Abstract:
The effects of collapsed international trade and banking failures on Canada’s Economy during the Great Depression are analyzed in this research paper with a primary focus on understanding governmental response strategies. From an extensive review of the Literature, it is apparent that the Great Depression severely impacted Canada. The sharp reduction of demand for Canadian goods and services due to international trade’s collapse has led to job loss and reduced the earnings of households, especially those engaged in exporting sectors such as forestry, mining, and agriculture. Following the banking failures and subsequent credit crunch leading to liquidity shortages along with increased nonperforming loans for Canadian banks further deteriorated the economic crisis. The Government’s action plans played an essential role in dealing with the consequences of the Depression, including expansionary monetary policy, fiscal policies aimed at reducing unemployment rates, and several relief programs addressing poverty. Even though those actions provided some comfort but could not restore the prior economic status, this research has provided valuable insights into how the Canadian Economy was affected by the Great Depression by analyzing essential factors such as global economic conditions and domestic issues while examining government responses. Our understanding of economic crises may be improved by leveraging the knowledge attained by these insights.
Introduction
The Global Economy bore a deep and enduring mark from one of history’s most severe economic crises – the Great Depression and the broad involvement of Canada within international markets indicated that it had no protection against such severe consequences. The aftereffects of the Great Depression resonated throughout Canada’s Economy, creating significant declines in output and employment and income rates (Lamb, 2015). This research paper seeks to delve into Canada’s economic history during The Great Depression era and analyze its Impact. To fully comprehend this critical era in Canadian history, we will consider the Impact of global economic factors as well as local issues and governmental decisions.
Research Question:
What Impact did The Great Depression Have on Canada’s Economy? This is what this paper aims to find out. The objective is to identify specific mechanisms that connect with how Canada’s Economy and society were affected during an economic downturn by analyzing multiple facets of this question. Using this research question as a framework for our analysis allows us to uncover how specific factors shaped Canada’s experience during this challenging period.
Thesis Statement:
Significant declines in output coupled with a drop in employment rates and income levels illustrate just how much the Great Depression impacted Canada’s Economy. Moreover, domestic frailties and international financial factors led to an unmitigated economic disaster (Amaral & MacGee, 2002). Although they were limited in their Impact, the Impact of the Great Depression on the Canadian Economy is analyzed comprehensively through this research paper which examines interdependent International Economic Factors. Furthermore, risks within the Canadian Economy are being evaluated alongside Governmental Responses.
Literature Review:
Just like many other nations at the time of The Great Depression period, Canada was also afflicted by financial difficulties. A comprehensive appraisal of academic articles and books that focus on how Canada’s Economy was affected by the Great Depression is reviewed in this section (Siklos, 2003). The diverse array of sources selected offers comprehensive insights into how both domestic and international factors have contributed to this period of economic decline
International Economic Factors:
The Great Depression was a catastrophic recession that began in the United States and quickly impacted several countries, including Canada. International economic influences played a considerable role in instigating and aggravating the economic downturn. By examining existing Literature on the subject matter in greater detail within this section, we aim to understand better how international factors shaped Canada’s Economy during the Great Depression.
Global trade collapse contributed critically to the severity of Canada’s Great Depression. However, Canada’s economic growth was primarily driven by exporting primary commodities before the Great Depression. Nonetheless, the contraction of foreign trade caused extensive damage to Canadian businesses (Lamb, 2015). The verdict is out: Harold James’ study concludes that Canadian industries reliant on exports are facing substantial drops in product demand, which translates into significant losses in production and jobs.
Canada’s finance industry faced significant consequences as it witnessed US-originated economic malaise spreading northwards during The Great Depression. The Literature states vulnerabilities in the Canadian banking sector and spillover impacts from American banks’ failure. As per Bryce’s 1996 studies, the severe Credit Crunch & Banking Crisis in America resulted from the collapse in banks & withdrawal of US Capital, which impacted the Canadian Economy severely. Challenges, including limited liquidity and increased nonperforming loans, confronted Canadian banks. Bryce (1996) pointed out significant shortcomings of the Canadian banking system, such as inadequate capitalization and insufficient regulatory supervision, that had exacerbated the financial crisis. The economic downturn was fueled by Canadian financial institution failures that reduced access to investment credit.
To mitigate The Great Depression’s economic Impact, governments all over formulated various policies. The exploration of international collaboration and policies enacted are evident in these works. The Ottawa Agreement in 1932 demonstrated how countries could collaborate by reducing tariff barriers to invigorate global trade. An agreement was made between Canada and four other countries The UK, Australia & South Africa. The analysis conducted by Kehoe & Prescott (2007) indicates that through enacting the Ottawa Agreement, countries made a united attempt to address global trade collapse and promote economic recuperation.
Additionally, the Literature emphasizes the importance of domestic policy responses to control the Impact of international economic factors. Governments have taken measures like currency devaluation and exchange rate adjustment to improve the nation’s export competition. Also, expansionary monetary and fiscal measures target higher domestic demand to reduce the Impact of the declining Economy.
Domestic Factors:
Although international factors are often cited as significant causes of Canada’s experience with the Great Depression, Experts say that one of the leading causes of Canada’s recent economic downturn is its dependence on a narrow range of exports and falling commodity prices.
The decreased price of staple commodities, including wheat and timber, significantly affected Canada’s Economy. The severe Impact of unemployment and lowered incomes highlighted by Eigner & Umlauft (2015) is attributed to the over-abundance of primary goods, which caused prices to fall, ultimately affecting Canada’s export-oriented zones.
Scholars, including Eigner & Umlauft (2015), explore how structural weaknesses within Canada’s Economy exacerbated outcomes during The Great Depression. Talking about the overreliance on a small range of exports reveals how vulnerable Canada was to shifts in international competitiveness. The limited number of industries that this country depended upon -agriculture & mining-hurt them even more during their economic crisis since they could not expand into other fields. The literature review revealed the significance of examining weaknesses in Canada’s financial system by looking into Canadian banks’ failures during The Great Depression and their consequences for Canada’s Economy; in general, authors such as Bryce (1986) provide important insights.
Government Responses:
Canada’s response during the Great Depression was instrumental in mitigating its Impact on society and helping those who suffered. The utilization of expansionary monetary and fiscal policies is a common practice by the Canadian Government, according to various sources in Literature. In order to mitigate the economic downturn Bryce (1986) investigated how significant these policies are in enhancing government spending to encourage demand stimulation for reducing poverty levels and addressing issues caused by unemployment.
The Literature sheds light on establishing relief programs and their integration into governmental responses. Initiatives like the Dominion Relief Commission and Unemployment relief act were designed to extend direct assistance to those who needed it. Relief programs were developed to lessen the immediate hardships that unemployed individuals and affected families underwent due to the economic crisis.
Despite this fact that there is still an ongoing debate about how effective were the government responses at tackling The Great Depression, scholars are of the view that though some benefits were attained from several policies and relief programs aimed at re-establishing the Economy during the Depression era, these measures could not achieve complete restoration of pre-depression status. Struthers (2002) suggests that despite attempts made by the Government towards recovery from Depression was unsuccessful in attaining complete achievement. Thus, its Impact persevered over an extended duration—however, the challenges and complexities associated with implementing successful policies during an economic crisis.
Interpretation
The Impact of The Great Depression on Canada’s Economy becomes clear after reviewing relevant Literature, as the severe Impact of the collapse in international trade was seen through a decline in demand for Canadian goods and services, specifically those from export-oriented sectors. As a consequence of this downturn, the mining industry, along with others like farming and logging, witnessed considerable setbacks contributing to increased rates of unemployment & decreased household incomes. Canadian Industries, which relied heavily upon exportation, faced a catastrophic outcome due to collapsed global commerce, as highlighted by Boivin’s works in 2011. Canada’s heavy reliance on the commodity and raw material sectors proved detrimental as their decline directly impacted the already struggling Economy
What is more, the crash in stocks and banking meltdowns exacerbated a dire situation in the Economy. An analysis of the Literature shows that the exposure of Canada’s financial system and the spillover effect from the US banking failure is significant. Significant challenges like liquidity shortages and mounting nonperforming loans confronted Canadian banks, and the Economy shrunk due to limited credit availability caused by the failures of Canadian financial institutions that hindered investments.
The Canadian Government successfully responded to lessen the Impact of The Great Depression on its Economy by tackling widespread unemployment and poverty-related issues. A combination approach was taken, including expansionary monetary and fiscal policies and the establishment of relief programs. Kehoe & Prescott (2007) explore mitigating an economic downturn as significant. The objective of raising Government expenditure while boosting consumer demand was to increase economic activity and lessen the painful effects of poverty and joblessness. Also worth noting is that the initiation of relief efforts such as The Unemployment Relief Act and Dominion Relief Commission furnished direct support to those requesting help (Bagliano & Morana (2012); these relief programs were implemented to relieve unemployed individuals and affected families from immediate hardships caused by the economic crisis.
Conclusion
The trajectory of the Canadian Economy got established post-The Great Depression. Era Economic crisis gravely impacted the employment rate and productivity, leading to severe difficulties for numerous Canadian residents. The complex interplay between domestic and international factors that brought about this crisis is underscored in the reviewed Literature. Additionally, it is essential to note that the efforts from the Government in addressing Depression played a crucial role in lessening its effects though complete recuperation remained sluggish. Understanding how the Great Depression affected society is essential for policymakers and economists because discoveries made during this time have affected economic policies and led to the implementation of safety measures to shield against upcoming financial setbacks. Examining this historical event provides us with insightful information about challenges faced by economies during times of crisis which can be used to prevent similar consequences in future.
References
Amaral, P. S., & MacGee, J. C. (2002). The Great Depression in Canada and the United States: A neoclassical perspective. Review of Economic Dynamics, 5(1), 45–72.
Bagliano, F. C., & Morana, C. (2012). The Great Recession: US dynamics and spillovers to the world economy. Journal of Banking & Finance, 36(1), 1-13.
Boivin, J. (2011). The ‘Great’Recession in Canada: Perception vs. Reality. Speech from March28, 2011.
Bryce, R. B. (1986). Maturing in Hard Times: Canada’s Department of Finance through the Great Depression. McGill-Queen’s Press-MQUP.
Eigner, P., & Umlauft, T. S. (2015). The Great Depression (s) of 1929-1933 and 2007-2009? Parallels, differences and policy lessons. Parallels, Differences and Policy Lessons (July 1, 2015). Hungarian Academy of Science MTA-ELTE Crisis History Working Paper, (2).
Kehoe, T. J., & Prescott, E. C. (2007). The Great Depression of the twentieth century. Minneapolis: Research Department, Federal Reserve Bank of Minneapolis.
Lamb, D. (2015). The economic Impact of the great recession on Aboriginal People living off Reserve in Canada. Relations industrielles, 70(3), 457-485.
Siklos, P. L. (2003). Understanding the Great Depression in the United States versus Canada. The World Economy and National Economies in the Interwar Slump, 27-57.
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