Independent since 1867, Canada is a dominion within the British Commonwealth; a governor-general is the symbolic head of state. Railroads allow Canada to capitalize on a wheat boom in the prairie provinces with exports to the U.S. and Commonwealth. A huge resource base provides a natural spur to industrialization. Pre-World War I Ontario boasts more than 30 auto plants. Immigrants pour in.
Canada enters World War I on the side of the Allies. It signs the Treaty of Versailles and joins the League of Nations in 1919. William Mackenzie King, Liberal Party head, becomes prime minister. Cheap hydroelectric power in Quebec and Ontario attracts American investment in the manufacturing sector, and the U.S. overtakes Britain as the largest foreign investor. Wheat is Canada's chief export.
The Great Depression severely constricts Canada's trade-dependent economy. The Conservatives win the 1930 elections. A protectionist response to that year's U.S. Smoot-Hawley tariff constrains markets. One in five Canadians is unemployed in 1933. Labor organizers and farmers form the Cooperative Commonwealth Federation (CCF), a socialist party. King's Liberals return to power in 1935.
As war approaches, U.S.-Canada tariffs are lowered. Canada declares war on Germany in 1939. King's government introduces unemployment insurance in 1940, and it institutes wage and price controls to fight wartime inflation. The war rejuvenates the economy, effectively ending the depression. Canada's first socialist government is formed when the CCF wins 1944 elections in Saskatchewan.
The Canadian Citizenship Act ends Canadians' classification as British subjects. Postwar industry enjoys a manufacturing boom. Economic prosperity differs by region, according to provinces' varying growth rates and social welfare policies. Canada's economy is increasingly tied to that of the U.S. In 1948 export-dependent Canada is a strong supporter of GATT (General Agreements on Tariffs and Trade).
Led by John Diefenbaker, the Conservatives win the 1957 elections, ending 22 years of Liberal rule. As fears of Americanization grow, the Canada Council is formed to promote Canadian cultural uniqueness. The Liberal Party wins the Quebec provincial elections in 1960. They launch a "Quiet Revolution," a program of economic modernization and secularization of education.
The CCF becomes the New Democratic Party (NDP) in 1961. It advocates a social democratic welfare state. The Diefenbaker government introduces government-funded health care for all citizens in 1964. In 1967 the Watkins Report warns of growing American ownership of Canadian industry and recommends creating a Foreign Investment Review Agency to block foreign takeovers of Canadian firms.
Liberal leader Pierre Trudeau becomes prime minister in 1968. His government expands social welfare programs and increases the size of government. After a close election in 1972, Trudeau is forced to form a minority government with the NDP. Deficit spending and state intervention in the economy alienate opinion in the Western provinces. The 1969 Languages Act enshrines bilingualism.
The Trudeau administration institutes wage and price controls in 1975 to fight inflation in the wake of the global oil crisis. A National Energy Program is established to control oil prices and to expand Petro-Canada, the government energy company. National debt skyrockets during the Trudeau era. The separatist Parti Québecois suffers defeat in a 1980 provincial referendum on Quebec independence.
High inflation and unemployment doom the Liberals in the 1984 election. Conservative Brian Mulroney becomes prime minister. Deregulation dismantles the NEP and the Foreign Investment Review Agency, and state-owned Air Canada and Petro-Canada are privatized. Canada and the United States sign a free-trade agreement in 1987. Trade dominates the 1988 elections, which the Conservatives win.
The free-trade agreement goes into effect, and Prime Minister Mulroney begins to reduce the size of government. He cuts federal transfers to the provinces, forcing them to shoulder more health and education costs. After a national sales tax is passed in 1990, Canadians begin to buy goods in the U.S. to avoid it. The Conservatives lose the 1993 federal elections.
Jean Chretien, head of the Liberal Party, becomes prime minister. The North American Free Trade Agreement (NAFTA) goes into effect. Critics fear it will increase U.S. economic domination and move Canadian jobs to Mexico, but by 1999 NAFTA has opened new markets for Canadian goods without job flight. In 1995 Quebec voters reject separation from Canada by a narrow 50.4 percent majority.
Canada enjoys a reputation for sound economic management, despite its trade-based exposure to the vagaries of the U.S. economy. Canada has moved from a manufacturing economy to one based on services. Liberals retain federal-level control, but a political renewal beckons as Finance Minister Paul Martin is forced out by party rivalries, and Prime Minister Jean Chretien promises to step down in 2004.
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