William Lyon Mackenzie King and the Great Depression

The Great Depression of the 1930s was of unprecedented severity in Canada. The dependence on exports of raw materials and farm products meant that Canadian providers were especially vulnerable in a world where nations raised tariffs to protect their producers. Western farmers were doubly unfortunate because not only did prices reach historic lows, but in many regions drought, rust, and grasshoppers also meant crop failures. In cities, factories closed because consumers could no longer buy. Desperate Canadians had to turn to governments when they had no other place to turn, first for food and shelter and then for any means to restore their hope. The depression brought regions and classes into conflict and encouraged demagogues to propose radical and unorthodox policies.

Liberal Party leader William Lyon Mackenzie King, who was at the time heading the official opposition, was convinced that the depression would end only with the restoration of international trade, when Canadian producers would once more have markets. It was enough to focus attention on trade and tariffs until voters had the chance to correct their error and return his party to power. King, however, gradually realized that for many Canadians, including some long-time Liberals, waiting was not good enough. Talk of tariffs had little relevance for parents who could not feed their children or for farmers who could not buy seed or hay. For them, the capitalist system seemed to have failed and tinkering with tariffs would accomplish nothing.

King’s response reflected his fundamental commitment to finding a consensus among “liberally-minded” Canadians. He did not expect to convert the Tories, whom he believed were wedded to big business, or the socialists, who wanted a monopoly of power for the workers. Criticism from his own caucus members, however, he took seriously. He might regret their impatience but he would not ignore them. His role was to keep the party united. By 1933 he had reluctantly concluded that traditional Liberal preconceptions were not enough. If the party was to survive, it would have to face the challenge of the depression more directly. Here his talents as a conciliator would be crucial. Although lower tariffs would be part of a new Liberal platform, the most controversial issue would be inflation. King and his more conservative followers still equated inflation with theft, but, for indebted producers especially, inflation seemed the only way to meet their financial obligations. King’s compromise was a government-controlled “central bank” that could modify the money supply on the basis of “public need.” He was proposing an institution, not a policy. He succeeded because the moderates saw the bank as an agency that could protect sound money and the radicals saw it as an agency that could introduce a policy of controlled inflation. The significance of this compromise should not be minimized. It recognized that the state should play a positive role in determining fiscal policy. It certainly implied more intervention than did the Bank of Canada legislated by prime minister Richard Bedford Bennett in 1934, which was to be an agency of the chartered banks.