handpicked successor as leader of the Liberal Party, William Lyon Mackenzie King, Canada continued to enjoy good levels of prosperity through much of the twenties, even if the frenetic effervescence of the Laurier years had gone.
But big changes were afoot. There was the human slaughter and benighted leadership on a vast scale of the First World War. In its wake were left broken trading relationships, barriers to the movement of people, the economic dislocation of Germany, the breakup of the Austro-Hungarian Empire, and the exhaustion of Britain, whose dynamism had so contributed to Canada’s own. The Russian Revolution had let the genie of radical politics out of the bottle throughout the West, and it took the fall of the Berlin Wall more than seventy years later to put it back. This was part of a series of events that cumulatively, with the slowly gathering force of a locomotive, drove not just Canada but the entire industrialized world off course.
The big changes coming were perhaps masked at first by the return of prosperity in the decade following the end of the war.3 Then in 1929 came the Crash, and the thirties that followed brought a worldwide depression and a protectionist surge that undid much of the remarkably free
global movement of goods, services, capital, and people that had characterized the prewar years. Unemployed Canadians marched on Ottawa and queued for soup kitchens. The huge triangle of land in Alberta and Saskatchewan that the explorer and surveyor John Palliser had warned in 1863 was unsuitable for agricultural settlement had in fact been heavily settled during the Laurier years. Palliser had his revenge later when it turned out that “Palliser’s Triangle” was a major contributor to the dustbowl of the 1930s that helped drag down Canada’s economy.4
The Second World War, among other things, broke up this unhappy state of affairs in Canada as much as elsewhere, and the returning troops rushed into new jobs in a Canada determined to do better. Economically we entered an era of pronounced prosperity, as we reverted to a large extent to Laurier’s policies and enjoyed the energy thereby set free. Britain was finished as an imperial power and as a major market for Canada. America confronted no serious competitor as our main market, our main supplier of capital, and the main alternative destination for the skilled immigrants fleeing Europe’s postwar daze.5 While we still lacked an institutional framework and strong rules to bind America’s ability to run roughshod over Canada’s interests, we had a powerful shared history as allies in the recent war and were partners in the construction of the postwar order.
America sat astride the world and found in Canada a respected neighbour who shared its world view. That had to be enough for the moment, in large part because the trauma of Laurier’s defeat over free trade still lingered in the minds of the mandarins of Ottawa and the operatives of the dominant Liberal Party. Yet even in the face of this potent political bogeyman, it was only Mackenzie King’s personal objections that prevented a new reciprocity agreement being consummated in the immediate postwar era. In 1948 a deal was struck and ready for signature in both capitals; in Ottawa the Liberal caucus and the senior mandarins were on board. At the last minute, Mackenzie King’s still vivid memories of his political mentor’s political humiliation over the issue won out over economic logic.6
The people who ran the country were keenly aware that our success depended on remaining competitive with America on every front, and indeed we kept our tax load and our newly emergent welfare state under tight rein to ensure that neither the cost of government nor the allure of an easy dependence would distract us from building a country equal to the promise of the continent we shared. In the fifties and sixties we intentionally positioned ourselves, as Laurier had recommended, as a low-tax alternative to the US.7 Research comparing public spending over the three decades stretching from 1932 to 1963 show that over this period Canada remained close to the Laurier prescription. We were less inclined than the Americans to enrich social welfare but more inclined to invest in productivity-enhancing transport and communications. We spent less of our rising incomes on government; they spent more. And anticipating the critics, it is perhaps worth pointing out that the higher American defence spending does not account for the gap in favour of higher US spending: the gap between Canadian and US defence spending is considerably narrower than the one on social welfare.
From 1932 to 1963 expenditure on health, education, and transportation rose slightly more quickly in Canada than in the United States, and expenditure on defence and social welfare and total expenditure more quickly in the United States than in Canada.8
Louis St. Laurent, the prime minister who most embodied the era of postwar progress and freedom, entertained no doubt that Canada’s great good fortune was rooted in its inheritance of a tradition of freedom and individual responsibility—Laurier and St. Laurent were as one in their belief that our individual freedom was the cornerstone of all else and that the biggest danger to that freedom was an overweening state.
The St. Laurent government’s policy could hardly have been closer in spirit and in detail to Laurier’s vision. Canada’s public finances were carefully managed to ensure regular budget surpluses to help pay down war debt. Modest expansions were made to social welfare programs, but these were kept under tight control and designed to ensure that they would not become an alternative to work for Canadians. The resistance to fashionable expansion of the size of government came not only from St. Laurent’s government, but from the provinces as well. As a result of this measured frugality, Canada enjoyed the tax advantage that was so close to the heart of Laurier’s plan, which was proving itself again in the mid-twentieth century as it had in Laurier’s day.9
As late as the 1957 federal election campaign, St. Laurent was still firmly committed to Laurier’s vision for Canada—and for the Liberal Party—when he said:
[A]ny idea of non-essential interference by the government is repugnant to the Liberal Party. We believe that the private citizen must be left to his own initiative whenever possible and that if some help is required for the individual, that which is afforded by the national government must encourage rather than replace the help which the community or the province with its municipalities can give.10
We were not overtaking America, but the two nations of North America were together showing the rest of the world their heels.
The twenty years of growth and dynamism we enjoyed in the immediate postwar years amply demonstrated that Laurier’s vision was not a mere product of its times but that it was a vision that stood the test of change and retained its power to inspire.
Again, however, Canadians got knocked off course—and this time the blame fell more on us than on world circumstances over which we enjoyed so very little influence.
Beginning in the mid-sixties, the confluence of many forces began to work a change in the minds of Canadians. A wave of nationalist antiAmericanism washed over Canada, fuelled in part by distaste for the Vietnam War and America’s brash assertiveness on the international stage and in part by domestic alarm over a perceived American domination of the economy.11 The counterculture movement that emerged in the US found echoes around the world, including in Canada, and Marxism, feminism, and various other isms began a long march through the academic institutions. Keynesianism, a naïve faith in the ability of government officials to “manage” the economy, became almost universal among Western governments, especially since memories were still reasonably fresh of the success of central planning controls during the Second World War.12 In the seventies, a Republican president brought in price and wage controls, the ultimate expression of confidence in government’s superiority over markets.13
Increasingly, government was being looked to to solve perennial social problems, such as when Washington moved in the 1960s against both racial discrimination, through the Civil Rights Act, and poverty, through the War on Poverty and the Great Society. All of these factors and more— wider access to education, the emergence of effective contraception,
