It has been argued that Newfoundland should never have joined Canada in 1949. There were many people who believe that Newfoundland had a strong enough economy to survive on their own, as a producer of many goods. It was involved in many industries, with the fishery being the major producer of goods in the Newfoundland region. This paper will explore the economic history of Newfoundland and also explore the reasons why Newfoundland would have been better off if they had joined Canada in the 1864 Confederation.
The issue of Newfoundland joining Confederation was one that was brought up on many occasions. In 1864, two members of the Newfoundland Assembly Were sent to the Quebec Conference (Rothney 1964, 22). They were F.T.B. Carter and Ambrose Shea. They were sent with the blessing of the governor, but had no authority to commit Newfoundland to Confederation. The talks went well and the two delegates returned to Newfoundland with great things to say about joining with Canada. Their speeches were heard, but Confederation was turned down at that time.
In 1869, terms were negotiated and agreed upon by the Newfoundland delegation and Ottawa (MacKenzie 1986, 8). However, in the Newfoundland election that followed the agreement of these terms, Charles Fox Bennet, an anti-confederate, won the election. Confederation and all the benefits of joining went down in defeat. At this point, many believed that a union with Canada provided very few benefits. Newfoundland relied heavily on their exports. Most of their economic ties were with Britain and the United States. Their exports went mostly to these two countries, as their imports did as well. Newfoundland would receive no benefits from the Railway and most believed that there were very few economic links with Canada. The idea of Confederation was postponed temporarily.
This defeat did not lay the idea of Confederation to rest. In the 1880's the Confederation issue rose again (Mackenzie 1986, 9). This time the idea arose to possibly solve the hard economic times that Newfoundland was experiencing. The average price for cod had fallen and the proportion of the labor force employed in the fishery had declined as well. Merchants were finding it difficult to make a profit, and poverty and unemployment were becoming increasingly more abundant. People were leaving Newfoundland to find work elsewhere. When Charles Tupper, the Canadian high commissioner of London arrived in Newfoundland to open negotiations, confederation was once again denied. The Newfoundland government showed reluctance to support a cause that had previously been disliked by so many people.
Sir John Thompson and Mackenzie Bowell opened the idea of Confederation again in 1892 at the Halifax Conference (Mackenzie 1986, 9). This conference had been called to ease the tension between Newfoundland and Canada. Newfoundland had independently negotiated an agreement with the United States called the Bond Blaine Convention. This agreement would have allowed a free trade agreement exist between the United States and Newfoundland. Canada was upset that Newfoundland had deliberately left them out of the agreement. Canada then proceeded to form their own agreement with the United States, and the Newfoundland agreement was thrown out the window. Quite obviously, Newfoundland was furious with this. Canada had managed to step out of bounds and quite possibly ruin Newfoundland's only chance of economic redemption. Canadian interest in Newfoundland seemed to come about only if there was a competitive edge with trade relations with the United States. At this point, the two nations viewed each other more as competitors in the fish industry than as partners, and Confederation would have to wait again.
In 1895, this situation had shifted dramatically (Rowe 1980, 305). The bank cash of 1894 had sparked a severe financial crisis in Newfoundland and the government was confronted with the problem of being unable to meet its interest payments. The confederation issue was brought up once again to hopefully solve this crisis. In April of 1895, a conference was held in Ottawa to negotiate possible terms for Confederation. Newfoundland's proposals followed the lines of those discussed in 1888, with consideration given to the country's immediate needs. However, Mackenzie Bowell felt that he could not be overly generous because of the effect that this might have on the other Maritime Provinces. Also, he was concerned about taking Newfoundland's entire debt. Newfoundland wanted Canada to take over their entire debt, but Canada was not willing to do this because of their own economic problems. It was hard to negotiate because Newfoundland was negotiating from an economically weak position, and Canadians were driving for a harder bargain. Confederation talks collapsed, leaving bad feelings on all sides. This incident also solidified a strong resentment towards Canada by many Newfoundlanders.
The party system in Newfoundland became more fully developed at the turn of the century (Rowe 1980, 310). The economy during these years was relatively stable and the government was able to operate on a surplus.
Newfoundland participated in the First World War on both land and sea (Rothney 1964, 24). Although the sacrifices of the men at war were great, the benefits to the Newfoundland economy were great. Oversea competition declined, and the fishery boomed. The demand for fish rose and so did the prices. Improved communication technology made it easier for the people of the island to cross over to the mainland and seek better employment in Canada and the United States. The general standard of living rose and all communities prospered. However, many people do not realize the enormous amount of money the Newfoundland government spent on the war effort. The long run implications were staggering. Newfoundland had accumulated a debt of approximately thirteen million dollars. This loan had been taken to meet the Colony's war expenditure and shortly after peace returned, the gross public debt had soared to approximately forty-three million "“ an enormous figure for a community that was so small. Although the economy was failing, Newfoundland had gained prestige and status from the war.
The depression had a very severe effect on the Newfoundland economy and ultimately brought it to the verge of collapse (Mackenzie 1986, 11). Throughout the 1920s the government operated with a continuous budget deficit and survived only by yearly borrowing. By 1933, the national debt stood at approximately one hundred million at an average interest rate of five percent. Of total government expenditures, close to fifty percent was directed to interest payments on this debt. So, quite obviously, new borrowing was needed just to make the interest payments. The governments economic predicament was only deeper fueled by the falling off of international trade. The total value of Newfoundland's exports dropped from forty million to twenty-three million between 1930 and 1933. The fishery was hit especially hard as fish prices dropped to their lowest levels ever. The ramifications for Newfoundland's economy were enormous. Lower prices and decreased trade led to lower incomes for most of the population. In turn, the demand for imports fell and the revenue from import duties was diminished. Wages were cut and unemployment rose drastically. Because the depression affected the entire world, not just Newfoundland, emigration decreased, as there were less job opportunities on the mainland. By 1932, twenty-five percent of the population was on relief, receiving about six cents a day. The result was pressure on the government for more borrowing at a time when there was an increased demand for government services. These years were ones of political turmoil in Newfoundland. The government of Sir Richard Squires found it increasingly difficult to avoid making their interest payments. Although many efforts were made to raise funds for Newfoundland, including an offer to sell Labrador to Canada, nothing worked. Finally, in 1932, the Canadian government and several Canadian banks came to Newfoundland's rescue with some short-term help.
Newfoundland's financial collapse reawakened the issue of Confederation with Canada (MacLeod 1994, 22). Since the turn of the century, union with Canada had rarely been discussed. At this time, the Newfoundland government favored a union with Canada. However, the Canadian government had to look at the idea a little closer. There were two conflicting issues. One was that if Newfoundland joined Canada, Canada would have to take the burden of Newfoundland's enormous debt. The other was that is was not in Canada's best interest to let Newfoundland go under financially. The collapse of Newfoundland may reflect the rest of Canada, and that may affect foreign relations. Once again however, Confederation was refused because to Canada, the union was financially impossible.
The Second World War had basically the same effect as the First World War (Rothney 1964, 25). The fish prices were low, and uncertain markets left the population in poverty. At first, the war only worsened the economic situation of Newfoundland, but eventually there was a temporary boom in employment due to the construction and maintenance of the American defense projects.
The Second World War emphasized the strategic importance of a union between Newfoundland and Canada (Mackenzie 1986, 22). Newfoundland was increasingly looking to Canada for its imports and the fishing industry was looking more to North American ties because the overseas markets had not expanded. Between the years of 1946 and 1948, attention was focused on planning for Newfoundland's economic future. In 1948, a vote was taken and eighty-nine percent of the population voted in favour of confederation.
On March 31, 1949, Newfoundland became a province of Canada (Rothney 1964, 25). At the moment of union, Newfoundland became eligible to participate in Canada's vast social welfare programs. These programs included veterans' benefits, unemployment insurance, merchant seamen benefits, Family Allowances, National Housing, health grants, old-age pensions, and pensions for the blind. It was with these programs that the lives of Newfoundlanders became more bearable.
Newfoundland's major source of income was and still is the fishing industry. The role of the fishing industry was central. In 1935, the cod fishery alone employed more than thirty-four thousand men (Mackenzie 1986, 5). It is easy to see that one small fluctuation in the foreign market could either make it or break it for most of the population in Newfoundland. If exports went up, the fishermen and the government were better off. If exports went down, the fishermen and the government were worse off. As a result, the standard of living would rise and fall in accordance with expansions or contractions in the outside world.
The only other sources of income for Newfoundland came from its forests, and mineral wealth (Rowe 1980, 7). Because of the weak soil and adverse growing conditions, forestland in Newfoundland was not abundant, and the areas that did exist comprised mainly of spruce and fir. Less than twenty-five percent of the island supported forest cover, and there was practically no cover in the interior of Newfoundland. Traditionally, much of the forest was used for domestic purposes, and there were almost nine hundred small sawmills producing board for these needs (MacKenzie 1986, 5). In 1909, the owners of London's Daily Mail, opened a pulp and paper mill at Grand Falls. Virtually all of the output was shipped to London for use by the Daily Mail. A second pulp and paper mill was established in 1923. In 1933, the two mills employed fourteen hundred men, plus three thousand more in the cutting season. This industry helped to employ some of Newfoundland's population, but not enough to help the economy grow in any way.
Throughout Newfoundland, there were a considerable variety of minerals, but only a few were found in sufficient quantities to be commercially profitable (Mackenzie 1986, 5). The two major minerals were the iron-ore deposits on Bell Island, and the copper deposits in Buchans. The Dominion Steel and Coal Corporation ran the mines. Normally, the company employed over two thousand men, but this number dropped to one thousand during the depression.
The importance of these industries is evident in the export statistics (MacKenzie 1986, 6). Between 1936 and 1940 the average was $14 870 389 out of a total of $30 958 389. That was ninety-five percent of Newfoundland's total exports.
Domestic manufacturing and secondary industry in Newfoundland at this time was very small (MacKenzie 1986, 6). As a result, Newfoundland was very dependent on the outside world for many of their basic goods.
From the above history, one can see that Newfoundland would have been much better off if they had joined Canada at an earlier time. There was nothing wrong with Newfoundland wanting to remain on their own, but it was easy to see that such a small country would never be able to sustain a stable and prospering economy. Without the fishing industry, there was little else in Newfoundland for economic development. Clearly, foreign trade was an essential element to Newfoundland's economy.
I believe that Newfoundland would have been better off if it had joined Canada when Confederation talks first began. No country can survive on exports alone. Newfoundland had could not even produce its own food due to the poor soil conditions and short growing season. An earlier entry into Confederation would have relieved Newfoundland from its large public debt. Canada would have also been able to provide Newfoundland with some of the Social Welfare Programs, so there would have been less poverty and less unemployment. The standard of living in Newfoundland would have gone up and the education standards would have gone up as well. With a more stable economy and a more stable population, Newfoundland could have been a prospering part of Canada.
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