League For Social Reconstruction - Political Economy and The Great Depression

Political Economy and The Great Depression

The Great Depression resulted in a protracted period of mass unemployment, and it was the impact unemployment had on Canadians that motivated the LSR into action. National unemployment peaked in the first half of 1933 at 32%; but 32% was only the average, in some towns unemployment reached nearly 50%. The LSR were roused, as they faced the ravages of unemployment in their classrooms, churches, and offices; "Everywhere hopelessness. A country without a purpose ... An industrious and intelligent people going to waste in idleness and despair."

For the LSR, the Depression was the inexorable result of laissez-faire philosophy. This philosophy had spread since the Act of Union in 1840, which began a transition from power structures that favoured aristocracy to structures that favoured business. Responsible government arrived shortly after the union, and shifted influence from the governor to ministers. Powers that had previously been focused in the governor, became divided among ministers. No meaningful administrative structures were implemented to ensure that ministers remained responsive to the public, and ministers aligned themselves with capitalists. Free market governance became the consort of free market capitalization. Legislation regulating conflicts of interest did not exist, and politicians worked openly with business. One former Prime Minister made the marriage of business with politics strikingly clear when he stated "my politics are railroads." The developmental history of Canada's political economy was central in the analysis of the LSR, and they later observed that "onopolies are not an unlucky accident in our economic system, they are our economic system."

Previous economic fluctuations had not created the need for federal unemployment programs, and policy and tradition dictated that assistance was a local issue, because traditionally it had been locally tractable. Under the British North America Act of 1867 (BNA), government received most revenue collection powers, and provinces became responsible for social relief, education, and health care. However, 60 years had passed since the BNA, and this was a different economy. The National Policy dramatically increased prairie populations, and when Depression hit, the prairies in particular could not manage social relief, and, along with other provinces, asked for federal aid. Federal politicians believed free markets would rebalance themselves, and refused assistance. Liberal Prime Minister William Lyon Mackenzie King refused to attempt relief, claiming it would endanger the national budget. Conservative Prime Minister Richard Bedford Bennett declared that provinces should reduce wasteful spending. Laissez-faire ideology underpinned the policies of Liberals and Conservatives alike. Provinces became disgruntled, relationships with Ottawa became strained, and so it was that the crisis of capitalism triggered a crisis of federalism. "Here was the proof that the built by the businessman and the old party politician was defective. The men who had presided over the construction of a complex modern civilization apparently did not know how to keep it running smoothly."