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Two: Down Home

A century of Atlantic de-industrialization, de-population, growing dependence on Ottawa and lost opportunities is a major national tragedy, shrieking to be righted now. A chain of events has led to the decline in the economic potential and in the political clout of the three Maritime provinces, a phenomenon the rest of Canada, and politicians of all three major political parties in Ottawa, observed mutely for the most part and failed to stop.

"Haggard," "poor cousins," "economic basket case" -- each is among the terms thrown at the region by Canadians from other parts of the country who should know better. The leader of one national political party, the late David Lewis, told his party’s national council in 1971 as he left a meeting for a short interval, "Talk about something unimportant while I’m gone --talk about the Maritimes." Too many leaders of all three parties have been perfectly capable of saying the same thing in unguarded moments. Almost a decade earlier, a prominent Ontario historian, the late Frank H. Underhill, proclaimed to a CBC radio audience: "As for the Maritime provinces, nothing of course ever happens down there." Many others have committed the same intended or accidental slight before and since.

Atlantic academics continue to assert that most Canadian textbooks and historians display a deep ignorance and profound indifference to their region. John G. Reid, a historian, in an assessment of some recent books about Canadian history, concluded many gave short shrift to his region and some contained errors about even basic facts pertaining to it. He scolded Toronto historian J.L. Granatstein’s Canada, 1957-1967: The Years of Uncertainty and Innovation, noting: "Outside of the introductory chapter, the three Maritime provinces are barely mentioned and Newfoundland comes off marginally better only because of Premier Smallwood’s clashes with Prime Minister Diefenbaker in 1958-59." Another work, Twentieth Century Canada, by five prominent non-Atlantic historians, was also criticized by Reid for stating boldly, but incorrectly, that the Maritimes "experienced an almost continuous depression since Confederation."

A related perspective was provided by Prince Edward Island Premier Joe Ghiz. In a letter to the Globe and Mail in June 1989 on the budget-proposed closure of the Canadian Forces Base at Summerside, PET and the paper’s editorial supporting the proposal, he noted that the closing of the base would in proportional terms be of similar impact in Ontario to closing down its auto industry or eliminating 35,000 military jobs in Québec. Ghiz concluded: "We (Islanders) are not your poor cousins -- we are equal as Canadians, deserving of hospital and health care, of education and of transportation facilities equal to those provided to you. And, incidentally, we also believe that the defence spending should not be primarily spent in Central Canada, thereby giving you the ability to earn a good income while dumping on the ‘have-not’ regions of the country."

A stirring definition of the regional identity was provided by the educator William B. Hamilton at Mount Allison University during 1984. Calling on Atlantic Canadians to recognize that respect abroad begins with dignity at home, he asked them to reflect positively on their "common historical and demographic background, the far-reaching legacy of the sea, tell-tale traces of our architectural history; the deep relationship with the land and its people that runs through so much of Maritime literature. All of these are qualities that illustrate and illuminate the commonality that sets the Maritime region apart and have helped make it what it is today."

In short, the picturesque but generally negative perception held of the region by the rest of our country is a major obstacle to a better Atlantic future.

The West and the Maritimes

Ironically, Atlantic and Western Canada, each dubbed a "Cinderella of Confederation," have found themselves in conflict on several fronts over the years. As the population grew in the West, the regional redistribution of seats in the House of Commons resulted in a growing number of MPs for that region at the expense of the Maritimes. Political power in the West, at least theoretically, was growing while, as their number of seats dropped, Maritime Canada’s voice and role in the national political community were declining. As Alberta and Saskatchewan benefited from becoming provinces in 1905, and during 1912 Québec, Ontario and Manitoba each saw their surface areas grow considerably, the Maritime provinces were left not only without new land -- there was none available on the east coast -- but with a diminished percentage of the national land surface. This weakened their position in Confederation even further. Moreover, Maritimers felt the new provinces in the West had received unreasonably generous financial subsidies from the federal government. For example, Saskatchewan’s annual federal subsidy was, for a period, approximately three times that of Nova Scotia’s subsidy even though at the time Nova Scotia had twice Saskatchewan’s population. Maritimers felt that the settlement of the West was occurring at their expense.

The frustration of the Maritimes with the ascendancy of the West and their own decline, combined with other sources of political discontent, culminated in the Maritime Rights Movement that swept the entire region between 1919 and 1927. The movement helped foster a regional consciousness and sense of identity. It did not secure any significantly different approach in federal government policies.

At the beginning of the 1990s, the four Atlantic provinces have less than half as many MPs as the West. Many Atlantic Canadians concluded that government policy in respect of VIA Rail cut backs (sixty per cent of the VIA job losses announced in October, 1989 were to be in Atlantic Canada), and the Wilson budget during the spring of 1989 (fifty per cent of the jobs affected by the various spending cut backs were in Atlantic Canada) were punishment for having voted mostly Liberal in the 1988 national election.

In the fall of 1989, premier Ghiz told a Toronto audience that Atlantic Canada feels the same sense of frustration and alienation as Western Canada. We have the "deep-seated feeling we’re not cared about, that policies made in Ottawa are insensitive to the region," he stressed. He called for an elected Senate with an equal number of senators from each province to act as a counterweight to the House of Commons. The three other Atlantic premiers appear to be united with Ghiz on the need for a Triple-E Senate (Elected, Equal, Effective). In an open letter to Robert Stanfield and Jack Pickersgill about flaws in the Meech Lake accord, Newfoundland’s Clyde Wells noted in early 1990 the resounding silence of premiers Bourassa and Peterson on that score. "It is abundantly clear," he stated, "that if ever the Meech Lake accord were approved as it is, Senate reform involving a true Triple-E Senate would be virtually impossible." His continuing opposition to the unanimity requirement of the Meech Lake accord for any constitutional amendment to pass became one of the rocks upon which the agreement smashed on June 23, 1990. With the collapse of Meech Lake, the 1982 amendment formula -- approval by the legislatures of seven provinces together having half the population of Canada-- is still in effect.

Atlantic Confederation Experience

Atlantic Canada’s experience in Confederation is a story of hesitation and triumph followed by successive disasters. By the mid-nineteenth century, Nova Scotia, New Brunswick and Prince Edward Island were thriving within a trade network involving themselves, Great Britain and the West Indies. The shipyard industry, at its peak in the 1860s, had built much of the fleet that made the world’s fourth largest shipping power of what soon was to become Canada. The financial network included a dozen banks, -- the Bank of Nova Scotia and antecedents of the Royal Bank of Canada, as well as other important institutions. Halifax -- the centre for

Nova Scotia by mid-century -- Toronto historian J.M.S. Careless called "the wealthiest most advanced metropolitan city in the British North American provinces." Culture flourished in the region. There emerged a strong regional outlook which gave rise to the romantic notion of a golden age of "Wooden Ships and Iron Men."

The crisis of Confederation soon hit each of the three Maritime provinces. Wooden ships began giving way to an economy based on railways and coal. Charles Tupper, premier of Nova Scotia, pitted this emerging industrial model against a departing era of "wind, wood and sail" in favour of his province’s joining Confederation. Public support for union was so low that he passed the necessary motion to bring Nova Scotia into Confederation in the provincial assembly without calling an election on the question. In the federal and provincial votes called shortly after Confederation, anti-Confederationists won thirty-six of thirty-eight provincial and eighteen of nineteen federal seats in Nova Scotia. In New Brunswick, Premier Samuel Leonard Tilley, who more courageously called a provincial election in 1865 on the Confederation issue, was defeated overwhelmingly by opponents who mistrusted Canadians generally and worried about a loss of autonomy. On Prince Edward Island, opinion initially was virtually unanimous against union from fear of losing both independence and island-identity.

Eventually, the tide of Maritime public opinion turned in favour of union due to other factors, including what the historian George Rawlyk saw as the "loyalty" of many Maritimers to the Queen: it was plainly the wish of Queen Victoria and also of Westminster politicians that the entire region enter Confederation. Nevertheless, resentment would long smoulder actively below the surface.

There was also, in the thought of David Alexander, a Newfoundland economic historian, "fear that the provinces would be reduced to colonies of Upper Canada, and optimism that they would develop into the workshop of the new dominion."

John A. Macdonald’s National Policy and its high tariffs introduced in 1879 to stimulate national manufacturing prompted a Maritime industrial boom. The completion of the Intercolonial Railway from the Maritimes to Central Canada that same year, with its freight rates favourable to moving products westward, was also a powerful tonic to regional manufacturing. By the mid-l880s, Maritimers controlled three of Canada’s five sugar refineries, one of three national glass works, two of seven ropeworks and eight of twenty-three Cotton mills. Nova Scotia’s iron and steel industry and related sectors were also thriving. In the decade of the I 880s, Nova Scotia increased its industrial output by two-thirds, substantially greater than the growth in Québec and Ontario. Nova Scotia’s per capita growth in manufacturing led the nation and Saint John’s exceeded that of Hamilton. The rapid industrialization, for a time, abundantly fulfilled the hopes of Maritimers to become a prosperous and cultural model for Canada and to play a role similar to the one New England has long played in the United States.

The second golden era was not to survive for long. In an attempt to reduce competition, Montréal and Toronto businessmen, with more cash reserves or better access to bank credit, bought out a large number of Maritime firms. During the 1890s, Montréal replaced Halifax and Saint John as the dominating metropolitan influence. The process was largely completed early in the new century and at the outbreak of World War I the region had become a branch-plant economy. By the 1 930s, Torontonians, who didn’t operate a single branch in the region in 1881, owned 228 regional business operations.

A number of Ottawa policies played a significant role in the economic subjugation of Maritime Canada. One was the branch banking system established by Parliament’s Bank Act of 1871. Quite predictably, it quickly shifted all real banking clout to a small number of banks in Montréal and Toronto. As the historian T.W. Acheson notes: "Between 1900 and 1920 every component in the century-old Maritime banking system was swept away and replaced by branches of great national banking consortia." Central Canadian shareholders took control of the Bank of Nova Scotia, for one, and moved its effective ownership and directors to Toronto.

Earlier promises by national politicians to the Maritimes soon weakened in favour of concentrating manufacturing in the St. Lawrence valley. The Maritime industrial sector went into rapid decline. The Intercolonial Railway, based in Moncton, had at first itself operated as an effective regional transportation device through rates which encouraged long haul traffic Out of the region but mildly discouraged finished goods from coming into Maritime Canada. This made Maritime manufacturers competitive with Central Canadian factories; under it, freight tonnage quadrupled between the years 1899 and 1917. The Intercolonial also made a modest profit.

While it lasted, the regionally-oriented freight rate system permitted the Maritimes both to industrialize and to share in the general economic prosperity accompanying the settlement of Western Canada. It was probably the only way Maritimers could benefit over a longer term from Macdonald’s National Policy. In 1912, Central Canadian manufacturers astonishingly persuaded the newly-elected government of Robert Borden, himself from Halifax, to completely abolish the east-west differential of the Intercolonial. A final Ottawa nail in the region’s manufacturing coffin was added in 1919 when the Intercolonial was absorbed in the nationalized Canadian National Railway and its management abruptly moved from Moncton to Toronto. The special freight rates for sugar and coal were quickly eliminated and its freight charges generally levelled with those in Central Canada. By 1920, cumulative freight rate increases had the effect of raising rates on the Intercolonial by 140 to 216 per cent. The new rate was a terrible blow, further maiming a regional economy already in shock from attempting to adjust to a host of technological changes.

Ironically, the strong Maritime case for special freight rate treatment was advanced in the Arthur Meighen cabinet by A.E. Kemp, a Toronto manufacturer. The general increases went ahead and all Maritimers were affected adversely. Robb Engineering of Nova Scotia, for example, had planned to produce farm tractors for the Prairies; it soon abandoned production when it was hit with a 40 per cent freight increase. By 1926, a majority of its 350 highly-trained employees were laid off; they found work and brighter futures in the United States.

Rapidly growing out-migration itself became the major cause of Maritime economic grief. At least 100,000 people, including my great grandparents, left the Maritimes in each of the decades between 1881 and 1931, mostly the young, skilled and ambitious. At least three-quarters of these talented Canadians appeared to follow the traditional Maritime route to the United States. Prince Edward Island was the worst affected and it would not regain its 1881 population level until a full century later in 1986. The loss of so many vigorous people from those provinces, which as a whole in 1881 held only 871,000 persons, was clearly the main cause (or some say the major symptom) of the region’s economic and political decline.

The decline of the regional population had a highly negative impact on the local industry which survived. The common pattern was for machine shops, cotton mills, rail car factories and steel mills either to be transferred to Ontario or Québec, closed by head offices, or forced into bankruptcy.

World War II

Economic stagnation in Maritime Canada has never been inevitable or beyond a ‘turn-around.’ World War II provided an excellent opportunity for a fresh start because of the massive wartime role of the federal government. Adam Smith and his laws of the market were suspended by the Mackenzie King government between 1939 and 1945 when controllers were appointed over each major industry to develop and implement an industrial program. The man who dominated Ottawa’s wartime thinking on most economic issues was C.D. Howe. Direct grants were made by Ottawa to many private businesses and tax incentives were also available to designated ones. For Maritime and Western coal, however, senior Ottawa officials, who seem forever unable to see Canada as a whole, during mid-1940 recommended against continuing transportation subsidies, arguing it was better to purchase coal in the U.S. and to absorb Maritime and Western Canadian miners thrown out of work into other sectors of our war effort. The King cabinet accepted this to the extent of reducing the subsidies by more than a third.

It is now well documented how Maritime coal, steel, shipbuilding, ship repair and manufacturing companies were, for more than a year into the war, denied federal funds for modernization and expansion. The historian Ernest Forbes states that C.D. Howe and his controllers "with the realization of impending commodity shortages and the great strategic importance of the region, finally turned to Maritime industries only to encounter manpower shortages and a limited infrastructure." The C.D. Howe vision, Forbes concludes, "of a centralized manufacturing complex closely integrated with the United States apparently did not include the Maritimes in any significant role."

The case of the Dominion Steel and Coal Company (DOSCO), the largest manufacturing employer in the Maritimes and one of Canada’s "Big Three" steel producers, is illustrative. Howe provided $4 million in tax money to assist each of its two Ontario competitors, the Steel Company of Canada in Hamilton and Algoma Steel in Sault Ste. Marie, to modernize and increase capacity. Arthur Cross, DOSCO’s president, was reduced to pleading that his was the only primary steel producer in the country receiving no government assistance whatsoever. A continued failure to provide a level playing field for all, Cross wrote to Howe, would make inevitable the conclusion that Ottawa was intending "to discriminate against the post-war future of this corporation and in favour of its Central Canadian competitors."

Howe’s unexplained hostility towards DOSCO and his campaign to concentrate steel manufacturing on the Great Lakes alone had devastating repercussions for the Maritime steel industry. In 1944, Ottawa’s steel controllers were even advised by Howe to use DOSCO "to the minimum extent possible even if we have to buy the steel from the United States" as reported by Duncan MacDowall in his book on the Algoma Steel company. Nor was DOSCO included in the federal government’s invitation, extended to other companies as part of the postwar economy adjustment plans, to develop proposals for a sheet steel mill.

Wartime Ottawa also financed two new shipbuilding facilities on the Great Lakes and reserved for major naval contracts ten of fifteen existing shipyards across Canada which were capable of building freighter class vessels. Conspicuously absent from this list, however, were the Halifax and Saint John yards. Angus Macdonald, Nova Scotia’s representative in the wartime cabinet, later defended the exclusions on the basis that they were needed for repairs and service. In fact they were used for neither of these purposes. The reality was that steelmaking, shipbuilding and even ship repairs were, by Ottawa order, first to be done in Québec and Ontario. More skilled Maritimers were thus forced by Ottawa to move inland.

The failure to develop a good naval repair service on our east coast resulted in some Canadian navy vessels becoming frozen in St. Lawrence ports and the dispatching of others to British Columbia and American ports. The Canadian navy, notes Forbes, "was forced to watch ‘from the sidelines’ while the better-equipped British escorts brought victory to the allies in the Battle of the North Atlantic." Mari timers and knowledgeable Canadians elsewhere could only mutter about the egregious stupidity of Ottawa’s defence planners.

As early as 1940, British naval authorities opposed Ottawa’s plan to ignore the potential of Atlantic Canada. Later, the British Admiralty mission in Ottawa would object, on the grounds of effectiveness, to building ships in Central Canada yards which were cut off by ice from the Atlantic for five months yearly and to forcing vessels to travel up the St. Lawrence River for servicing. They specifically wanted Ottawa to build an adequate repair facility at Halifax. Since the capital’s czars were unmoveable, the British turned to the United States for the North American refit of their larger vessels. The Americans, too, were surprised by the Canadian nonchalance at the state of their repair facilities. In the spring of 1942, they completed their own survey of the port of Halifax and were strongly critical of the scarcity of repair berths. The investigators recommended that the American government send tug boats to Halifax to ‘rescue vessels of all nationalities. . . detained for an unreasonable length of time in Canadian waters awaiting repairs."

As the war escalated, the federal government eventually made an investment in Maritime plants and equipment. It was modest and involved industries with poor prospects for post-war continuation. None of the 28 federal Crown corporations that existed at the time had its head office in the region. Of $823 million of Ottawa wartime spending on industrial expansion which could be identified on a provincial basis, the Maritime share was a pitiful 3.7 per cent. PEI didn’t receive a dime; Nova Scotia-- $20.8 million; New Brunswick -- $6.5 million.

After the war, Ottawa started allocating money to enable industries to make the transition to peacetime production. By mid-1945, 48 per cent of the funds went to Ontario, 32 per cent to Québec, 15 per cent to British Columbia and the remaining 5 per cent was divided among the remaining six provinces under the assistance formula used. Ministry of Reconstruction officials justified this grossly discriminatory approach with gibberish and doubletalk. The problem of transition, gushed one, will be "most acute in the Maritimes. .. where wartime dislocations have been superimposed on the special problems of a depressed area." The post-war reconstruction policy reinforced the dreadful economic status quo for Maritime Canada.

Federal wartime policy was destructive to the Maritimes mainly because it created virtually no industries of a lasting nature. Compared to its two major competitors who received some of Howe’s millions, DOSCO came out of the war weakened. Canadian National’s repair shops in Moncton were undermined by the presence of a modern new shop in Montréal, converted by the railway -- at C.D. Howe’s suggestion -- from a munitions factory at the end of the war.

Why this perverse wartime ministerial hostility toward Maritime industry? One can only speculate as to motives as Howe’s biographers shed little light on that aspect of his many decisions. Presumably, he felt Maritime industry must inevitably decline and this became a self-fulfilling prophecy. He used enormous amounts of public money to ensure that it would occur.

Newfoundland: The Rock

Probably no province anywhere in Canada has a longer, more vexatious and contradictory history than Newfoundland and Labrador, the most recent partner in Confederation. That history deserves attention: its understanding may generate an improved national partnership between Newfoundland and the rest of Canada.

From the standpoint of national unity, it is no accident that in one recent poll done before the demise of the Meech Lake accord, 47 per cent of Newfoundlanders identified themselves with their province first, the highest showing in the country. Newfoundlanders maintain a strong sense of independence which could in some circumstances threaten Canada’s continuation as one nation. Post-Meech Lake comments as the one by an Inner Canadian MP, Don Blenkarn, that consideration might be given to towing the province out to sea are adding fuel to Newfoundland fires instead of building much-needed national unity.

The province is physically divided into two major units: the mainland territory of Labrador to the north and the much smaller island of Newfoundland to the south. Part of the Canadian Shield, Labrador contains picturesque, rugged and isolated scenery, characterized by bare rock and barren tundra, forest, rivers, innumerable fjords, bays and inlets. Labrador is a vast storehouse of natural resources, mostly undeveloped. Approximately 27,000 Labradorians in eleven communities cling to a way of life which reflects the harsh realities of geography and politics.

For four centuries, Newfoundlanders fought for economic prosperity and political independence. It is ironic that their endless efforts achieved the opposite effect: greater dependence and economic decline. Almost a century after first being wooed by Canadian Confederationists, they were finally drawn into the North American orbit. Still, only a razor-thin majority of Newfoundlanders opted for provincehood, seeing it as a means of achieving economic development. Instead of being a "ward" of Britain’s Royal Navy, as George Rawlyk puts it, by 1970 Newfoundland was transformed into a reluctant "ward" of Canada.

Until 1949, a series of territorial conflicts with France, the United States and Canada helped Newfoundlanders mould and strengthen their well-founded sense of national identity. This sense of national identity still endures as the twentieth century comes to a close. Today, Newfoundlanders weigh the benefits and disadvantages of the union, pondering upon the balance between humiliating dependency and proud but poor independence. The words "Having lost nothing they have surely gained a great deal …," expressed by an enthusiastic Toronto newspaper 40 years ago, must be ironic not only to hundreds of thousands of Newfoundlanders who left the island in search of opportunity but also to those who stayed. As of January, 1989 there were some 568,000 residents on the Rock, most of whom owned their own homes. Compared to the national average a higher percentage of its residents are self-employed. The island also supports a proportionately larger service sector than does Ontario.

As the Economic Council of Canada has pointed out, in Newfoundland and Labrador the "incidence of suicide, murder, divorce, mental illness, cirrhosis of the liver and cancer is low compared with that in more privileged provinces like Alberta, British Columbia and Ontario. The human condition in short is a good deal better than is indicated by economic statistics alone." Indeed, one Council study is hopeful that Newfoundland and Labrador can break out of a circle of poverty and dependence if intelligent investments are made in its ideas and its people.

A Proud Past

Newfoundland’s earliest role in the New World was as a dry mothership for English fishermen in the Grand Banks and as a possession of the Royal Navy. Despite British attempts to limit all permanent settlement on the island, approximately 15,000 permanent residents lived on the island by 1770, mostly on its eastern tip. They were joined each year for the fishing season by 10,000 Irish and English fishermen. Despite official British support for Confederation, the strong pro-British sympathy on the island made the going easy for those opposing it in the I 860s. A popular folk song went in part:

"For a few thousand dollars Canadian gold,
Don’t let it be said that our birthright was sold.
Newfoundland’s face turns to Britain.
Her back to the Gulf.
Come near at your peril,
Canadian wolf."

Most Newfoundlanders resisted the financial and other blandishments offered by the Fathers of Confederation even though the colony probably had more to gain in terms of cash inducements than any other part of the nation. Less than a fifth of Newfoundland’s two-way trade was with London’s North American Colonies and the merchants of St. John’s feared they would lose their hammerlock on the island’s economic power if exposed to mainland business competition. Many Newfoundland Roman Catholics, who by the 1800s had lobbied successfully for responsible government and government-supported denominational schools, were also reluctant to put such hard-won achievements in jeopardy through union with Canada. They saw an obvious parallel between the Irish economic and political decline following the 1801 Act of Union of England and Ireland and what would happen following Newfoundland’s union with Canada. Many independent Newfoundlanders also deeply resented being pressured by Westminster to become Canadians. In consequence, anti-Confederationists swamped the supporters of Confederation in the 1869 election.

Hopes of Newfoundland joining Canada had been dashed for a generation. The next serious look at the issue came in the late I 880s. After a period of high employment in the cod and seal industries, the industry was severely battered by an export price collapse. Instead of restructuring the industry that employed virtually all of its labour force, the Newfoundland government chose to provide no assistance. Employment in the sector dropped from 60,000 in 1884 (87% of the work force) to 35,000 by 1935 (half of the labour force). Other sectors failed to take up the slack. Chronic unemployment and out-migration inevitably followed.

In 1890, Newfoundland negotiated a reciprocity agreement with the United States which might have improved things. Ottawa, concerned that the result might be harmful to Maritime fishermen, mischievously persuaded the British government to veto the agreement. This did serious harm to Canada-Newfoundland relations and contributed to a further postponement of Newfoundland entering Confederation.

The financial crisis of 1894 in Newfoundland reopened the issue of Confederation, viewed as a possible solution to the island’s problems. The failure of talks with Canada in 1895 on the financial terms of entering Confederation had enduring consequences for public opinion on the island. There was little sympathy for a deeper involvement with Canada for a very long while.

During the first third of the twentieth century, St. John’s merchants, ‘the Water Street set’, dominating a proudly independent island population, kept most heads turned firmly away from Canada. The Great Depression, however, all but wiped out foreign markets for Newfoundland’s resource-based economy and shook the population to its foundations. Bankruptcy loomed for its government with a massive public debt. After unsuccessful attempts to raise money, including an effort to sell Labrador to Canada, it voluntarily suspended its self-government and dominion status within the Commonwealth in favour of a Commission of Government composed of British and Newfoundland appointees.

The Commission of Government did have some important achievements, in social services, tax reform, agriculture and fishing development programs. Yet, by the end of the 1 930s, popular disenchantment had set in. There were still as many unemployed as in 1933; nor had the Commission achieved anything positive to restore self-government to the island. In the words of one of the Commissioners, Thomas Lodge, "To have abandoned the principle of democracy without accomplishing economic rehabilitation is surely the unforgiveable sin." By 1940, most Newfoundlanders seemed to agree.

Because of its strategic importance during World War II, the United States and Britain built bases at various locations across Newfoundland. Prosperity reached most corners of the island as thousands of jobs were created. Many British residents moved toward the greater prosperity on North America. World demand for primary goods exploded -- fish exports alone quadrupled during the war years; newsprint sales climbed about 60 percent and mineral production increased by almost fifty percent. The best indicator of the massive change was that there was full employment on the island by 1942 compared to approximately 30 per cent of the population on relief just before the war began.

After the war, a referendum was held in mid-1948 on three options for the future: retention of the Commission of Government; reversion to responsible government; or confederation with Canada. The winner was responsible government by a small margin over joining Canada. Seven weeks later in a second referendum containing two choices only --responsible government or confederation -- union with Canada narrowly won with only 52 per cent of the vote. Interestingly, Joey Smallwood, leader of the pro-Canada side, won most of his support in rural areas where incomes were lowest. An immediate result of joining confederation was higher personal incomes because of the new family allowance and unemployment insurance benefits from Canada. Other Confederation advantages were harbour facilities, the Trans-Canada Highway, and considerable equalizing of incomes within the new province.

On the negative side, the effective price of Canadian consumer goods fell sharply on the island since custom duties were removed and generous transport subsidies granted. "Within months," the Economic Council of Canada noted, "most of Newfoundland’s substantive agriculture had succumbed to competition from imports of meat, vegetables, and canned milk, paid for with the baby bonus." Island manufacturing suffered similarly and within a year a paper bag producer, a mattress manufacturer and an underwear plant closed. The warning by Newfoundland’s Responsible Government League, that Confederation would ruin local industry, seemed to be correct.

By entering Confederation, Newfoundland also lost control of its most important industry, the fishery. The result has been devastating. It need not have happened in the judgement of at least one expert, Michael Staveley, if Ottawa had drawn on lessons taught by the Commission of Government and dealt sensitively with the island fishery.

During the 1950s, neglect by the federal government and internal structural problems arising from a divided jurisdiction over the industry caused the fishery to slip even further into decay. Ottawa’s slow response to the problems of off-shore fishing by huge foreign fleets led to quickly diminishing stocks. The island’s entry into Confederation had legally given the federal government its fishery and oil resources. The 1985 Atlantic Accord ceded a substantial share of resource control and revenue to Newfoundland and entitled its residents to a major say in how and when they are to be developed. The post-Meech Lake "postponement" of the huge Hibernia oil project by the Mulroney government was understandably seen by many Newfoundlanders as a revenge because its assembly ultimately did not vote on the Meech Lake accord.

Whither Self-Reliance

Throughout history, Newfoundlanders have attempted grand projects and initiatives devised to raise incomes and increase employment. Some of them worked to a degree, but the island experienced more than its share of misfortune and adversity. Confederation brought transfers and subsidies that improved family incomes and social services. As a result, the province is dependent on money flowing from Ottawa: half of every dollar spent in the province now comes from the federal government. At the same time, the province forgoes a lot of money in revenue from natural resource development. Moreover, the disparity in income and unemployment between Newfoundland and the rest of the country is real and persistent.

In its 1980 study Newfoundland: From Dependency to Self-Reliance, the Economic Council of Canada studied development problems and opportunities in Newfoundland. It determined that it was possible to reduce the unemployment rate in the province and to lower its dependence on transfer payments. It also stressed that improvements could and should be made within existing subsidies and programs, without increase in aggregate government expenditures: "We are convinced that ways can be found to reduce Newfoundland’s disparities in income and unemployment by reallocating the hundreds of millions of dollars already going to the province through subsidies on transportation, shipbuilding, and fishing; the program budgets of the Department of Regional Economic Expansion, the Department of Fisheries and Oceans, and the Department of Industry, Trade and Commerce; and the transfers under Established Program Financing and the Unemployment Insurance Act."

One very straightforward Council argument was that Canadians generally should recommend changes in national policies if those policies are perceived as having undesirable effects in places like Newfoundland. Optimistic that Newfoundland’s situation can be improved, the authors pointed out many changes that would help the Newfoundland economy; some of them imply removing some undesirable aspects of provincial and federal government policies.

Suggesting that Ottawa give Newfoundland a new deal in order to overcome entrenched economic problems, the study concluded that to lower its unemployment and raise its productivity the province must foster the efficiency and self-reliance of its economy and its people. The authors do not see the main hope for Newfoundland in the resource industry but they rather stress the human talent in the province. We must, says the Council, go "with the ways in which they organize themselves and their activities into cities, towns, and outposts, and with how they develop their transportation and distribution systems and their businesses."

A partial update of the 1980 study was published in 1986 under the title Newfoundland Revisited. Noting the devastating impact of the 1980s recession on the economy -- Newfoundland’s unemployment rate reached 26.1 percent in January 1985, the highest level recorded since the province joined Confederation -- the Council pointed out again that there are very large transfers of income from Newfoundland to the rest of Canada, most notably the annual transfer of hundreds of millions of dollars from the Churchill Falls hydro-electric power project in Labrador to Hydro-Québec under the terms of the notorious 65-year Churchill Falls Power contract. With the benefit of hindsight, the Council concluded that most of the economic analysis proved to be correct. Most of the recommendations of its 1980 study remain to be fully implemented.

The overall conclusion of the study was that with an expanded fishery, oil developments, improved productivity, and better income maintenance systems, Newfoundland will move from dependency to self-reliance. Its century-long quest for a measure of prosperity and independence could be finally realized for its proud people.

The promises and hopes of Confederation might be fulfilled even before the Newfoundlanders celebrate the 50th Anniversary of the union.

Recent Days

Since the 1950s, Ottawa has taken a wide assortment of federal initiatives in an attempt to undo the damage done to Atlantic Canada. Regional Economic disparities have persisted nonetheless. The Maritimes and Newfoundland and Labrador are constantly positioned last among Canadian provinces in all the economic indicators. Productivity and capital formation are lowest. Despite the presence of many universities and colleges, educational levels tend to be lower, partly because so many Atlantic Canadians continue to seek opportunities outside the region. In out-migration, the four easterly provinces continue to win hands-down. In terms of personal income per resident, Atlantic Canadians have been lowest almost continuously since 1926. In both 1931 and 1933, farm-devastated Prairie incomes fell below Atlantic ones, but the pattern has since been unbroken. During World War II there was an improvement, but a deep Maritime slump followed between 1946 and 1951.

The gains Atlantic Canada has made since the early I 950s are pensions, unemployment payments, industrial incentives and other social payments from Ottawa. Despite the improvements to personal incomes from these transfers, the average income of Atlantic Canadians continues to vary between 65 and 80 per cent of the national average. In Nova Scotia, the highest income province in the region, personal incomes were only 81 per cent of our national average during 1984. For New Brunswickers and Prince Edward Islanders in the same year, the comparable figures were 74 and 72 per cent respectively, whereas Newfoundlanders stood at a mere 67 per cent.

Excluding transfer and incentive payments of various kinds, the so-called "earned" incomes of Atlantic Canadians as a whole during 1984 were only two-thirds of the national average compared to 65.2 per cent in 1926. Combining "earned" and "unearned," total personal income per person in the mid-1980s for Atlantic Canadians was still only about three-quarters of the national average. This gap is simply unacceptable today to any thoughtful Canadian.

Unemployment rates area good indicator of disparity. In mid-1989, the regional unemployment rates were: Newfoundland -- 15.5 per cent, PEI -- 13 per cent; Nova Scotia--9.4 percent and New Brunswick-- 12.2 per cent. Unemployment soars disproportionately faster in Atlantic Canada during national recessions and falls much more slowly than elsewhere across Canada during recoveries. For example, following the 1982 recession, it took two more years for the Atlantic unemployment rate to show any improvement whatsoever. Atlantic participation rates in the work force are, moreover, lower than elsewhere. Transfer payments from governments to individuals are much higher. Economic output per person is also lower and a larger part of it is accounted for by public administrators and defence spending.

Equalization payments are made on the basis of a formula that awards the most to provinces with the lowest revenue-raising capacities. They average about $800 per capita for Nova Scotians; more than $1,000 per person for all other Atlantic Canadians. These large amounts of overall government spending in the region when added to the public sector and all other government spending equalled two-thirds of the Atlantic economy in 1987.

Atlantic Canada vs. New England

The impressive economic turnabout of New England in the mid l970s and 1980s is often contrasted with the opposite experience in Atlantic Canada during the same period.

The six New England states and Atlantic Canada are similar in geography and population roots but not in patterns of population growth and economic development. Major differences were already clear in 1640, and have persisted ever since. The political and social fabric of New England differs significantly from that of Atlantic Canada. There is also a marked difference in the relative size of the business community and industrial base in these two regions.

The Atlantic Provinces Economic Council undertook a study of the two regions on behalf of the Department of Regional Industrial Expansion and published its findings in 1985. It perceived the two regions as quite dissimilar due to significant differences in the political systems and due to the existing economic base, the availability of capital and the willingness to take risks in New England.

The key economic indicators for New England and Atlantic Canada show a dramatic contrast in the economic growth of the two regions. In 1975, the unemployment rate in New England was 10.4 per cent, higher than that of Atlantic Canada at 9.8 percent. Nine years later, the rate in New England had dropped to 4.5 per cent while that in Atlantic Canada had increased to 15.4 per cent.

The Council identified four major factors that were instrumental in prompting New England’s recent impressive economic growth. First, the historical presence of a strong economic base which provided the foundation of a vibrant economy. The region has been in the forefront of "high-tech" industries in the U.S. for almost 200 years. Second, defence spending has had a major effect on the New England economy. Over 13 per cent of the supply contracts for U.S. defence awarded in 1982 went to Vermont, Massachusetts and Connecticut alone. The statistics provided by our Department of National Defence for 1985/86 indicate that 77 per cent of the contracts in Canada were awarded in Montréal-Ottawa-Toronto and only 23 per cent in the remaining eight provinces and two territories. Before 1985/86, DND did not keep records of financial activities in specific geographic areas.

New England also enjoys an abundance of venture capital. Twenty of the top 100 venture capital firms in the U.S. are located in New England. Conversely, there were no Canadian venture capital investment companies in Atlantic Canada in 1987 and 1988. It was not until 1989 that venture capital investors held their national convention in the region during their 10-year history.

Finally, world class educational centres have been a large New England source of R & D, highly skilled personnel, spin-off technologies and entrepreneurs.

Other factors contributing to overall growth within the New England states include research and development; a good business environment (e.g., tax levels, wage rates); transportation infrastructures; entrepreneurship; government programs; and rationalization and adjustment within the manufacturing sector.

Building on its analysis of New England’s economic success, the Atlantic Economic Council identified a number of conclusions and recommendations for Atlantic Canada. It stressed the need to expand the region’s limited economic base through the encouragement of local entrepreneurs and the creation of inter-industry linkages. Noting that Atlantic Canada holds a significant representation of armed forces personnel -- as was the case before the 1989 Wilson budget -- it called for a higher level of spending on military production, contracts and research. It suggested that special investment policies be considered. It called for improvement in the education levels and stressed the need for regional universities to develop better links with the local business community and to become centres of innovation.

Other recommendations included encouraging an increase in applied research and development; reducing high tax levels; attracting more business investment through better government attitudes and policies; modernizing, rationalizing and diversifying traditional Atlantic Canadian industries; improving transportation links and stabilizing transportation costs to businesses. The service sector is of great importance in the region, and should receive more attention in economic planning. Finally, a special effort should be made to relocate head offices to Atlantic Canada. At present not a single one of the forty biggest or best known federal crown corporations has its head office in Atlantic Canada.

New initiatives in Atlantic Canada must recognize the nature of the region: this is the only way to overcome barriers to growth and the creation of an environment which will promote sustained economic growth. Atlantic Canada’s future is still in our hands.

Prospects for the 1990s

Following the spectacular pre-release of the Wilson budget by the television journalist Doug Small in April, 1989, a wave of disappointment and anger swept across Atlantic Canada as its consequences for the region became fully understood. Timothy O’Neill, chairman of the Atlantic Provinces Economic Council, complained that about half of the federal government cuts as measured by employment were in Atlantic Canada. No one across the region disagreed except for some local federal cabinet ministers.

Two years of relative prosperity across the region had just ended; now an estimated 10,000 Atlantic Canadians were expected to lose their jobs either permanently or temporarily because of the proposed closing or reduction in six Canadian Forces Bases in the region, the postponement of the Hibernia oil mega-project and a deeply depressed fishery. Many of the residents of Atlantic Canada are faced with an all-too-familiar regional dilemma: to remain unemployed in their home province or to go job hunting in Central or Western Canada.

The Armed Forces base closings were fresh Ottawa kicks in the face for Atlantic Canadians. The closing of the Summerside base would result in the disappearance of 1,300 direct jobs over two years. The Atlantic Provinces Economic Council estimated that as many as 5,000 individuals might in consequence be obliged to leave Prince Edward Island with the loss of $40.8 million in salaries and $20 million in local contracts. The local impact of additional base closings at Barrington and Sydney, Nova Scotia, and Moncton, New Brunswick and the scaledowns at Gander, Newfoundland, and Chatham, New Brunswick would also be disproportionately heavy. The establishment of a data processing centre for his proposed goods and services tax in Summerside, announced in May, 1990, promised 400 full and part-time jobs by the time it is to open in 1992. This was far fewer than the 1,300 direct and 1,700 indirect jobs that would be lost by the time the base closes in mid-1992.

Why, Atlantic Canadians ask, must military operations be further concentrated in high-cost regions such as Ontario? Must PEI’s unemployment rate be raised by two or three points when it was already 14.3% in April, 1989? The Mulroney government replied woodenly that military spending is not regional development. Bases must, however, go somewhere: don’t they provide an opportunity to distribute some federal spending in a way that entails regional benefits? Doesn’t the location of a penitentiary within the Prime Minister’s constituency fulfil a similar goal? In short, why should Atlantic Canadians carry the heaviest share of Ottawa’s thus far largely futile effort at cutting its deficit?

"There is no crisis in Atlantic Canada," protested Prime Minister Mulroney in the Commons during an exchange with opposition members in January, 1990. At that time it became apparent the region would bear most of the pain from deficit cutting measures and present economic slowdown. Also, the consequences of the latest crisis in fisheries had become obvious. The fall in cod stocks forced Ottawa to cut the 1990 fishing quotas by a ratio that would throw 3,000 Newfoundlanders and Nova Scotians out of work.

A report by a special panel to investigate the state of cod stock, headed by Leslie Harris of Memorial University in St. John’s, concluded that the 1991 quota of 190,000 tonnes might well contribute to a further decline in stocks, and that it will be necessary to further decrease the 1991 quota. In short, more Atlantic jobs are doomed. As to the region’s share of federal industrial assistance it has fallen steadily since 1980 as indicated in a 1989 study by the Atlantic Economic Council. That year, Ottawa aid to Atlantic Canada amounted to $1,045 per person, compared with $229 per person in the rest of Canada and $302 per person for all of Canada. By 1987, the per person federal spending in the region was $200 (in 1980 dollars), while for the rest of Canada it was $258. The national average that year was $253 per resident.

The underlying message of these numbers -- dismissed by some federal cabinet ministers as nonsense -- was evident: though the region is getting some band-aid assistance in the form of various "show-case" programs, such as the Atlantic Canada Opportunities Agency, and a recent half-billion dollar aid package spread over five years, meaningful aid in the form of a coherent overall development plan for the region, backed up by a substantial dollar value, is not on Ottawa’s current agenda. There is no plan that would mobilize existing resources and industrial potential, build on the human talent and develop technologies for tomorrow. Ottawa development dollars are mostly by-passing Atlantic Canada because of policy-makers who are incapable of envisaging a future for the people there other than a hand-to-mouth existence.

Atlantic Canadians appear to have been among the major victims of recent federal government changes in the tax system. In preparing to replace a 13.5 per cent tax at the manufacturing level, which applied to a limited number of products, with a seven per cent tax on virtually every good and service at the retail level, the impact will clearly be greater on middle- and low-income Canadians generally. The proposed tax credit for low-income families will arguably reduce the blow for a while for some Atlantic families. However, without full indexing for cost of living increases, Canadians who earn the least will soon be hit the hardest.

The Atlantic Provinces Economic Council pointed to the probable impacts of the GST on the region, noting that because Atlantic Canadians have lower average income levels than people elsewhere, "it would seem critical to ensure the tax credit be of sufficient size and be indexed to inflation." It also said that removing the manufacturing tax would initially benefit a number of industries (motor vehicle, furniture, household appliances, alcohol, tobacco, construction materials) concentrated in southern Ontario. Extending the federal sales tax to sectors such as services and food-processing, moreover, would strike regions like Atlantic Canada, which lack a strong manufacturing sector, disproportionately hard. It warned that Atlantic Canadian consumers will be forced to pay more of the new sales tax than Canadians in denser population centres where greater market competition will encourage producers to absorb some of the increased costs created by the new tax. The effects of a multi-stage tax on transportation services is particularly worrisome to the region because both producers and consumers remote from Central Canada face higher transportation costs than persons close to population centres in Ontario and Québec. Overall, the regional Council doubted the new tax would prove neutral in its geographic implications. It disputed proceeding with such a major initiative in the absence of a detailed study of its regional consequences.

Regional Hope

New directions, new development techniques and new technologies can bring sustainable development for Atlantic Canada during the l990s and beyond. The catch-up instruments of the past have clearly failed. These include the development policies of federal departments and many provincial development policies. At the current rate, it will take a full century to raise per person incomes across the region to our national average. Only some new directions can produce changes to achieve major improvements in the living conditions of Atlantic Canadians.

A late summer of 1989 edition of the Globe and Mail carried an article "Farewell to Toronto" by writer Alexander Bruce, son of Harry Bruce and grandson of Charles Bruce -- both Maritime authors. Three generations of Bruces drew strength and inspiration from the region, its people and their century-old homestead Down Home: "The Place." In his father’s account of a 1986 Christmas spent in "The Place," Alexander, visiting from Toronto, remarked, "Boy, if I could get a decent job down here, I’d be back in a flash." It took him longer than that and there is no indication that "a decent job" was located, but eventually he left Toronto as a successful writer "for the second and probably last time."

The Toronto-born Alexander Bruce’s decision to move his family to Halifax epitomizes the plight of many other Atlantic Canadians by birth, by choice or by family heritage. Today or a century ago, wherever they live outside "Down Home," and no matter how successful they are, they never fully detach themselves from the spot on the map where they feel they really belong. They will always come back even if it is only in thought, memory or spirit.


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