64. Quoted in Groom, 225.
65. Quoted in John Terraine, The Road to Passchendaele (London: Leo Cooper, 1977), xix–xx.
66. Sir Robert Borden, Letters to Limbo, ed. Henry Borden (Toronto: University of Toronto Press, 1971), 59.
67. Winter, 45–46.
68. Winter, 131, 41.
69. Winter, 145.
70. Morton and Granatstein, 174.
71. For a detailed analysis of the cavalry’s role at Cambrai and the debate over its alleged failure, see David Kenyon, British Cavalry on the Western Front 1916–1918 (Unpublished PhD thesis, Cranfield University Defence College of Management and Technology, 2007), 167–205.
72. Morton and Granatstein, 174.
Chapter 8
The Home Front
There was something depressingly symbolic in the fire that gutted the Houses of Parliament on February 3, 1916. It was like a forewarning that . . . the country was entering a period of profound trouble.
—Robert Craig Brown and Ramsay Cook[1]
Canada’s war was not fought only in France and Belgium. As quaint as it may seem to us a century later, the First World War was in fact the first modern war. This statement doesn’t just apply to the new weapons technologies that were employed for the first time, such as machine guns, airplanes, and submarines. It applies also to the fact that all the resources of the nation had to be mobilized. Vast amounts of money were needed to pay for the war, and farmers had to expand their production as much as possible to feed both the army and the European civilian populations. Manufacturers had to maintain production to the extent possible, while some of them converted their factories to produce war equipment and supplies. And workers had to be found to replace the men who enlisted in the army or other services, a number that eventually rose to more than 600,000.
The impact of all this on not just the economy but on Canadian society generally proved to be profound. In many ways, it could be considered positive, but in many other ways, it was disruptive and divisive. The one thing that was certain, although unanticipated in August 1914, was that Canada was a very different place in 1918 from what it had been only four years earlier. This was not, of course, unique to Canada. It was also true of Britain and the other combatant nations, including the United States, although its involvement in the war was very brief compared to that of its Allies.
The Canadian economy grew dramatically during the war. The amount of farmland devoted to field crops rose from 35 million acres in 1913 to 53 million acres in 1919, while wheat acreage on the prairies rose by 80%.[2] By 1921, twice as many Canadians were employed in non-agricultural pursuits as in agricultural pursuits.[3] This reflected the very significant growth in the industrial sector of the economy. It has been estimated that the gross income produced by industry rose from $2.4 billion in 1914 to $4.4 billion in 1919, much of it in the secondary manufacturing sector, where the gross income produced rose from $390 million in 1914 to $1.1 billion in 1919. Much of this increased production was exported to Britain and Europe.
Because the Canadian economy had gone into a slump in the two years before the war, this growth was of course very welcome. What most people, including the politicians, did not at first realize was that managing the national economy was a vital component in managing a modern war. Many people at the time, and since, have been highly critical of the Borden government’s inefficient management of the war economy, be it the use of manpower, the letting of contracts for war materiel, or the overall management of vital resources. There can be no doubt that the government made many mistakes, but it got better at doing these things as it gained experience.
What needs to be remembered by modern critics is that neither Borden nor anyone else in Canada had any experience of even trying to “manage” an economy beyond tinkering with the tariff system. Indeed, very few Canadians before 1914 even thought the government should be trying to manage the economy. Borden and his colleagues not only had to learn how to manage a war, they had to make the psychological adjustment to accepting that managing the economy was an essential part of governing a nation engaged in a major war.
The transition took a little time. Borden told the House of Commons in 1915 that the government did not intend “to interfere with the business activities of the country,” at least not unless and until the situation absolutely required some degree of intervention.[4] It was not long before that situation arrived, and it is fascinating to observe the politicians, all of whom were the product of nineteenth-century economic liberalism, grapple with the problem and reverse their views on the role of government, at least during the temporary crisis environment of a major war.
The most dramatic illustration of this transformation related to the seemingly insatiable demand for munitions and other war materiel. Because the government had virtually no experience in large-scale purchasing, there was no system in place at the outset of the war, resulting in the inevitable corruption and mismanagement. Borden addressed this as early as April 1915 by establishing a War Purchasing Commission to take responsibility for the contracting for all Canadian military expenditures and all British and Allied orders for war supplies except munitions. Under the capable chairmanship of Edward Kemp, a prominent Toronto manufacturer and conservative member of parliament, the Commission “shifted expenditure away from what was good for the party to what was good for the war effort,” developed a systematic tendering process, issued contracts only to proven suppliers, and restricted patronage “to contractors who could deliver quality material.”[5]
The Militia Department had already set up a Shell Committee to serve as the purchasing agent for the British government, which was buying huge amounts of munitions in Canada. The Shell Committee quickly built up a significant munitions industry in Canada, but a political crisis soon developed over the activities of at least one of its members, J. Wesley Allison, who was of course an old friend of Sam Hughes. This led to the abolition of the Shell Committee and its replacement by the Imperial Munitions Board.[6] The Board was chaired by Joseph Flavelle, president of the largest pork-packing company in the British Empire and a prominent financier. It did an outstanding job, and by 1918 was even selling surplus production to the U.S. Ordnance Department. The IMB was directly responsible to the British Ministry of Munitions, however, which meant that the Canadian government was allowing the British to oversee the largest employer of workers in the country, a reflection, as Tim Cook points out, “of the colonial mentality that still prevailed in Ottawa.”[7]
Equally significant was the problem of Canada’s railways and the solution which the government eventually and reluctantly found for it. Some background information is required to make any sense of this situation. When Confederation took place in 1867, one of its major objectives was to create the firm foundation on which acquisition of the vast northwestern territories controlled by the Hudson’s Bay Company could be transferred to Canada, creating a transcontinental empire rivaling that of the United States.
The Canadian Pacific Railway was built in the 1880s and was an immediate success, both financially and in enabling the government to move troops quickly at the time of the 1885 North West uprising. When Laurier’s Liberals came into office in 1896, at the beginning of a decade of extraordinary economic and population growth, they responded to the acknowledged need for a second transcontinental railway, but in an extravagant and highly politicized fashion.
The Grand Trunk Railway, which operated in Ontario and Quebec, was granted a charter (with subsidies) to build a line from Prince Rupert on the west coast to Winnipeg, where it would connect with the National Transcontinental Railway, which the government proposed to build to link Winnipeg to Quebec City. This would be leased to the Grand Trunk, and another section would be built linking Quebec City with Moncton on the east coast. This was not an unreasonable policy, but the government then yielded to political pressure and also provided subsidies to the Canadian Northern Railway, which operated lines in Manitoba and northern Ontario but was e
xpanding to become another transcontinental railway. In other words, the Laurier government chartered or subsidized not one new transcontinental railway but two.
Clearly, in retrospect and to many people at the time, this was more railway than Canada needed, but the early twentieth century—at least until 1914—was a period of exuberant optimism in Canada. The outbreak of a global war, not surprisingly, was not anticipated. When it broke out, the new lines were not yet completed, and they were heavily indebted, to both private investors and the government. Capital for investment in railways dried up as governments began borrowing aggressively to finance the war effort, but the railways were important to that war effort, besides which their collapse would very likely trigger a financial and political crisis.
The Borden government, therefore, continued assisting them from 1914 to 1916 but took mortgages on them when it concluded that it could not continue to do so. And yet they were vital to the war effort. The result was that in June 1917 Borden made the extraordinary decision to nationalize the Canadian Northern, combining it with the already-government-owned National Transcontinental and the Intercolonial (built in the 1870s to link the Maritime provinces with Montreal) to create Canadian National Railways. The Grand Trunk and Grand Trunk Pacific continued to receive subsidies until 1920, by which time they clearly were bankrupt and were absorbed into the CNR as well.
The nationalization of the railways was bitterly opposed by a large segment of the business community, especially in Montreal and particularly by the Canadian Pacific Railway, and did enormous harm to the Conservative party at the very time that it was alienating many thousands of ordinary Canadians with its conscription policy (which will be discussed in the next chapter). Borden was denounced as a socialist or even a communist, which was of course absurd, but the whole affair showed, as did conscription, that Borden, who had thought of himself as a progressive conservative before the war, was above all else a pragmatist who would do what he thought needed to be done, regardless of philosophy or ideology or even political interests.
Nobody could have been more surprised by his decision to nationalize the railways than Borden himself. It might be noted, however, that the U.S. government also nationalized American railways as a temporary wartime measure, operating them from 1917 to 1920 through the United States Railroad Administration.
Similarly, the huge need to feed both the Allied armies and the civilian populations of Europe forced the government to intervene in the grain trade. In 1915 it commandeered a large portion of the grain crop for sale to Italy, and when Britain, France, and Italy established the Wheat Executive Agreement in November 1916, Canada and the United States both responded by forming wheat export companies to manage the purchase and export of grain on behalf of their farmers. When an anticipated shortage of wheat in the spring of 1917 drove prices up from $1.90 to $3.00 a bushel, the Canadian government went further, establishing the Board of Grain Supervisors (later succeeded by the Canadian Wheat Board), which was given monopoly control over wheat sales, to determine domestic and foreign requirements and to regulate domestic prices and distribution.
Again, faced in the winter of 1917–18 with a possibly serious coal shortage which would affect the production of war industries and also create hardship for the general population in this pre-oil and pre-gas era, the government appointed a Fuel Controller to regulate prices, distribution, delivery, and consumption. The United States similarly created the United States Fuel Administration, and the two organizations worked closely together, establishing a continental distribution system for American anthracite coal. As well as regulating the price of coal, miners’ wages also were controlled.
It was also in 1917 that the government appointed a Food Controller to stimulate greater production and conserve supplies, although it did not reduce or regulate prices, as many people had hoped it would in view of the inflation in prices taking place. Its role has been described as “a middle road between the British method of compulsion and the American effort at volunteerism.”[8]
The dramatic expansion of the economy, combined with enlistments in the army, had the effect of eliminating unemployment and creating a labor shortage. To a considerable extent the jobs were filled by women, who began working in factories, on farms, in offices, and in public services. By the end of the war, more than 30,000 women were employed in munitions factories alone, and thousands of others held jobs that had not been available to them before the war.
At the same time, the booming economy and labor shortage had the effect of raising wages, but the amount of money being pumped into the economy also created inflation. The cost of living rose by 18% in 1917, 13% in 1918, and 10% in 1919.[9] Put another way, it has been calculated that an average weekly household budget rose from $7.96 in November 1914 to $13.49 in November 1918.[10] This naturally made life more difficult for most people and stimulated labor unrest, which boiled over at the end of the war.
While wages did rise during the war, they failed to keep pace with inflation, causing unrest in the working population. Membership in trade unions grew, and strikes became more frequent as the war dragged on. In July 1918 the government responded by banning strikes and lockouts for the duration, although it conceded the right of workers to join unions and required that female workers receive equal pay for equal work. As the historians Robert Craig Brown and Ramsay Cook have observed, “on paper it was a rather enlightened labour policy. But it came much too late” and “responded to rather than anticipated the conditions the Great War imposed on labor. Like their employers, workmen were in serious trouble before the war. Like their employers, they did well during the war. But their employers did better.”[11]
Meanwhile, the good wages being paid in factories and the shortage of men because of enlistments in the army also encouraged many young men in rural areas to move into the urban centers. This accelerated the problem of rural depopulation, which agricultural leaders traced back to and blamed on the National Policy of protective tariffs adopted in 1879. The highly emotional issue of rural depopulation, when combined with the conscription controversy, ignited a fierce political firestorm that would sweep the government from office in 1921.
By the end of the war, the Canadian government, with the cooperation of provincial and municipal governments, had assumed a large role in the management of the economy. Brown and Cook claim that the government had justified this on the ground that it was essential to achieve the war’s goal of preserving “civilization,” which “assumed continuance” of the pre-war laissez-faire attitude to the economy.[12] This assertion is questionable, however, because—as we shall see—many Canadians came out of the war hoping that the post-war world would be a better place based on new attitudes and major changes in society.
The radical transformation in government’s role in society had not taken place as the result of an ideological conversion by the politicians and leading businessmen of the nation but because they believed that the war simply had to be won and they were prepared to do whatever was necessary to achieve that goal. Canadians generally accepted these policies, albeit with considerable grumbling. But the determination to do whatever was necessary to win the war also led most politicians and business leaders to another decision that would, when combined with the social stresses caused by wartime controls, result in unprecedented social, cultural, and regional divisions that came perilously close to destroying the nation that they were trying to save.
The initial offer of 25,000 troops had been easily manageable, although to most people in 1914 even that involved raising a significant amount of additional revenue. But when Borden kept raising the Canadian commitment, eventually promising to raise five divisions, there were many experienced and knowledgeable people who thought it could not be done and, even if it could be done, that it would impose an unsustainable financial and economic burden on the economy.
Neither Borden nor his ministers appreciated the strain his rising manpower commitments were making on the economy.[13] The gove
rnment did recognize at the outset that it could not finance the war effort from current revenues, so it raised the tariff on coffee, sugar, alcohol, and tobacco products, and excise taxes on alcohol and tobacco as well. It also began issuing notes to meet its monetary requirements, in other words issuing enough paper money, which inevitably led to inflation. In 1914 it borrowed $60 million in London, followed by borrowing another $45 million in New York—the first time a Canadian government had borrowed there—in the spring. The idea of borrowing money in New York was a delicate one because of the nature of Canadian-American relations, but the reality was that money was no longer available in London, the country’s usual source of capital, and Canadian-American relations were much closer than they had been before the war. The government subsequently followed up with further loans in New York of $75 million in 1916 and $100 million in 1917. What Sir Thomas White, the minister of finance, may not have realized, or if he did he recognized that he had no alternative, was that the American loans “tied Canada to Wall Street as the Dominion’s primary lender. This change would be critical for the country in cutting its financial tethers to Britain.”[14]
The government also broke new ground in 1915 by offering bonds on the domestic market. Fifty million dollars was easily raised—much to the astonishment of White, who naturally followed up in 1916 and 1917 with further bond issues. Perceiving that there was more money in the country than it had thought, the government now issued Victory Bonds, which raised more than $400 million in 1917 and $660 million in 1918!
As the war dragged on there was a growing feeling in the country that those at home profiting from the war should share in the burden, based on the argument that the men who volunteered were offering their lives, so surely those at home, especially those making money from war production, could help to pay for the war. The result in 1916 was a modest business profits tax, which was well received by the general public.
Canada's Great War, 1914-1918 Page 16