Government Response to the Great Depression
Dec 23, 2015
Government Response to the Great Depression
Downward Economic CycleThe prosperity of the 1920s was based on false optimism • the global economy was very weak• Easy access to credit made the economy appear stronger than it was
From “Recession” to “Depression”
The Psychological Effect• A weakening economy can
have a powerful psychological effect on consumers
• Fear of job losses and decrease in value of goods and stocks consumers save decrease demand
Government Response
The Failure of Ideology• Most governments believed in laissez-
faire economics “leave it alone”
• The economy will regulate itself – government regulations will make things worse
• Prime Minister Mackenzie King did nothing to correct the situation – economy would eventually correct itself
• King, and other world leaders, failed to grasp that the sharp decline in prices and rising #s of unemployed were not part of normal business cycle
From Bad to Worse…
R. B. Bennett• Mackenzie King lost the
election of 1930 to Richard Bennett (conservative)
• Bennett promised to take action to solve economic crisis:
Rise tariffs against countries that riased tariffs against Canadian products (USA)
Millions of $ for building projects
Relief for unemployed
And Worse…
• Bennett also promised to decrease tariffs on countries that would decrease tariffs on Canadian products (USA)
• USA not interested in Free Trade
• Canada had little economic influence and were deeply dependent on global trade
• Canadian economy continues to worsen
And Worse…
• British economist John Maynard Keynes suggested government should go into debt and spend $$$ - build infrastructure - to put people back to work and stimulate the economy
And Worse…
• Bennett’s ideas were good but he rejected the idea of government debt – therefore his government did not take any direct action to solve the problem
• Result: families evicted to streets, unemployment @ 30% of work force!
Unemployment• 1933 1.5 million
Canadians depended on government relief
• Government gave unemployed relief vouchers – must prove you had no $ to qualify
• Store owners did not like to take vouchers – government would take a long time to pay
• The unemployed “drifters” travelled around looking for work - they were viewed with suspicion
Living Condiditons• Top Picture: “Bennett
buggies” – people could not afford gas reverted to hooking a horse or ox to their car
• Middle: “Riding the rails” – unemployed men would hitch rides on open freight cars to travel around looking for work
• Bottom: “Hobo jungles” or “shanty towns”
Relief Camps
• 1932 – Bennett establishes work camps to offer “relief” to the unemployed
• Really, government feared communism would spread amongst unemployed
• Camps were established in isolated locations under the control of the army
• Workers worked for 20¢ per day
Protest: “On to Ottawa”• 1935 – relief camp workers
went on strike• 1000 strikers boarded freight
trains and headed for Ottawa – take their demands to Bennettt
• Eventually over 2000 “Trekkers” joined the movement
• Government feared a Communist revolution
• RCMP stops the strikers in Regina – riots break out, the strike leaders are arrested
The Dust Bowls…• The economic collapse
coincided with a natural disaster in the prairies
• A severe drought would begin in 1929 and last 10 years
• The rich fertile land – bread basket of Canada – turned into a virtual desert
And Locusts
• If the drought wasn’t bad enough, the 1930s also saw a plagues of locusts (large grasshoppers) that would destroy what little crops farmers did manage to harvest!
And worst of all…the bankers!
• Due to these natural disasters many farmers were not able to make their mortgage payments – bankers would seize their farms and sell them
• 250,000 farmers abandoned their farms between 1931-1941!
The Great Depression:
Alternative SolutionsNew Political Parties
Alternate Solutions
• Although Bennett had some good ideas about solving the Great Depression he was not prepared to go into debt to spend his way out of the recession
• He would occasionally send his own money to people who asked for assistance – but this was not solution
• Many people began to look for radical solutions to the problem
The Communist Party of Canada
• Most radical political party• Committed to a workers
revolution to overthrow democratic government
• Eliminate private property and business and banks
• Leader, Tim Buck, was arrested and convicted of plotting to overthrow government of Canada – sent of Kingston Penitentiary
The Co-operative Commonwealth Federation (CCF)
• Leader: James S. Woodsworth• Democratic Socialism• Believed in democracy and
supported private private property• Big business, utilities and banks
should be owned by the government
• 1944 Tommy Douglas elected as Premier of Saskatchewan – introduced health care, human rights laws and government run hydro electricity
• In 1961 CCF joined with the the Canadian Labour Congress to form the New Democratic Party
James S. Woodsworth
The Social Credit Party
• Began in Alberta• Leader: William Aberhart• Solution to GD – give
people money sitting in banks
• Government would use its credit to print money & give $25 to every adult per month
• Federal government vetoed this idea
Union Nationale• Quebec based party• Leader: Maurice Duplessis• Promised higher minimum wage,
workers’ compensation & government owned hydro-electricity
• Duplessis won election of 1936 but failed to bring in reforms
• Allowed Roman Catholic Church to influence social policy & English protestants to dominate business
• Government plagued by corruption