the demands of a growing nation against the need to keep the cost of government low.40 Private finance built a lot of infrastructure, keeping the costs off the taxpayer’s back, while what public borrowing there was was designed to further ease the burden on the taxpayer by spreading over many years the cost of constructing bridges, railways, wharves, and courthouses.41
Finally, Laurier and Fielding kept an eagle eye on international financial markets to ensure that Canada never borrowed beyond what lenders thought the young Dominion could support. They clearly feared that excessive debt would trigger higher interest rates, which would be followed by higher taxes and the loss of competitive advantage vis-à-vis the US. Laurier’s legacy to us on this front was that reasonable levels of debt for the right purpose while living within the country’s means contributed to Canada’s well-being. But it was easy to get the balance wrong, and borrowing needed to be carried out carefully and in a disciplined way.42
3. Self-confident engagement with the Americans
The third part of Laurier’s plan for the Canadian century was that Canada could not shrink before the challenge posed by American dynamism and proximity, but instead Canada must meet them head-on, turning them as best we could to our own account, especially as the British imperial power faded slowly from the scene. Laurier was a Canadian nationalist and a realist. He understood that Britain took but scant interest in Canada and that we were not strong enough to impose our will on America. Laurier believed, therefore, that we had to play cleverly and well the few cards that we had been dealt.
American arrogance and brashness; manifest destiny; hostility to the former colonial power, Britain, and its continued presence in North America; and the unsettled nature of the boundaries between much of Canada and the US helped to give rise to many conflicts between the two countries. Britain, which kept control over all questions of Canadian foreign policy—which they saw as merely a part of imperial policy—often sacrificed Canadian interests to further larger imperial objectives that required friendly relations with Washington.
Laurier lived through a classic example of Canada being sacrificed on the altar of British–US power politics in the resolution of the dispute over the border with Alaska in 1903. The three parties—Britain, the US, and Canada—had agreed to the creation of a joint commission to recommend how to resolve this long-festering issue. The issue had a special significance to Canada in that the Yukon gold rush was under way; Canada desperately wanted an outlet to the Pacific from the Yukon on Canadian soil so that Canadians would be the chief beneficiary of the wealth being created by the development of the Yukon’s gold deposits.43 American interests were equally determined that Canada should gain no such outlet and that Alaska should capture much of the economic benefit of the gold rush.
The commission was composed of six people: three Americans, two Canadians, and a Briton. Laurier was horrified when he realized that the British member of the Canadian delegation had marching orders to give in to the US to preserve transatlantic relations. Lord Alverston, the British judge in question, gave his name to a newly coined verb, to Alverstonize, that for years was just as prominent in Canadian political vocabulary as Captain Boycott’s name became in Ireland’s. And it was just as uncomplimentary a reference.44
The lesson that Laurier learned from disasters such as these was that Canada could not look to any power, whether Britain or the US, to protect the interests of Canada. We would always be sacrificed whenever it was convenient. Canada had to look to its own interests, while claiming from Britain increasing jurisdiction over its foreign relations. Beyond that, however, it had to seek to bind the more powerful nations to agreed and enforceable rules of behaviour that limit their ability to win their point through sheer brute force.
Moreover, Laurier understood that regardless of what Canada owed to Britain for its endowment of institutions and a culture of liberty, the rising power, and the one on Canada’s doorstep, was America.
The fact that Britain was now a free trade nation, plus the extra cost of transatlantic shipping for Canadian exporters, plus the failure of British politician Joseph Chamberlain’s scheme to create a free trade zone behind high tariff walls within the Empire, meant that Britain’s role as the major trading partner for Canada was fated to fade with time.
America was on its way up in the world, and within North America was the obvious trade and commercial partner to step into the void being created by Britain’s long goodbye.
During most of Laurier’s long period in office, however, America was in no mood to bind its power through the kind of long-term commitments Canada needed if it was to reduce its vulnerability to American unilateralism. For Canada to invest in the US–Canada trading relationship required some certainty about Canadian access to American markets and some rules about how the US would treat exports from Canada.
This was a period of Republican dominance, and the Republican Party was the party of the Northern industrial interests that favoured high tariffs and considered Canada a direct commercial threat on their doorstep. Americans were in an ebullient mood, mirroring no doubt that of their president, Teddy Roosevelt. Roosevelt had been a hero of the Spanish-American War, which in 1898 led to a large expansion of US overseas possessions and power. He took over and completed the construction of the Panama Canal. He won the Nobel Peace Prize for brokering a peace settlement between the Russians and the Japanese. In 1901, he famously summed up the principles that he thought should guide American foreign policy thus: “Speak softly and carry a big stick, and you will go far.”45
When Roosevelt had been the vice-presidential candidate on the William McKinley ticket, both he and McKinley—who was later assassinated, making Roosevelt president—stumped for prosperity at home behind high tariff barriers. These were truly unprepossessing partners for a Canadian government seeking freer entry to American markets and a taming of US power to damage Canada, by binding the US through enforceable trade agreements.
On the other hand, excessive and heedless use of power by American governments has traditionally exacted its own costs on that country. While powerful, America always somehow comes to realize that even it is not omnipotent and that even superpowers need friends and allies. William Taft, who succeeded Roosevelt as Republican candidate and president in 1908, was a Northerner and a protectionist; yet he and Congress proved to be on the lookout for ways to improve relations with the rest of the world. After having had his advances constantly rebuffed for a decade, Laurier suddenly found Canada’s interest solicited in what we would call today an American charm offensive. Laurier lost no time in grasping the opportunity to put in place such a vital piece of his plan, binding the American colossus and subjecting its power to the rule of law, at least in its trade relations with Canada. But the chance slipped through his fingers—and ours. And thereby hangs a tale.
4. Free trade
Free trade deserves its own separate treatment as a central part of Laurier’s plan. While the object of his efforts to negotiate free trade was the United States, free trade on a broad scale was, in his view, an end in itself. The fourth piece of Laurier’s plan was therefore to move the country by degrees toward the regime of full free trade he so admired in Britain. Laurier believed that free and open trade was the cornerstone of economic prosperity and entrepreneurship and that government’s role included working to throw open foreign markets to Canadian products while not obstructing the entry of products from abroad.
There was, of course, the tariff. We’ve already seen how Laurier dealt with the Canadian tariff. America,46 emerging as the only rival to Britain as our chief trading partner—in 1896, these two markets purchased more than 90 per cent of Canadian exports—was a relatively high-protection economy. Only Britain, workshop of the world, levied no tariffs at all and posed no barriers to Britons buying and selling as they pleased.
For Laurier and his cabinet
