The outbreak of the Great Depression in the fall of 1929 caused much economic hardship in Newfoundland and Labrador. Most damaging was a breakdown in world trade, which caused the country's revenue to plummet. Despite its shrinking income, the government still had to make interest payments on a sizeable national debt and provide essential services to the public. Widespread unemployment during the 1930s exacerbated an already difficult situation by forcing the government to spend millions of dollars on various relief programs. Most, however, were ineffective. Dole rations, for example, were heavily policed and much too small to live on; land settlement also ended in failure. At the same time the government increased relief spending, it also contributed to the crisis by laying off employees and making cuts to health care, education, and other social programs. When allegations of corruption surfaced against high-ranking political officials in 1932, it intensified the public’s mounting dissatisfaction with party politics and led to the swearing in of the Commission of Government in 1934. For the most part, however, the new regime proved equally incapable of improving the Depression’s impacts on the working class and on the country as a whole. It was not until the employment boom of the Second World War that the country recovered. Financial CrisisThe impact of the great Depression was devastating to Newfoundland and Labrador’s export-based economy. A sudden slump in international trade dramatically reduced revenue from fish, mineral, and pulp and paper exports. Profits decreased from $40 million in 1930 to only $23.2 million in 1933. The national debt, meanwhile, continued to climb. By the end of 1933, the government owed $100 million – mostly to the United Kingdom and the United States. Interest payments alone accounted for 63.2 per cent of the country’s shrinking income. The government responded to the crisis by borrowing more money from abroad. As the Depression deepened, however, the pool of willing lenders dried up. Britain and Canada worried that it would reflect badly on the Empire if Newfoundland and Labrador failed to meet its interest payments and agreed to lend the government money in return for a number of concessions. One was the appointment of a financial advisor to help organize the country’s finances. Sir Percy Thompson, deputy chairman of the Board of Inland Revenue, filled this position in August 1931. At around the same time, the Newfoundland and Labrador government appointed Montreal businessman Robert J. Magor to investigate various government departments and reduce spending wherever possible. Unfortunately, it was the country’s poor and vulnerable who were most negatively affected by the ensuing government cutbacks. The government laid off one-third of its civil servants and reduced wages for the rest. At the same time, it introduced new taxes that increased the cost of living by approximately 30 per cent. The government also slashed spending on health and education, but doubled its police force in 1932 to better maintain law and order amid a growing atmosphere of public unrest. Perhaps most frustrating to the country’s unemployed, however, were Magor’s efforts to reduce public relief payments, widely known as the dole.
Newfoundland Constabulary, 2 May 1937 The government doubled its police force in 1932. Photographer unknown. Reproduced by permission of Archives and Special Collections (Coll. 137 04.04.009), Queen Elizabeth II Library, Memorial University, St. John's, NL. Government ReliefThe dole was a small amount of support the government distributed to the poor and unemployed. A typical ration included flour, pork, split peas, corn meal, molasses, and cocoa. It provided for only about half of a person’s nutritional needs. The government did not give more partly because it had very little money to spare during the Depression; by 1933 it was already spending more than $1 million on relief payments annually. Government officials were also afraid that if they gave too much, people would become comfortable on the dole and stop trying to find work elsewhere. A third concern was that dole payments should not exceed the income of the country’s working – yet impoverished – fishers. “The tragedy of Newfoundland,” Commissioner Thomas Lodge wrote in 1939, “is not that the scale of able-bodied relief is so low. It is that the scale differs so little from the standard of living enjoyed by the workers who manage to retain complete independence.” Some government officials worried that relief expenditures were becoming too large a drain on the country’s finances. To keep costs down, they closely policed dole applicants to ensure that only those who desperately needed relief received it. The government also hired a limited number of relieving officers, which made it difficult for a lot of people to apply for the dole. The officers had sweeping powers to investigate applicants and to determine how much government support they should obtain. This contributed to the economic and social hardships experienced by the poor and working class during the Depression. If people supplemented inadequate dole rations by hunting or farming, then they risked being cut off from government support. Furthermore, Magor recommended that the government not only refuse relief to people who cheated the system, but also to those who knew of abusers and did not report them. This helped create an atmosphere of paranoia, discontent, and oppression in Newfoundland and Labrador during the 1930s. The Commission of GovernmentThe Commission of Government only marginally improved matters when it came into power in 1934. It distributed free milk and cod liver oil to children, raised the health department’s budget, and slightly increased dole orders. Destitution remained widespread and the relief system was still harshly policed, left people hungry and malnourished, and did not allow recipients to buy their own provisions. The replacement of white flour with brown was a particularly sore point, as many applicants felt the new flour was difficult to bake with.
Inauguration of the Commission of Government, 16 February 1934 The Commission of Government was unable to improve the Depression's impacts on Newfoundland and Labrador. Courtesy of The Rooms Provincial Archives Division (B4-137), St. John's, NL. The Commission also introduced a land settlement program to Newfoundland and Labrador which had a promising start, but eventually ended in failure. Under this program, the government helped families establish farms, raise animals, and build communities in various uninhabited parts of the country. The intention was for people to eventually support themselves off of the land and pay back the government’s investment. The first and largest program took place in May 1934 at Markland. Others followed in such places as Brown's Arm, Lourdes, and Midland. The settlements, however, were run by trustees and not by the people who lived there. This made the settlers feel as though they had no control over their lives. In 1936, for example, the government evicted one family from Markland for refusing to send their children to the local school; seven men objected to the expulsion and were also forced to leave. By 1937, the government felt the land settlement families would not be able to pay back the money it had invested in them and began to scale back the program. It dismantled the program in 1941. By then, however, the Second World War had brought widespread prosperity to Newfoundland and Labrador. The country reported a financial surplus for the first time in years and unemployment had virtually disappeared. When hostilities ended, it was time to replace the Commission with a new form of government. Canada’s social security net made Confederation an attractive option for many voters who still remembered the hardships of the 1930s. Version française
The Great Depression, which began in the United States in 1929 and spread worldwide, was the longest and most severe economic downturn in modern history. It was marked by steep declines in industrial production and in prices (deflation), mass unemployment, banking panics, and sharp increases in rates of poverty and homelessness. Three factors played roles of varying importance. (1) Abandonment of the gold standard and currency devaluation enabled some countries to increase their money supplies, which spurred spending, lending, and investment. (2) Fiscal expansion in the form of increased government spending on jobs and other social welfare programs, notably the New Deal in the United States, arguably stimulated production by increasing aggregate demand. (3) In the United States, greatly increased military spending in the years before the country’s entry into World War II helped to reduce unemployment to below its pre-Depression level by 1942, again increasing aggregate demand. Read more below: Economic history: Sources of recovery Read more about the New Deal. In most affected countries, the Great Depression was technically over by 1933, meaning that by then their economies had started to recover. Most did not experience full recovery until the late 1930s or early 1940s, however. The United States is generally thought to have fully recovered from the Great Depression by about 1939. Read more below: Economic history: Sources of recovery Great Depression, worldwide economic downturn that began in 1929 and lasted until about 1939. It was the longest and most severe depression ever experienced by the industrialized Western world, sparking fundamental changes in economic institutions, macroeconomic policy, and economic theory. Although it originated in the United States, the Great Depression caused drastic declines in output, severe unemployment, and acute deflation in almost every country of the world. Its social and cultural effects were no less staggering, especially in the United States, where the Great Depression represented the harshest adversity faced by Americans since the Civil War. Discover some facts about the Great Depression Encyclopædia Britannica, Inc.See all videos for this articleThe timing and severity of the Great Depression varied substantially across countries. The Depression was particularly long and severe in the United States and Europe; it was milder in Japan and much of Latin America. Perhaps not surprisingly, the worst depression ever experienced by the world economy stemmed from a multitude of causes. Declines in consumer demand, financial panics, and misguided government policies caused economic output to fall in the United States, while the gold standard, which linked nearly all the countries of the world in a network of fixed currency exchange rates, played a key role in transmitting the American downturn to other countries. The recovery from the Great Depression was spurred largely by the abandonment of the gold standard and the ensuing monetary expansion. The economic impact of the Great Depression was enormous, including both extreme human suffering and profound changes in economic policy. The Great Depression began in the United States as an ordinary recession in the summer of 1929. The downturn became markedly worse, however, in late 1929 and continued until early 1933. Real output and prices fell precipitously. Between the peak and the trough of the downturn, industrial production in the United States declined 47 percent and real gross domestic product (GDP) fell 30 percent. The wholesale price index declined 33 percent (such declines in the price level are referred to as deflation). Although there is some debate about the reliability of the statistics, it is widely agreed that the unemployment rate exceeded 20 percent at its highest point. The severity of the Great Depression in the United States becomes especially clear when it is compared with America’s next worst recession, the Great Recession of 2007–09, during which the country’s real GDP declined just 4.3 percent and the unemployment rate peaked at less than 10 percent. The Depression affected virtually every country of the world. However, the dates and magnitude of the downturn varied substantially across countries. Great Britain struggled with low growth and recession during most of the second half of the 1920s. The country did not slip into severe depression, however, until early 1930, and its peak-to-trough decline in industrial production was roughly one-third that of the United States. France also experienced a relatively short downturn in the early 1930s. The French recovery in 1932 and 1933, however, was short-lived. French industrial production and prices both fell substantially between 1933 and 1936. Germany’s economy slipped into a downturn early in 1928 and then stabilized before turning down again in the third quarter of 1929. The decline in German industrial production was roughly equal to that in the United States. A number of countries in Latin America fell into depression in late 1928 and early 1929, slightly before the U.S. decline in output. While some less-developed countries experienced severe depressions, others, such as Argentina and Brazil, experienced comparatively mild downturns. Japan also experienced a mild depression, which began relatively late and ended relatively early. The general price deflation evident in the United States was also present in other countries. Virtually every industrialized country endured declines in wholesale prices of 30 percent or more between 1929 and 1933. Because of the greater flexibility of the Japanese price structure, deflation in Japan was unusually rapid in 1930 and 1931. This rapid deflation may have helped to keep the decline in Japanese production relatively mild. The prices of primary commodities traded in world markets declined even more dramatically during this period. For example, the prices of coffee, cotton, silk, and rubber were reduced by roughly half just between September 1929 and December 1930. As a result, the terms of trade declined precipitously for producers of primary commodities. The U.S. recovery began in the spring of 1933. Output grew rapidly in the mid-1930s: real GDP rose at an average rate of 9 percent per year between 1933 and 1937. Output had fallen so deeply in the early years of the 1930s, however, that it remained substantially below its long-run trend path throughout this period. In 1937–38 the United States suffered another severe downturn, but after mid-1938 the American economy grew even more rapidly than in the mid-1930s. The country’s output finally returned to its long-run trend path in 1942. sharecroppers Recovery in the rest of the world varied greatly. The British economy stopped declining soon after Great Britain abandoned the gold standard in September 1931, although genuine recovery did not begin until the end of 1932. The economies of a number of Latin American countries began to strengthen in late 1931 and early 1932. Germany and Japan both began to recover in the fall of 1932. Canada and many smaller European countries started to revive at about the same time as the United States, early in 1933. On the other hand, France, which experienced severe depression later than most countries, did not firmly enter the recovery phase until 1938. |