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ADMS 1010 (61)

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York University
Administrative Studies
ADMS 1010
Alison Kemper

PART TWO Wars, Depressions, and Dynamic Growth, 1905–55 Introduction Canada - early in the twentieth century: ‘great colony of the British Empire.’– with its rapidly growing population fuelled by immigration - middle of the century: weathered by two world wars and two depressions – including the Great Depression of the 1930s which hit Canada harder than any other developed nation public policy - became more intrusive in areas formerly thought of as preserves of the private sector, most notably in the public utilities field - governments required more revenue since they had to cope with both wars and depressions o ‘temporary income tax,’ which was used not simply to fight wars but ultimately to provide Canadians with its version of a social-safety net - Public policies also included a welcoming attitude towards foreign investment Great Depression - Canada’s healthy financial system withstood the depressions and played a positive role in financing war efforts - led to the creation of the Bank of Canada – an entity that served in its early days more as a financial adviser to the federal government than as a decider of monetary policy - Toronto Stock Exchange surpassed the Montreal Stock Exchange as the major exchange in Canada Canadian entrepreneurs - continued to demonstrate vitality by creating wealth and investing in the Canadian economy greatest transformation in Canada’s economy - rise of manufacturing and more particularly the arrival of the oil-powered internal combustion engine as the automobile replaced the steam-powered train Public Policy - because laissez-faire capitalism had failed Canadians during the Great Depression, government intervention provided the key to future prosperity - governments at both provincial and municipal levels had intervened in what had been privately held, investor-owned operations, specifically in the areas of electrical and telephone utilities Crown Corporations crown corporation - frees an enterprise from the inefficiencies of operating within a government department by permitting it to be run at arm’s length and in a more businesslike fashion - 1906: newly elected Ontario provincial government, in alliance with municipalities, put the government into the electrical-distribution business through Ontario Hydro - prairie provinces moved into the telephone business while others followed Ontario’s lead and entered the electricity business - All provincial governments but Prince Edward Island ended Prohibition in the 1920s and then established liquor ‘control’ commissions as enterprises charged with the control and sale of liquor - federal level: first major crown corporation was the Canadian National Railways (CNR) - Canadian Wheat Board - Canadian Broadcasting Corporation - Trans-Canada Airlines (TCA) as a subsidiary of the CNR Trade and Investment - 1911: reciprocity or free-trade election - Laurier Liberals were defeated by the Borden Conservatives (with help from some powerful Toronto Liberals), thereby scuttling for years any possibility of lower tariff structures between the two countries - federal government’s 1926 budget brought in Canadian content requirements for domestic car production, an historic first, and at the same time introduced a lowering of the tariff which resulted in modestly lower domestic auto prices - June 1930: the Smoot-Hawley Tariff, the highest tariff in American history, was approved by U.S. President Herbert Hoover o provoked retaliatory protectionist actions by nations all over the globe - Franklin Delano Roosevelt elected president of the United States: United States Congress passed the Trade Agreements Act, which permitted the executive to negotiate treaties for the reciprocal lowering of tariffs - A Canada-U.S. trade agreement was concluded, marking the beginning of a return to sanity between the two North American neighbours as well as a significant shift in Canada’s external relations from the United Kingdom to the United States - move to freer trade internationally continued after the Second World War with the signing of the General Agreement on Tariffs and Trade (GATT) in 1947, signalling in general the beginning of lower tariffs among nations - Accompanying this trend towards lower tariffs was a heavy reliance in Canada on foreign direct investment (FDI) Government Expenditures - Governments played a facilitative role, albeit a more intrusive one Financial Systems Public policy (federal) - Creation of a central bank, the Bank of Canada, during the Great Depression - 1940: introduction of unemployment insurance - after the Second World War: creation of the Central Mortgage and Housing Corporation (CMHC) - 1954: banks permitted to issue home mortgage loans for the first time - government did not follow the American example of establishing a single national securities regulator Public policy (provincial) - Ontario and Alberta: established government-owned banks - Saskatchewan and Alberta: provincially owned insurance companies were established - Quebec and Ontario: agricultural crediy organizations were created to supplement the private sector - Ontario in 1914, when the government led the way in creating a system of Workmen’s Compensation Insurance, with the passage of ‘the first Canadian statute to accept this principle … that some level of injury is inevitable and that compensation should be provided.’ Within four years, four other provinces had followed suit and the remainder followed later. private sector - banks had consolidated and were still important but accounted for just under 40 per cent of the assets of all private Canadian financial intermediaries - Life insurance companies played a more significant role since they had taken over a great deal of the real estate lending - mortgage loan companies had experienced a long, slow inexorable decline into relative insignificance - proliferation of other financial intermediaries had emerged o trust companies – which had become much more important o acceptance companies o non-life insurance companies o investment dealers Banking five big banks - Royal Bank of Canada - Bank of Montreal - Canadian Bank of Commerce - Bank of Nova Scotia - Toronto Dominion Bank Montreal - still the main banking centre in Canada - headquarters of the two largest banks in Canada (the Royal and the Bank of Montreal) All of the banks operated with large branch networks within Canada and the biggest among them were represented in London and New York as well as in Europe, Latin America, and the West Indies. All were involved in retail and commercial banking but not in investment banking. Other Financial Intermediaries life insurance industry - experienced explosive growth in the first half of the twentieth - Canada Life was no longer number one. The new giant was the Montreal-based Sun Life, three times the size of its main Toronto rival, Manufacturer’s Life Trust companies - prospered to become an important part of the Canadian financial scene by the mid 1950s o Spawned by entrepreneurs o encouraged by the government in its attempt to separate commercial banking and trust services - could also act as financial intermediaries to attract savings and invest these funds in mortgages (which banks could not do) as well as in securities and loans - two largest were the Royal Trust and the Montreal Trust Consumer loan companies (generally called acceptance companies) - had become new and important financial intermediaries by mid-century - assumed the financial risk of providing day-to-day operating capital, spanning the time gap between the production of commodities and the sale and payment for them investment firms - Max Aitken’s Royal Securities, Nesbitt Thomson, Green-shields, and others Montreal Stock Exchange - major exchange in Canada - experienced real difficulties in the Great Depression. (Neither the Montreal nor the Toronto stock exchanges closed during the Depression years, however, as happened on some days in New York in 1933.) - overtaken by the Toronto Stock Exchange in 1934 o merged with the Toronto Stock and Mining Exchange to become the largest exchange in Canada and one of the largest exchanges in North America Canadian economy - financing obtained through banks and public offerings - attracting huge amounts of foreign capital, particularly from the United States o American investment in Canada surpassed British investment in the 1920s and unlike British investment, which was primarily in debt, American investment was principally direct or in equities Large Non-Financial Corporations - most of the investor-owned electrical public utility industry had disappeared after provincial governments, led by Ontario, took over the investor-owned operations except Bell Telephone and its related companies, as well as BC Telephone - Half of the investor-owned railway sector had been taken over by the government and replaced by a gigantic crown corporation, Canadian National Railways - Canada shi
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