Chapter 8. The Economy since 1920
8.14 Economic Nationalism
Doug Owram; Department of History; and University of British Columbia - Okanagan
Relatively speaking, Canada came out of the Second World War in good shape. It was able, over the next few years, to absorb the wartime debt, convert its economy to peacetime production, and set the stage for nearly three decades of prosperity.
However, there was a problem. Throughout much of its history, Canada sought to maintain political and economic autonomy by balancing the overwhelming influences of its two most influential trading partners and cultural influences, Great Britain and the United States. The so-called North Atlantic triangle prevented Canada from being pulled exclusively into the orbit of either of the much larger powers around it.
By the post-war years, that equilibrium was failing. Britain, already weakened by the First World War, left the Second World War mired in debt and challenged by an obsolete manufacturing base. In contrast, the United States was indisputably the world’s greatest economic and military power — the first “superpower.” By the 1950s, two-thirds of Canada’s exports and imports were with the United States. Even more dramatically, more than three quarters of all foreign capital invested in Canada came from south of the border. When such economic dominance was compounded by the influence of Hollywood, American magazines, radio, and the emerging medium of television, many worried — as did Canada’s foremost economist, Harold Innis — that we had gone “from colony to nation to colony.” Thus, economic policy in these years was inseparable from wider fears about Canadian identity.
| Decade | UK | USA |
| 1926 | 44% | 53% |
| 1945 | 25% | 70% |
| 1955 | 18% | 70% |
Over the next 20 years, Canadians wrestled with how to manage a relationship with an ally, economic powerhouse, and dominant neighbour. For all political parties, Canadian nationalism and American influence became a significant and often contentious issue.
Traditionally, it was the Conservative party that had stood as the primary defender of the British connection and opponent of excessive American influence. The pattern seemed to continue when, in 1957, John Diefenbaker defeated the long-reigning Liberal party, to some extent, on the question of undue American influence in the building of a trans-Canada oil pipeline. However, old traditions were hard to maintain in the new world of the American superpower.
For the six years they were in power, the Conservatives tried various strategies. The first approach was both the most traditional and the most unrealistic. The Conservatives sought, in various ways, to strengthen British trade as a means to counter-balance American influence. Diefenbaker talked of diverting 15% of trade to Britain, but he had no idea how to carry it through. Britain’s economic clout was no longer anything near that of the United States. Second, the power that Britain retained was increasingly ori