal masters in their desperation to win the election of 1945. No one seriously questioned that the issues were under provincial jurisdiction, and a federal-provincial conference was called for August 6, 1945. It was the first heads of government conference since the disastrous one of 1941. The nine premiers were presented with Ottawa’s plans for the welfare state and with the request that the temporary wartime tax agreements be made permanent. A number of the programs would be shared-cost ones, in which the provinces paid a portion while Ottawa determined all the conditions. Overall, these programs would represent a massive transfer of power from the provinces to Ottawa. Regarding the constitutional issue, the senior civil service and cabinet seemed to have concluded that amending the constitution was too difficult and indeed unnecessary. Ottawa had unilaterally changed it with pensions in 1927 and the baby bonus in 1944, and the thinking in 1945 was that the new federal welfare schemes could be implemented unilaterally or through federal-provincial agreements. If so, that was a terrible, indeed inexplicable, reading of the Canadian political scene, because Ontario, Quebec, Alberta, and Nova Scotia were strongly opposed to federal programs for welfare.
For the taxation agreements, Ottawa offered a grant of $12 per capita, which would produce a minimum of $138 million annually for the next three years. All the premiers said that was inadequate. The federal offer would have made it difficult, if not impossible, for the provinces to have adequate programs in almost any field, and the shared-cost programs would have given Ottawa a large degree of control over provincial spending priorities. Drew, Duplessis, and Alberta’s new premier, Ernest Manning, rejected the welfare proposals out of hand. Duplessis did not believe that a province could be autonomous if the federal government was collecting taxes on its behalf. He believed Ottawa would use such a system as leverage on his government, and he was determined not to renew Quebec’s tax agreement. BC was not opposed to Ottawa’s welfare plan, but rejected the financial arrangements.
One of Mackenzie King’s strongest critics was a fellow Liberal, Nova Scotia Premier Angus L. Macdonald. He had joined the wartime cabinet and returned to Halifax with a deep hatred for Mackenzie King, a strong mistrust for his actions and words, and a good understanding of his tactics. He told the meeting that the proposals would destroy provincial autonomy and independence. Macdonald joined Duplessis, Drew, Manning, and BC Premier John Hart, which meant Ottawa now faced opposition from the powerful premiers of all five of Canada’s regions. On the last day of the conference, St. Laurent pleaded with Ontario and Quebec and made the dubious argument that Ottawa needed more taxes because of the war. Drew and Duplessis walked out of the meeting.
The most enthusiastic provincial support came from Premier Tommy Douglas and the new CCF government of Saskatchewan. After the conference failed, Saskatchewan developed a welfare state that was as good as the one Ottawa had designed. Ontario proceeded with the one the Conservatives had outlined in 1942. Other English-speaking provinces followed suit, providing all the provinces with tailor-made welfare systems to suit their circumstances. Until 1960, French Canadians would continue to trust their Church more than their government, and their welfare system remained fundamentally different from those in the rest of Canada.
The conference was thus a failure, if not a fiasco. That may well have been King’s objective, because it then appeared that Ottawa wanted to respond to popular demand but the provinces had prevented it from doing so. The only positive thing to emerge from the conference was agreement that officials would meet to discuss the issues over coming months, and the first ministers would continue the meeting the following year. Interestingly, the failure of the conference had no apparent effect on Canada’s adjustment to post-war realities. The recession Ottawa feared never materialized, a major miscalculation for a group who had managed the war so superbly.
As the April 1946 meeting approached, Finance Minister Ilsley seemed desperate to have the provinces sign new taxation agreements so he increased the federal offer from $12 per capita to $15, a jump of 25 per cent. All the provinces except Ontario and Quebec signed agreements covering the period 1947–1952. The federal grants were greater than what those taxes would have yielded if collected by the provinces themselves, which meant that Ottawa was losing money. That called into question the argument that the agreements were necessary to help Ottawa finance the welfare state. Ontario and Quebec were also losing money, but they were in stronger financial positions than other provinces. Ottawa announced that it was leaving “tax room” for the provinces that did not join. Accordingly, federal taxpayers in Ontario and Quebec could be given a credit of 5 per cent of their personal or corporate taxes if the two provinces decided to collect that amount themselves, a process that would not affect the amount taxpayers paid. Neither province took advantage of the opportunity.
Ottawa made little attempt to actually follow Keynesian economics after the war while some provinces such as Quebec did, and both Ottawa and the provinces continued to develop the welfare state. Ottawa’s two main arguments for maintaining control of direct taxation—to implement the welfare state and manage the economy—proved to be highly questionable. The remaining argument was that Ottawa wanted power and control. That, of course, was precisely why Duplessis refused to countenance the scheme. Ottawa’s plans for the welfare state were also based on the assumption that there would be no more wars. In 1949, Canada was at war again, defence spending mounted quickly, and Prime Minister St. Laurent admitted that Canada could not have afforded both the welfare state and the Korean war.
On November 15, 1948, St. Laurent replaced Mackenzie King as prime minister. In his address to the nation that day, he promised a “national standard of social security and equality of opportunity . . .” Ontario Premier Drew had become leader of the federal Opposition, and he said that his main priority was federal-provincial relations and attacked the government for amassing power. By then, however, Ottawa had succeeded in setting a new course for federal-provincial relations. The era of shared-cost programs had definitely arrived. Federal involvement in provincial areas of jurisdiction would grow exponentially, increasingly blurring the “watertight” compartments of responsibility outlined in the BNA Act and confirmed by the courts in 1937. The 1950s would see the adoption of dozens of such programs with substantial federal involvement in welfare, then health, then education, and then local government and local economies. That, in turn, would lead to blow-back from the provinces, led this time by Quebec.
Newfoundland Becomes a Province
One of the greatest achievements of this period was the admission of Newfoundland into Confederation, the completion of the process begun in 1864. In the early 1930s, Newfoundland had gone bankrupt, and its government was replaced by a British-appointed Commission that was to govern until the colony was self-supporting again. The war produced prosperity, and the conditions were met for restoring democratic government. That became complicated because the Second World War convinced both Ottawa and London that Newfoundland should become a Canadian province. The war highlighted Newfoundland’s strategic importance, and Canada’s large investment in military facilities gave it a stake in the colony’s future. There was also concern that the colony might remain heavily under Washington’s influence, a sort of east-coast Alaska. In 1943, the British government began examining options other than the restoration of democratic government, even though it was advised that any other course would be illegal and unconstitutional.
In July 1943, Ottawa let London know that it was interested in having Newfoundland as the tenth province. Secret negotiations began between Ottawa and London, which meant that the people of Newfoundland were not aware of the most important developments affecting their future. There were almost no indications that Newfoundlanders wanted to join Canada. If democratic government was restored, the new assembly might decide that Newfoundland should remain a self-governing colony or it might demand tough terms for joining Confederation. It was better, therefore, for London and Ottawa to steer the colony into Confederation before democratic government was restored.
Instead of announcing elections for a new assembly, Britain said that Newfoundlanders would elect a National Convention to recommend options for governance, options which would be put to the people in a referendum. It was unclear why a Convention was needed since there were only two options in terms of governance, continue with Commission government or restore democratic government. There were, however, three options in terms of future status, namely to remain a colony, become a province of Canada, or become an independent country. On June 21, forty-five delegates began the National Convention. Many of them said that there were only two options for governance. Some of them were open to the idea of Confederation, but only if democracy was restored first so that a new elected government could negotiate a deal and a new assembly could ratify or reject it.
The Convention met from September 1946 to January 1948. The governing Commission would not allow its records to be examined, so the option of its continued governance could not be properly debated. The Confederation option concerning status was debated at length, and the debates were broadcast on the radio. The minority who favoured Confederation dominated the debate, as Joey Smallwood talked endlessly of the riches that would flow from Ottawa should Newfoundland become a Canadian province. He proposed that a delegation be sent to Ottawa to examine the possibility of Confederation, but the motion was defeated 25–17. A motion was then passed to send delegations to both London and Ottawa. In London, they were made to wait, received coldly, and offered no encouragement—a sad reception given Newfoundland’s outstanding contribution to Britain’s recent war effort. In Ottawa, the delegation was warmly greeted at an official dinner with Prime Minister Mackenzie King and several cabinet ministers and senior officials.
On October 19, Ottawa sent the governor its proposed terms for joining Canada, and they were debated in the Convention from November 6, 1947, to January 15, 1948. On January 23, Smallwood introduced a motion to include the Confederation option on the referendum ballot. It was defeated by a vote of 29–16, so the referendum ballot would offer only the two options for governance: the continuation of Commission government or the restoration of democratic government. That was not the outcome London wanted, so it simply added the one that it did, the one the Convention had just decisively rejected: Confederation. Britain thus overruled the decision of the democratically elected delegates who had spent a year and a half fulfilling their mandate. The wording on the ballot was slanted to help obtain the desired outcome. Option One was a continuation of “Commission of Government for a further period of five years,” a choice with an uncertain future. Option Two was “Government as it existed in 1933,” but the reference to 1933 was negative as that was the year the old government had collapsed. The third option was “Confederation with Canada.” London and Ottawa were probably pleased if voters found it confusing that two of the options were about governance and one was about status.
The advocates of restoring democracy were furious. Newfoundland had now been betrayed twice, first when London established the Convention instead of restoring democracy and now when the options identified by the Convention were altered to include Confederation. The pro-Confederation champions had most of the advantages in the referendum campaign—better leadership, unity, and organization. They promised pensions, family allowances, UI, social benefits, and transfer payments, all to be paid for by Canadian taxpayers. Their opponents could promise little or nothing, certainly not support from London. The anti-confederates were divided between those wanting democracy and continued colonial status and those open to Confederation after the restoration of democracy. Smallwood portrayed the anti-confederates as lackeys of the rich merchants, but it was the Smallwood campaign that was well financed. Much of that money came, apparently, from Canadian companies with ties to the federal Liberal Party. Smallwood accused the Antis of being unpatriotic towards Britain, an odd accusation as it was his faction that wanted to abandon London for Ottawa.
In spite of all the pro-confederates’ advantages, they obtained only 41.4 per cent of the vote in the referendum of June 3, 1948. Restoring democracy had the support of 44.6 per cent and 14.3 per cent of voters supported a continuation of the Commission. Had there been only the two options recommended by the Convention, the restoration of democracy would have won easily. For the next referendum, the choices were restoring democracy, a matter of governance, or joining Canada, a matter of status. Two of the British-appointed Commissioners intervened on the side of the pro-Confederation group, a violation of their neutral positions. Smallwood criticized the Catholic Church to rally the Protestant vote, a successful exercise in divide-and-conquer politics. The rich merchants were accused of wanting to restore the corrupt practices of the past and protect their positions as exploiters. In this referendum, restoring democracy gained three points to 47.6 per cent, but Confederation gained 11 per cent for a majority of 52.3 per cent. Ottawa declared that the vote was honest and the majority clear, and London naturally accepted the outcome it had helped engineer.
Even though it had been decisively rejected in the first referendum, Britain left the Commission in control. The governor then appointed seven delegates to negotiate with Ottawa, ensuring that at least five were pro-Confederation. Since the war, the colony’s financial situation had deteriorated and the delegation demanded a large increase in subsidies over that offered by Ottawa the previous December. Ottawa refused to budge, and negotiations dragged on through October and November. Ottawa finally made a small concession on December 11 and promised to appoint a Royal Commission within eight years to examine the province’s financial situation and perhaps recommend changes.
The new grant was for $6.5 million for three years, declining to $2.25 million over the following five years. Ottawa took over most of the colony’s debt and took ownership of the railway, the source of the greatest bleeding of provincial revenues. There was not much else to negotiate, because the BNA Act spelled out what responsibilities lay with provincial governments. The main change was that fisheries became federal and the new province lost control of its greatest natural resource. The Commission accepted Canada’s terms on January 26, 1949, the most important decision it made during its fifteen-year reign and possibly the most important decision ever taken by a Newfoundland government.
The next stage was for Britain to make Newfoundland a province of Canada. This was a problem because Section 146 of the BNA Act provided for the admission of other colonies that requested it in the form of “Addresses from . . . (their) Legislatures.” Since Newfoundland had no legislature, Canada asked Britain to amend the BNA Act to eliminate the requirement. In the British House of Commons, Sir Alan Herbert noted that this proposal violated the BNA Act. In Canada, the Globe and Mail pointed out that the process violated the BNA Act, the Agreement of 1933, and the sovereignty of the people of Newfoundland. It was all to no avail—Britain passed the legislation on March 31, 1949, and the subsequent court challenge failed. As with Nova Scotia and New Brunswick, the terms of union with Canada were never debated or approved by an elected legislature as required by the original agreement and in this case by the Canadian constitution itself.
On March 31, 1949, Newfoundland became Canada’s tenth province. The next step was to establish a new provincial government to take over from the Commission. This was tricky as the referendum had just rejected the option of restoring democratic government, but in fact it was democratic government that had to be restored. The proper way to proceed was for the governor to call elections and ask the leader of the party with the most seats to form a government. Instead, on April 1, the Canadian government appointed Smallwood, a man with no legal political standing whatsoever, as premier. He then appointed a cabinet to govern the province prior to an election. He called a convention of pro-confederates for April 28 and turned the participants into the provincial Liberal party. They then elected him as their leader and he then called a provincial election for May 27.
The federal government rushed to deliver pension and child allowance cheques. Smallwood claimed credit for them and threatened voters with their loss should they not vote Liberal. The Antis scrambled to turn themselves into a political party, took the name Progressive Conservatives, and attempted to mount a campaign. They had no chance—Smallwood’s Liberals took 65 per cent of the popular vote and twenty-two of the twenty-eight seats. Democratic government had been restored, making a farce of the referendum that had just rejected it. Newfoundland now had both Confederation and democratic government, both of the two opposing options on the second ballot. The path to that curious outcome had been smoothed with political machinations, the overruling of the elected Convention, the misuse of government offices, the acceptance of outside financial support, the manipulation of delegations and of referenda questions, the violation of the constitution, and vote-buying on an unprecedented scale, even if Ottawa’s cheques were technically legal. And this by a Convention that had been appointed in 1933 to replace an allegedly corrupt regime!
The federal Liberal government’s manipulation of Newfoundland’s politics produced excellent results in terms of federal-provincial relations. The federal and provincial Liberal parties in Newfoundland were essentially one, and they were both run by Smallwood. He selected the federal Liberal candidates and ensured that they won election—their job in Ottawa was to represent the interests of Newfoundland and of Smallwood. He selected a federal backroom politician, Jack Pickersgill, a Manitoban with excellent connections in Ottawa, to be Newfoundland’s cabinet minister and ensured that he was elected in a constituency he may never have heard of before. Federal funds flowed into Newfoundland, the standard of living shot upwards, Liberals won repeatedly at both provincial and federal levels, and the referenda campaigns became the stuff of song and legend. Smallwood was a hero, the federal Liberals had a strong ally in St. John’s, and Confederation was completed to the satisfaction of London, Ottawa, and eventually of most citizens of Newfoundland and Labrador. It would be a long time, however, before Newfoundlanders would regard themselves as Canadians, and they remain to this day a very distinct and much-loved group within the Canadian family.