The Great Depression
The Roaring Twenties saw boom times in Canada. Unemployment was low; earnings for individuals and companies were high. But prosperity came to a halt with the stock market collapse in New York, Toronto, Montréal and around the world in October 1929. (See 1929—Stock Market Crash.) The crash set off a chain of events that plunged Canada and the world into a decade-long depression. It was the beginning of the Dirty Thirties.
The Great Depression caused Canadian workers and companies great hardship. Prices deflated rapidly and deeply. Business activity fell sharply. There was massive unemployment—27% at the height of the Depression in 1933. Many businesses were wiped out: in Canada, corporate profits of $396 million in 1929 became corporate losses of $98 million in 1933. Between 1929 and that year, the gross national product dropped 43%. Families saw most or all of their assets disappear. Governments around the world, including Canada’s, put up high tariffs to protect their domestic manufacturers and businesses, but that only created weaker demand and made the Depression worse. Canadian exports shrank by 50% from 1929 to 1933.
While all of Canada suffered greatly, the regions and communities hit hardest were those dependent on primary industries such as farming, mining and logging, because commodity prices plummeted around the globe. Thus, the three Prairie provinces, where the wheat economy collapsed, and the municipalities where mining and logging were a mainstay saw the greatest decrease in per capita income between 1928 and 1933.
The economy began to recover, slowly, after 1933. However, the Depression did not end until 1939, when the outbreak of the Second World War created demand for war materials.
Many factors are believed to have caused the Great Depression. Speculation on the stock markets drove share prices to inflated levels, and the bubble burst when stock markets collapsed in the autumn of 1929. Consumer spending dropped, even though prices had been falling. Canada was suffering a trade deficit. Nature was also working against many Canadian farmers, as a devastating drought on the Prairies wiped out wheat crops.
The Great Depression was a turning point for Canada. Before 1930, the government intervened as little as possible, believing the free market would take care of the economy, and that churches and charities would take care of society. But in the 1930s a growing demand arose for the government to step in and create a social safety net with minimum hourly wages, a standard work week, and programs such as medicare and unemployment insurance. (See 1941—Unemployment Insurance Act.)
The Depression also led governments to be more present in the economy. It brought about the creation in 1934 of the Bank of Canada, a central bank to manage the money supply and bring stability to the country’s financial system. (See 1934—Bank of Canada.) As well, the world’s severely restrictive trading policies during the Depression were opened up by international treaties such as the General Agreement on Tariffs and Trade (GATT).
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