The Great Depression

by Pierre Berton

  1938

  1

  A loss of nerve

  2

  Trampling on the Magna Carta

  3

  Bloody Sunday

  4

  The Nazi connection

  5

  Keeping out the Jews

  1

  A loss of nerve

  In the tenth year of the Great Depression, Canada reached a turning point. This was the year in which the government of Mackenzie King moved hesitantly and reluctantly toward the Liberal welfare state. It was also the year in which – again hesitantly and reluctantly – it began to come to terms with John Maynard Keynes’s radical concept of cyclical budgeting: spending more money in bad times and (one hoped) paying off the deficit in better times. The balanced budget, in short, was about to become a thing of the past. And 1938 was, happily, the year in which the rains came at last – not the frustrating dribble that had characterized the drought years but real, drenching downpours in May and June that soaked the fields and produced the biggest prairie wheat crop in a decade.

  The rains came a year too late. The previous year’s crop failure, which reduced Canada’s chief export to a trickle, had a devastating effect on the economy. In 1936 and in the early months of 1937, the country had seemed to be recovering from eight dark years of slump. But by the fall of 1937 the slump returned – a recession in the midst of a depression – caused not only by the drought but also by a general failure of nerve in the business community, which found its earlier expectations crushed.

  Suddenly, after a few brief months of optimism, the light at the end of the economic tunnel winked out. Because there seemed to be no future for the country, not many were prepared to undertake long-term investments. The drought apparently had no end, and unemployment had not been solved – it increased by 30 per cent over the winter of 1937–38. In October 1937, when company earnings failed to justify the rising stock prices, the New York market crashed once again.

  It was a time of uncertainty and doubt, fear and foreboding. Labour disputes were on the rise; there had been more strikes and lockouts in 1937 than in any year since the early twenties. War and rumours of war had also conspired against any long-term investment. Fears of political upheaval and financial instability pervaded the business community.

  Manufacturers who had built up large inventories because of the optimism of 1936 had been unloading them in 1937. Construction had been on the rise; now it dropped as provincial governments reduced their expenditures. The lower birthrate and the lack of immigration meant that fewer families were building houses. Canadians (and Americans too) were like bathers who hesitate to swim too far into an untested lake. Years of economic depression had made them cautious.

  The Liberal government was totally unprepared for this alarming change. King, banking on recovery, had rushed to reduce federal grants-in-aid to the provinces under the Unemployment Assistance Act by a hefty 34 per cent. He was, in fact, pinching pennies with as much zeal as his predecessor. Like Bennett, he was absolutely convinced that the provinces were wasting relief money and, again like Bennett, he still held to the belief that a balanced budget was the key to economic stability. He didn’t want to spend a nickel more on public works than he had to, and he wanted, if possible, to get Ottawa right out of the relief business. With times improving, he thought that burden ought to go back to the provinces and the municipalities.

  Now, in January 1938, he was still reeling from a shock he had received a month earlier. His own political creation had stabbed him in the back! After the election he had invented the National Employment Commission to recommend ways of saving money on relief. Instead, he learned that the NEC was about to recommend that more money be spent and, even worse, that the federal government take over the entire responsibility for relief. That was something King and Bennett before him had passionately resisted.

  The NEC’s approach stemmed partly from the growing demand for a national scheme of unemployment insurance. Bennett had promised it; King had paid lip service to it. When recovery seemed certain he had gone so far as to poll the provinces on the subject. Six, including Ontario (but not Quebec), agreed to accept a national unemployment insurance plan.

  Thus in recommending unemployment insurance, the commission was only reflecting the tenor of the briefs placed before it and the apparent acquiescence of the government itself. But it did not stop there. Since such a plan would help only those who had jobs that they might lose, it could not cushion the effects of the Depression on the vast army of unemployed who weren’t covered. It made sense, then, that if Ottawa were to be responsible for relief through unemployment insurance, it should take over all relief. It was that proposed recommendation, leaked to him by the one dissenting member of the commission, Mary Sutherland, a Westerner, that drove King into a fury. His whole idea had been to get out, cleanly, and let the provinces do the job.

  In addition to Mrs. Sutherland, the seven-person commission was made up of three businessmen, one labour representative, and a widely respected economist, W.A. Mackintosh of Queen’s University. Its chairman was the president of Canadian Industries Limited, Arthur Blaikie Purvis. Now this essentially small-c conservative group was proposing a radical departure from conventional policies – nothing short of the centralization of all relief.

  King moved to head off this alarming turn of events. He called in labour minister Norman Rogers, who had set up the commission and appointed most of its members – but not the recalcitrant Mrs. Sutherland (who had been King’s personal choice). He was infuriated to find that Rogers was enthusiastically behind the NEC’s proposals. Mrs. Sutherland’s tip-off had been the first knowledge King had that this apparently captive commission was departing from what he considered its mandate – to advise the government on how to stop provincial and municipal waste and thus save Ottawa millions.

  King was convinced that he was being bamboozled by professors like Mackintosh and Rogers, another former Queen’s man. “I am beginning to see the wisdom of not taking into the government, men who have not had some political training,” he wrote, “however able they may be. The academic mind is not the best one to handle problems of Government.” He sensed a conspiracy. The two most powerful civil servants, W.C. Clark, Dunning’s deputy minister in the finance department, and O.D. Skelton, Under-Secretary of State for External Affairs, both backed the NEC proposals. They, too, were Queen’s University economists. “These University men,” King told the Cabinet, “… thought they had more in the way of wisdom than the rest of us put together.…” Their appointment, as James Struthers, the historian of the welfare state, has pointed out, was “a turning-point in cabinet/civil servant relations.” These members of “an emerging mandarinate … had no fear” – as King had – “of an activist social service state.”

  To King, the commission’s betrayal was political dynamite. Yet he was caught up by his own rhetoric. Ever since his defeat by Bennett in 1930, he himself had been calling for a commission on national unemployment; all during his five years in Opposition it had been the cornerstone of his unemployment policy. Now, if the NEC stuck to its guns, its report, in King’s view, would be a millstone around the Liberal party’s neck. It would “defeat the Liberal Party entirely by attempting something its members will not adhere to for one moment.”

  Federal commissions are supposed to operate independently, without political interference. King considered this commission was too independent, and he intended to interfere. He bluntly told Rogers and Dunning that the report must be rewritten and toned down before its release. Purvis, however, had resisted this unconscionable meddling. He was already peeved because the government had ignored the commission during its hearings. Worse, it had declined to take any action on the recommendations made public in an interim report released the previous August. Now Purvis was refusing to budge. King tried to split the commission, bringing pressure to bear on some of the weaker members. That tactic didn’t work. The best he could hope for was the minority r
eport promised by the obliging Mrs. Sutherland, who drafted it with his advice and help. Her point – and King’s – was that the only way to keep relief costs from spiralling was to maintain responsibility at the grass-roots level. If faced with bankruptcy, the municipalities would think twice about being overgenerous with relief.

  The Prime Minister sought refuge in delay, using another tried-and-true Canadian tactic. The report would have to be translated; that would hold it up until after the opening of Parliament, when the spotlight was off the Hill. He had one other stratagem. The Royal Commission on Dominion-Provincial Relations had been established the previous fall under Newton Wesley Rowell, the Chief Justice of Ontario, and was already holding hearings. King, through Rogers, managed to persuade the stubborn Purvis to see Rowell and discuss whether his report might conflict with the findings of the royal commission. Purvis did as he was asked and King got what he wanted – more delay.

  But he was still angry with Purvis, whose action in signing the report against his advice he compared “to the action of Hitler in invading and possessing Austria.” It revealed, King wrote, a lack of political sense. In a telling insight into his own political philosophy King noted that “in politics, one cannot reach one’s goal by a straight line. Account has to be taken of the rivers and mountains and other obstacles that have to be crossed on the journey.”

  With the report finally translated, Rogers rose in the House to bury it, explaining that because the whole matter of unemployment was bound up with some larger questions, the implementation of the report would be postponed until the Rowell Commission brought down its own recommendations. King had two years of breathing space.

  Meanwhile, conditions in the country had grown worse. Unemployment was increasing and the hoped-for upswing in the economy, which had caused an optimistic prime minister to consider implementing unemployment insurance, hadn’t occurred. Now King wished he hadn’t got into the subject. He managed to scrap his plans, using the convenient excuse that three provincial premiers – Duplessis, Aberhart, and A.A. Dysart of New Brunswick – had yet to agree to unemployment insurance. He could, of course, have bulled it through, whipping up public pressure to change the minds of the minority, but he had no intention of doing that. Although unemployment insurance had become an acceptable idea, it would not go into effect until 1940.

  King still clung to conventional economic theories. He had cut funds for relief, expecting better times, but he had no plans to restore the cuts now that the times were growing worse. Rogers tried to justify this in a remarkably convoluted explanation that larger grants were not necessarily the solution; they might, he said, “tend to aggravate the situation.”

  The government’s new policy reflected the old belief that the unemployed really didn’t want to work and wouldn’t work if relief payments were raised enough to equal the minimum wage. Ottawa made it clear that any aid advanced to the head of a family or to an individual must always be less than the normal earnings of an unskilled labourer in the same district. With a callousness that evoked the Bennett years, the King government had placed a ceiling on the dole designed to reduce further the living standard of the jobless. Small wonder that it could not escape the rumblings at the constituency level, especially from British Columbia, where hundreds of men, released earlier than usual from the provincial government’s forestry camps and again unemployed, were already tin-canning in the streets of Vancouver. This was a direct result of the cut in federal funding, and it called up bitter memories of 1935.

  In the United States, Franklin Roosevelt had launched a billion-dollar war on the recession through a program of emergency public works. King thought Roosevelt had gone too far, but his Cabinet, with the exception of Dunning, was clamouring for similar action in Canada. In April, King was forced to put Rogers in charge of a Cabinet subcommittee to recommend federal relief projects.

  A month later, in a proposal that shocked the Prime Minister, Rogers declared no attempt should be made to balance the budget and tabled the subcommittee’s recommendation that an additional seventy-five million dollars be spent at once on relief works.

  A nasty struggle followed in the Cabinet, with the conservative Dunning and the Keynesian Rogers both threatening to resign. In the end both men were mollified by a compromise that whittled the sum down to forty million. It was to be spent on a national program of conservation and development, much of which had already been recommended in the final report of the NEC.

  Like it or not, Ottawa was finally being forced to take on some national responsibilities. Two bills, designed that spring to revive the flagging construction industry, nudged the country forward on its path toward centralization. The Municipal Improvements Assistance Act offered loans for public works directly to the municipalities without going through the provinces, a procedure that both King and Bennett had said was impossible. The National Housing Act made low-interest loans available to the municipalities for low-cost housing, again bypassing the provinces.

  Dunning admitted that the federal government was edging into a field it had not previously occupied, while King, in a rueful diary entry, noted that nations everywhere were moving “in the direction of the extension of State authority and enterprise.” He feared that “Canada will not be able to resist the pressure of the tide.… The most we can do,” King wrote, “is to hope to go only sufficiently far with it as to prevent the power of Government passing to those who would go much farther.…”

  It was, in fact, happening just across the Ottawa River. In a different context, the Quebec government had already gone a long way towards imposing the authority of the state on those who disagreed with it. But King, for all his concerns about the authority of the state, was not prepared to interfere.

  2

  Trampling on the Magna Carta

  By May 10, 1938, the attorney general’s department in Quebec was able to announce that it had ordered 124 raids under the Padlock Law and seized 521 “Communist” books. Yet no one was arrested or charged with any offence. As the Canadian Civil Liberties Union pointed out, “twice every three days, for six months, the provincial police have carried out execution without judgment, dispossession without due process of law; twenty times a month they have trampled on liberties as old as the Magna Carta.”

  Duplessis defended the Act, comparing it to “the British law which enables authorities to put handcuffs on undesirable subjects and dangerous persons.” Under the British law, of course, such people, no matter how undesirable, were given their day in court. But the Premier had his entire Cabinet behind him, including the English-speaking members, one of whom, Gilbert Layton, praised the law as “one of the best pieces of legislation ever passed in the province.”

  The Duplessis government operated through fear. In most cases it wasn’t necessary to go through the motions of padlocking a home or a place of business. The threat of being padlocked, or even the fear of being padlocked, was enough to cause the owners of public halls to close their doors to progressive or left-wing groups protesting the loss of civil liberties in the province.

  Those who publicly opposed the law found themselves in danger of being labelled communists. The CCLU had trouble organizing any kind of protest because the owners of meeting halls refused to rent them out. When the Reverend R.B.Y. Scott of the United Theological College asked permission to hold a members’ meeting of the CCLU at the Montreal High School, the assistant superintendent of the Protestant School Board refused on the grounds that the school might be padlocked. Scott asked him if that wasn’t tantamount to making any discussion of civil liberties synonymous with communism. The answer was yes.

  From time to time in Canada, the advocacy of civil liberties has been equated with communism – generally by cranks and extremists. But in Quebec it was quasi-official government policy, as Frank Beare of the Presbyterian College in Montreal discovered. Shortly after the school board’s turn-down Beare wrote to the attorney general’s office asking for assurance that it was not the province’
s intention to apply the Padlock Law against the CCLU. Deputy Attorney General Edouard Asselin replied, “… we are sorry to state that your request cannot be granted.” The union found its efforts frustrated on every hand as the intimidation continued. Frank Leone found that out when he attended a meeting of the CCLU as the delegate from an Italian cultural organization. The very next day his home was raided and his entire library seized.

  Where books were concerned, the police cast a wide net. During 1938 they seized works by Spinoza, George Eliot, and Aldous Huxley as well as a Gaelic Bible, the Canadian Forum, and a variety of American periodicals, including such mainstream publications as Coronet, Pic, and Look, not to mention the magazine section of the Vancouver Daily Province. All were identified as carrying “communist propaganda.”

  One Montrealer, James Gauld, lost his car because of the Padlock Law. He was sitting in the car when he was picked up by the police, taken to headquarters, photographed and fingerprinted, and then told there was no charge against him; he was listed, euphemistically, as a “visitor.” His car was seized because he was using it to transport copies of the Toronto communist paper the Clarion. When the automobile was not returned, he tried to sue the chief of the Quebec Provincial Police but was told by the Superior Court that his only recourse was to take action against the provincial government by petition of right. Since the government itself would have had to consent to be sued – as it must under the law – the wretched Gauld found himself at a dead end. And automobiles weren’t even listed under the Act as subject to seizure – only documents.

  Any suggestion of a Russian connection was enough to cause a building to be padlocked. Early in February, the Maxim Gorky Club was locked up. The club, with fifty branches in Canada, was devoted to educational, social, and cultural subjects. In Montreal, it engaged in dramatic performances and the education of children of Russian origin. The police damned it as Bolshevik after finding a picture of Stalin in one of the schoolbooks. The CCLU pointed out that similar pictures appeared in history texts across Canada, including the Grade 10 text of the neighbouring West Hill High School, which showed Lenin addressing the Red Army. The police did not padlock the West Hill building.