The Butterfly Effect: A British AAR

Turning to the north we consider Canada, another country grappling with domestic questions that trumped all foreign policy concerns. Prime Minister William Lyon Mackenzie King had returned to office for his fourth term in October 1935 and had inherited a country recovering from dire economic straits; Canada had been hit harder than any nation in the world, bar the United States. While the economy had bottomed out in 1932, helped by the large scale government investment and welfare programmes, this had merely stopped things getting worse rather than improving the situation. It was therefore unfortunate that the then Conservative Prime Minister, Richard Bedford Bennett, chose that point to worry about the growing deficit and decided to 'balance the books' by slashing government spending. While Bennett tacitly admitted his mistake three years later, by restoring and extending the original programmes, by then it was too late and he had sealed his party's electoral fate.


For all the mistakes of Bennett his policies of the early 1930s were just beginning to filter through by the time of King's election, though no doubt they would have worked far faster had Bennett stuck to his guns and not lost his nerve. The Canadian recovery, slow and tentative though it was, had it's base in the recovery of exports, particularly the vital food and raw materials that had been a corner stone of the Canadian economy. This success though raised the first serious headache for King; Imperial Preference. While Bennett's Conservatives had naturally favoured it King's Liberals were supportive of free trade, or at the very least equal tariffs, and thus ideologically receptive to the constant US requests that Canada 're-consider' it's Empire Free Trade policy. The problem came that the exports that were lifting the economy out of the Depression were not to the ravaged and impoverished United States but to the British Empire. While 'free trade' would undoubtedly benefit the US, that was why they were so heavily pushing it, it was widely believed that it was only Imperial Preference that had saved Canada, along with Australia and the other Dominions, from suffering a balance of payments crisis and defaulting on her debts. Making the leap from the British policy that had arguably saved Canada's economy into the unsteady arms of United States was at best risky, at worst catastrophically foolish. There was also the political dimension, it was widely felt, with considerable justification, that Canada had only suffered so badly in the Depression because she was so close to the US. Logically therefore a policy that would tie Canada even closer to the country perceived as the source of the problem was widely opposed, particularly if that meant loosening ties with Britain, relations with which were riding high on a post-war jingoistic wave.

Thus practicality and politics convinced King that he should not waste his political capital on an unpopular and counter-productive policy, particularly when he believed there were more pressing social issues. Thus he poured his effort into new social and economic assistance programmes, populist programmes such as the National Housing Act and the National Economic Commission, schemes to provide social housing and small scale loans respectively. In one of fate's many ironies these schemes were similar to ones that King had refused to implement when the Depression started at the end of his previous term, refusals that, when combined with his indifference to the crisis and insistence that it would soon pass, probably cost him the 1930 election. While King would never be enthusiastic for Imperial Preference, both through ambivalence to the Empire and ideological belief, his decision to put practical benefit before ideology would see Canada build stronger links with the rest of the Empire, replacing the American links lost during the Depression. These links remain a key pillar of the Canadian economy to this day, testament to their strength and importance.

At the end of the concerns was the Canadian military, this is not an oversight rather a comment on the sad state of the armed forces. Having experienced the same 'drawing down' after the Great War as many other nations the Canadian military suffered another, particularly vicious, round of cuts in 1932 as Bennett's government gutted the defence budget. Thus it was that when Italy declared war on Britain the Canadian government had little to offer, the Royal Canadian Air Force could not offer an expeditionary group as the RAAF had, while the total Royal Canadian Navy was smaller than the average Royal Navy destroyer flotilla. However it was the Army, or more technically the Permanent and Non-Permanent Active Militias, that were in the most dire condition. The Permanent Active Militia, the equivalent of the regular army, could barely muster a division while the reservist Non-Permanent force was badly trained and under-equipped. Stung by a complete inability to contribute to the war effort, and perhaps somewhat jealous of the influence Australia had gained through the RAAF's endeavours over North Africa, King would implement a modernisation and expansion plan for all three services. The plan would be integrated with the social and economic assistance schemes, for the success of the more military-industrial Keynes Plan in Britain had not gone un-noticed and King hoped to duplicate the success for the economic and social benefits as much as for defence. Given the growing troubles in the world during the rest of the decade and beyond the re-armament programme would be invaluable to both Canada and the rest of the Empire.

Before we leave the region and move on to Latin America it is well worth studying the Dominion of Newfoundland, a nation worthy of attention if only due to is status as one of the few countries to ever voluntarily give up self-rule. A combination of the ravages of the depression and rampant endemic corruption had left the country bankrupt and her people angry and rebellious. Despite numerous arrests and investigations the Prime Minister, Sir Richard Squires, was only finally forced from officer after a 10,000 strong mob marched on Colonial House, the seat of government, and forced him to flee. To give perspective on that figure the population of the Dominion was less than 250,000, thus the mob consisted of almost 5% of the entire population of the country. While an election was held shortly afterwards, in late 1932, it was a formality, Squires and the Liberals were utterly routed and the United Newfoundland Party romped to a crushing victory. His successor, Frederick Alderdice, owed his success purely to the unpopularity of Squires, and had campaigned on a pledge of suspending the constitution and appealing to Britain for assistance until the Depression passed. The British response, in consultation with Canada, was the Newfoundland Royal Commission which was given the task of proposing a long term solution to the problems of the Dominion. The recommendations were published in late 1933 and were simple but uncompromising; the suspension of self-government until 'Newfoundland could once again become self-sustaining'. This was supported by a catalogue of evidence about the intrinsically corrupt political culture and the bleak economic prospects for the country without massive investment, which the indebted Newfoundland government could not begin to afford. Accepting the report in full Alderdice's government put the recommendations before Parliament, which duly voted itself out of existence in December 1933 in favour of a 'Commission of Government' led by a British Governor.


The Commission was split equally between British and Newfoundland members, the deciding vote being held by the Governor who chaired the Commission. It is difficult to judge the success of the Commission, if only because the size of the country meant even the relatively small grants from London went a very long way. Given the funds available it is likely almost any government could have achieved at least some improvement, though it must be said had such funds been channelled through Squires and his cronies rather than the Commission it is unlikely much would have reached ordinary Newfoundlanders. The investment was split between the local industries, mainly fishing and lumber, which were thoroughly modernised and social improvements, such as transport links and better health coverage for the rural areas. The real credit though went to the Abyssinian War and the ongoing industrial resurgence in Britain, two events that were welcomed in the province for reviving the fortunes of the many iron ore mines in the country, in particular the vast DOSCO (Dominion Steel and Coal Corporation) complex of mines on Bell Island. As British demand for steel began to return to pre-Depression levels her iron works demanded more ore, a demand Newfoundland was only too happy to meet, restoring one of the vital pillars of her economy. Of the three North American nations it was Newfoundland that ended the summer in the best shape, due in considerable part to it's constantly improving trade with Britain, a fact that was noticed by many in Canada. While welcomed by many who believed Canada could only benefit from strong neighbours and trading partners there were those who were distinctly annoyed and uneasy. The fact it had taken British intervention to revitalise Newfoundland was resented by the Quebecois, purely because many of that prejudiced minority disliked anything British, but more importantly it was feared by many Republican minded politicians, people who hated seeing progress or success associated with anything but moving away from the Empire, not towards it. As the Canadian economy turned away from America and back towards the British Empire those tensions and fears would only grow.