Читать книгу The Canadian Century - Brian Lee Crowley - Страница 6

When in 1904 Sir Wilfrid Laurier¹ proclaimed that “the twentieth century would be filled by Canada,” this was no mere boastfulness. We were one of the richest countries in the world; we enjoyed boundless natural resources, an energetic population, a privileged place in the great commercial empire established and defended by the imperial metropole, Britain, and reasonable access to American markets.

We had built a national railway across the vastness of the West, and immigrants were arriving on our shores in larger numbers, relative to our population, than anywhere else in the world. In the first twenty years of the twentieth century, our population grew by an unprecedented two-thirds.² Canada was a magnet to the world. Our future seemed assured.

Laurier had a plan to make sure that this unprecedented flowering would be no seasonal bloom, briefly drawing every passerby’s glance before withering away. He was putting in place a plan to fill, not a decade or two, but a full century with Canada’s rise to prominent adulthood on the world stage. It was a plan that found its roots deep in Canada’s origins, in the ideas of its founders, and in the hard work and dogged determination of those who had already been building the country since the founding of the first colonies.

But just as Wayne Gretzky was rightly called hockey’s Great One because he saw each play unfolding in his mind and knew what each player would do before he did it, Laurier was the one who saw and understood what had to happen for Canada to become a great nation. The whole plan was sketched out in his mind, and for almost sixteen years he patiently coached all the players in Canada, and slowly, methodically, he shaped our institutions, our landscape, and our relations with Britain and America to the end of making Canada the most prosperous, dynamic, and attractive country on earth.

Like all great leaders, it was less that he invented anything new than that he learned the secrets of how to call forth from each and every person the very best they had to offer, so that what emerged under his wise and thoughtful ministrations was simply the potential that he saw still slumbering within our awakening nation.

And that great awakening, that rise to full consciousness of Canada under his stewardship, remains a tale of heroic exploits still recounted in hushed and admiring tones by those who have not forgotten just how distinguished that period of our history was. For we were not merely talking about overtaking America as the world’s awakening economic giant and the light unto the benighted masses of foreign lands; we were hard at work creating that future every day.

This was in marked contrast to the doldrums into which Canada, like much of the world, had sunk in the thirty years following Confederation. The new country, so full of promise, seemed in those early years to have lost something of its effervescence, even though no one can deny the great achievements of the era—the admission of three new provinces, the purchase of Rupert’s Land, the completion of the Canadian Pacific Railway (CPR), and the country’s survival of the upheaval and division of the Riel Rebellion. Still, having achieved the Herculean feat of piecing together the country, the government and the people then seemed progressively to lose economic energy, while indulging in fits of patronage, scandal, timidity, and self-destructive protectionism.³

Then, in 1896, came Laurier.

By 1910, half a million immigrants had entered Canada on Laurier’s watch, many of them bound for the West, where the expansionist settlement policies of aggressive Minister of the Interior Clifford Sifton and his successors had made our “last best west” a magnet for the world’s dispossessed. In that first decade of the new century, our population grew by over a third, from 5.4 million to 7.2 million. And nearly two-fifths of that growth came from immigration. As noted Canadian historians Robert Bothwell, Ian Drummond, and John English remarked, both of these figures are “extraordinarily high; nothing like them had been seen before or since.”⁴ Not only did immigrants come in vast numbers, but outmigration to the more prosperous United States—the bane of the country’s early years—slowed to a trickle.⁵

The rush of newcomers was so great, and the attraction of the West so irresistible, that Laurier was obliged in 1905 to cut two new provinces out of the federally administered western territories. One of the new provinces, Saskatchewan, was seen to be such a land of opportunity that it quickly became the country’s third-largest province by population and remained so for a number of years.⁶

The West’s growth was more than mere dry statistics. Rather, it was the sum of choices by hundreds of thousands of people, each of their lives woven into the tapestry of Canada’s emerging future. Both sets of maternal great-grandparents of Brian Crowley, one of this book’s co-authors, were part of the great movement of people unleashed by the prosperity of the Laurier years. In 1891 Richard Lane and his wife, Mary Irving, were living in the rural Ontario of their birth; Crowley’s grandfather, Russell Lane, and his twin brother, Richard, were born to them in Huron County that year. By 1901 the family was in Toronto, part of the exodus from rural regions to the prosperous cities. But soon on the move again, by 1906 they had left Ontario, headed for the promised land of Saskatchewan, where Crowley’s mother was eventually born in North Battleford. Their initial destination was Saskatoon, a city that had barely existed a decade before.

Crowley’s other maternal great-grandparents, Henry and Edith Bierschied, came from the United States in search of the free homestead land that had been largely exhausted south of the border but was still relatively easily available in the Dominion.⁷ When they crossed the border from North Dakota at North Portal, Saskatchewan, in August 1911, they brought with them seven-year-old Grace, Crowley’s grandmother. Henry was of German immigrant stock, and it was not unusual for the many ethnic immigrants who ended up in the Canadian West—the Poles, the Russians, the Germans, the Ukrainians, the Galicians, the Swedes, and others—to have tried their luck in the US first. In fact, this theme of the competition between Canada and the US for the best immigrants is one to which we shall return.

The Lanes and the Bierschieds were but two of the tiny trickles that together added up to a mighty torrent of humanity sweeping into the West, changing the politics, the economics, and the population of Canada forever. As one of Laurier’s biographers, Joseph Schull, points out, the wheat yield in the three Prairie provinces rose during Laurier’s time from eighteen million bushels to nearly one hundred and eighteen million.⁸ This was the time when the West began to flex its muscles and the whole country saw the promise of the West as a powerful theme in the growing symphony of Canadian prosperity and optimism.

But there was more. The country’s natural resources, its minerals, its timber, its agricultural products were flowing in ever-increasing streams to the markets of the world. As much as the West, the North was proving to be a treasure trove of natural wealth and a magnet for newcomers. Provinces such as Manitoba, Ontario, and Quebec were pressing to expand their borders northward to capture the spreading prosperity.⁹ Manufacturing was booming and finding not just domestic markets behind modest protectionist barriers, but was part of a great Canadian effusion into foreign markets. Foreign trade tripled during this golden decade.¹⁰

William Cornelius Van Horne, the head of the CPR, saw his railway in terms that seem strikingly modern as we talk today about Pacific and Atlantic gateways to trade: Van Horne said that the CPR had one terminus in Euston station in London, metropolis of the greatest empire the world had ever seen, while the others were in Hong Kong and Sydney. And Laurier himself was “a convinced and ardent enthusiast for the ‘All-Red Route’ [red being the colour then reserved by mapmakers for the pieces of the far-flung British Empire, including Canada] which would link the British Isles with Australia and New Zealand by means of fast steamships and direct rail connections across Canada.”¹¹

Yet the CPR was not enough. The growth of Canada’s production of every kind, and our energetic push into the world’s markets, soon exhausted the ability of our single transcontinental tie to transport the fruits of our blooming, buzzing energy. Given the optimism of the day, it is perhaps no surprise that we ended up with more railways than we knew what to do with, although that may be as much due to our failure to stick with Laurier’s plan as to any flaw in that plan itself.

Canada’s boom cannot, however, be ascribed solely to exports. The new country was hungry for investment—it was not enough to plunk people in the wilderness and expect them to produce the New Jerusalem. They needed tools, homes, and institutions, things like railways, factories, mills, ships, equipment, roads, bridges, houses, schools, courts, customs houses, and churches. The new country was sucking in capital, chiefly from Britain and the United States, at a dizzying pace; the new investments themselves drove the boom even more than the exports that they made possible. “The value of new and repair construction increased by almost 400 per cent, while the value of exports went up just over 100 per cent. The size of the railway system and the quantity of residential housing increased much more rapidly than the volume of exports.”¹² And contrary to the much-caressed prejudices of the big-government apologists and historical revisionists of our own time, historians are clear that this investment boom was led by the private sector, not government investment, although the government certainly played its part.¹³

And while we were predominantly a rural people, our cities—home to much of our manufacturing—boomed with the countryside: Montreal, Toronto, and Ottawa more than doubled in population, while Vancouver and Winnipeg far outstripped them in their rate of growth, quintupling in the same period. Hitherto empty plains saw cities suddenly mushroom in their midst, as Calgary, Edmonton, Regina, and Saskatoon became centres of the new prosperity.¹⁴ The rate at which new companies were formed and chartered by the Dominion government grew over twelve times during the first decade of what Laurier felt in his bones was the Canadian century.¹⁵

A Man, a Plan, a People—Canada!

What was Laurier’s plan, his vision for a Canada that would be the best the New World had to offer the Old, a plan that had already unleashed the greatest growth in our level of prosperity ever seen and that he expected would fuel our development for decades to come? That policy had four distinct elements.

1. Prosperity grows from liberty’s soil

First, he thought it vital to preserve and protect the institutions brought to Canada by our forebears, the “British liberty” composed of the rule of law, free speech, freedom of conscience and religion, respect of minority rights, habeas corpus, parliamentary self-government, minimal state interference, low taxes, and respect of property and of contract.¹⁶ That liberty and those institutions were, Laurier believed, the catalyst that released the energy and dynamism of those who lived under them, whatever their ethnic origin or religious convictions. When people were free to follow their own star, to determine what was important to them, to build their own relationships with family, friends, and colleagues, they built well and energetically—they had confidence in the future, they took risks, and they reaped the reward.

Laurier was convinced that the best people in the world would jostle one another at Canada’s door, not just because they would enjoy a higher standard of living but, much more importantly, because in Canada they would be free: “I think we can claim that it is Canada that shall fill the twentieth century . . . For the next seventy-five years, nay the next hundred years, Canada shall be the star towards which all men who love progress and freedom shall come.”¹⁷

A society like this, where people were responsible for themselves, made their own plans, and accepted that their fate was in their own hands, was one that could be open to immigrants on a vast scale. Newcomers could not be a burden to the government or the population, because if they succeeded, they became net contributors, and if they failed, they were no affair of the state.

Canadians today, used to thinking of themselves as more caring and sharing, and just altogether “nicer” than, say, our American neighbours, may be shocked to learn that this failure to use the state as a way to support the poor was not an oversight, and even less was it a matter of waiting impatiently until the country was rich enough to pay the bill. The very idea of the state acting so as to relieve people of responsibility for their own choices and actions was anathema to the entire political class.

No one was interested in the devices which a later generation would call the “welfare state” . . . Neither Canadian governments nor the fashionable “reformers” were much interested in sickness insurance, old-age pensions, disability insurance, or unemployment insurance (not to speak of day-care centres!). Imperial and undemocratic Germany had provided sickness insurance and old-age pensions since the 1880s. Britain introduced such pensions, and a form of health insurance, in 1911, and New Zealand had already done likewise. These examples were not followed.¹⁸

Laurier’s objection to such schemes, like that of his Liberal colleagues, was one of principle: when people were expected to take responsibility for themselves and their family, they made better provision for their needs and directed their productive efforts where they would do the country and themselves the greatest good. When this natural necessity to strive was diluted by an easy access to the public purse, the ever-present danger was of the enervation of the individual and the stagnation of the progress of society. “If you remove the incentives of ambition and emulation from public enterprises”—by which he meant the economic undertakings of individuals and businesses, not state enterprise—Laurier said on the subject in 1907, “you suppress progress, you condemn the community to stagnation and immobility.”¹⁹

That individuals and families might occasionally need help to overcome the vicissitudes of life went without saying, but the appropriate institutions to deal with these hardships were ones that the community generated quite successfully itself, and no one in government saw any need to try to supplant the efforts that communities and families made together to protect themselves from the shoals and reefs of the human condition, such as illness and unemployment.²⁰

2. Limited government, light taxes, and fiscal discipline

The second element of Laurier’s plan was based on the view that once freedom, the rule of law, and key infrastructure had been created, the best thing that government could do was to then get out of the way, to keep taxes and rules to a minimum. Indeed, Laurier believed that the cost of government, and especially the tax burden, needed always to be kept below the level in the United States, so as to create a powerful competitive advantage for Canada. Small but efficient government, not big government, was, to Laurier’s way of thinking, Canada’s secret weapon in the competitive struggle with America.

Even beyond the absence of the welfare state, it may surprise many Canadians today the extent to which this belief in lean minimalist government in economic terms was also an article of faith for most of the first century of the Dominion’s existence. Indeed, one of our leading historians of Canadian tax policy, David Perry, of the non-partisan Canadian Tax Foundation, points out that this consensus was assumed by its drafters to be part and parcel of the plan that inspired the British North America Act, later rebaptized the Constitution Act, 1867. In that document’s scheme, both the major responsibilities and the major sources of revenue were granted to the central government in Ottawa, but the plan was not to create an expansive and activist government. Rather, it was to ensure that no government got too big for its britches by keeping them all, federal and provincial, on a meagre fiscal diet.

The prevailing assumption in 1867 was that government should be unobtrusive and cheap. Its job was to prepare an environment in which private enterprise could thrive, and then stand to one side. So, although the federal government was to be stronger than the provinces, it was not to be very strong, or very expensive, in its own right.²¹

Today Canada’s prime minister is excoriated in the press for suggesting that there are no good taxes;²² the country’s founders saw this view as unexceptionable. Sir Richard Cartwright, finance minister of the young Dominion in 1878, thundered during his budget speech to Parliament that

All taxation . . . is a loss per se . . . it is the sacred duty of the government to take only from the people what is necessary to the proper discharge of the public service; and that taxation in any other mode, is simply in one shape or another, legalized robbery.²³

Politicians stayed as far as they could from directly providing services or competing with private enterprise. They did not think it their job to provide what businessmen with proper incentives could do more cheaply and efficiently, while the voters wanted no truck nor trade with government masquerading as business, or even any expansion of the role already played by the state. As one set of historians of the time wrote, the public, “regarded ‘national services’ like the Public Works Department, Post Office, and Intercolonial Railway, all of them believed to be sinkholes of patronage, as painful necessities that ought not to be duplicated.”²⁴

Laurier believed that we lived in a world in which people and societies compete for the most desirable things—whether they be immigrants, industry, or capital—and that Canada could not win that competition by trying to throw up walls against it. Instead, the winner of the competition would be the country that proved most open and hospitable to these footloose forces. A vital part of his plan, therefore, was to find a way to create a distinctive set of Canadian advantages that would help the young Dominion win the competitive struggle with others, including the United States. Again, this preoccupation of Laurier’s has an arrestingly modern feel to it.

As already noticed, in the early years of Confederation, Canada was the destination for a goodly amount of immigration, but our country too often proved to be only a way station for many of the newcomers, who slipped south of the border in search of better opportunities.²⁵ And in this vast, empty country, people were wealth; it took strong hands and stout hearts to bring European civilization to the new Dominion’s empty spaces.

Governments, however, could not affect many of the factors that favoured one part of North America over another. If America enjoyed a more attractive climate, for example, or longer-established industry and infrastructure, there was little the government of Canada could do about it. Taxation, on the other hand, was something they controlled absolutely. In the battle to win a disproportionate share of people and industry for the Dominion, taxation was to prove a recurring and powerful theme.

Competition for these mobile human resources, not to mention the capital with which these immigrants (be they farmers or businessmen) arrived, was fierce. Consequently, all Dominion governments were determined to keep their taxes low.²⁶

No one displayed this determination more doggedly than Laurier.

Beyond rewarding energy and what we would today call entrepreneurialism and innovation, Laurier was deeply concerned that taxation that was too high, relative to the next-door neighbour’s, would create a vicious circle in which loss of people and investment led to loss of revenue, which led in its turn to higher taxes and so forth.

References were made [during the Laurier era] to the relative tax burdens between the two countries as an important political constraint. The economic loss of people and their resources to the U.S. would reduce the revenue bases available for taxation, necessitating higher tax rates or reduced government spending. Thus the potential economic cost of this horizontal tax competition [i.e., competition on tax rates between the two governments] would be reflected directly into higher political costs for the government.²⁷

Not only, then, did Laurier’s plan envisage taming, to the extent possible, American protectionism,²⁸ opening US markets to Canadian exports, it also envisaged attracting capital, enterprise, and above all people from under the American eagle’s nose. This he planned to do by making it clear that people who came to Canada from south of the border or beyond the seas would find in the Dominion a society of free men and women where everyone was expected to work hard, and where, if they did so, they would keep more of the fruits of their labours than anywhere else, including the United States of America.

Laurier didn’t merely willingly grasp the baton that was handed to him by his predecessors and the founders of the Dominion; he took it to be his duty and obligation to keep the burden that government imposed on taxpayers light and unobtrusive.

In this regard, he was himself a major tax reformer, for he believed that it was not enough to keep taxes low; it was also essential to impose the right kind of taxes and to the right degree.

Taxes were, of course, a rather different affair at the beginning of the twentieth century than at the beginning of the twenty-first. To understand Laurier’s plan on taxes, one must realize that the major source of tax dollars for the Dominion government was not the income tax, a tax that was only to emerge with the exigencies of war in 1917,²⁹ nor the sales tax—it was the tariff on imports.

A tariff is a tax imposed on the value of imported goods. What we forget today, when governments have the administrative and technological know-how to impose and collect far more sophisticated and efficient taxes, is that tariffs can have their virtues in simple colonial societies. You can concentrate the machinery of taxation at the points of entry into the country, making the costs of policing relatively light. The revenue authorities need little in the way of coercive or surveillance powers over the domestic population, because the tariff is paid directly by those importing goods from abroad, and that tax is then passed on indirectly to consumers by being included in the final price.

Used to thinking of tariffs exclusively as a weapon in the protectionist’s arsenal today, we forget the extent to which they were a simple and efficient way to generate cash for government a century ago. Indeed, they were the chief source of revenue.³⁰ Customs duties constituted at least 60 per cent of federal revenues from 1866 to 1917, a fact that finds a faint echo even today in Ottawa: control over tariffs falls, not under the jurisdiction of the Department of Foreign Affairs or International Trade or even Industry but that of Finance.

So as someone who believed that the tax burden should be kept light and simple, and who believed ardently as well in the principles of free trade, Laurier had his work cut out for him in tariff reform. He was dealing with the most important source of revenue the government enjoyed.

The competing principles that might guide thinking about the tariff were, on the one hand, that government should interfere as little as possible in the choices people made, including the choice to buy imported goods over domestic ones, and, on the other hand, the wish to keep the cost of raising revenue as low as possible. The solution, Laurier thought, was major tax reform: the steady move away from a “protectionist tariff ” and toward a purer “revenue tariff.”

The distinction today may seem a fine one, but then it was an important shift in policy. In the years prior to Laurier’s rise to office, the protectionist role of tariffs had risen steadily to the fore. A protectionist tariff confers major benefits on domestic producers competing with imports. Naturally, the domestic lobbies, particularly for manufacturers, push the government to make its tariffs fall most heavily on their foreign competitors, rather than making the tariff a relatively neutral one, falling more or less equally on all kinds of imports. Not only did the tariff, as it grew up under the National Policy, pit manufacturer against importer, but it pitted, for example, the free-trading West against Central Canada’s manufacturers, exacerbating regional tensions in the young country.³¹

A tariff is, by its nature, not economically neutral in its effects; it falls by definition on products coming from the outside, conferring an advantage on domestic production. That being said, however, the tariff itself could certainly be arranged in different ways. It could be used to favour domestic industries by placing its burden most heavily on industries in competition with domestic producers. Alternatively, its burden could be made to fall more or less equally across all imported goods, getting the government out of the business of using tax policy to favour some groups and industries over others.

Laurier’s view, and it is one that has been shared by many of the historians who have come after, is that under the Tories, who had ruled with only a brief interruption since 1867, the tariff had become infected with politics, its revenue-raising role playing second fiddle to that of selective protection for favoured industries.³² Originally, Laurier and the Liberals, guided by Edward Blake, their former leader, had been pure free traders, but after suffering electoral defeat on the issue, and given the Americans’ manifest lack of interest in reciprocity negotiations, the Liberals trimmed at their 1893 policy conference, preferring tariff reform to outright abolition, at least in the short run.

This was done over the objections of Laurier, who proclaimed himself not only completely committed to free trade with the US but ready to adopt a customs union³³ with a single set of common tariffs and a pooling of the revenue that resulted—a policy of deeper integration with the United States than that which exists today.³⁴ But while Laurier would have preferred full steam ahead on free trade, he accepted that it was not going to happen any time soon, and once in power set about reforming the tariff. As John Dafoe wrote of Laurier’s new policy, “A deft, shrewd modification of the tariff helped to loosen the stream of commerce which after years of constriction began again to flow freely.”³⁵

It was not the free trade, plain and simple, that a campaigning Laurier in earlier years had promised the West, and a revenue tariff, dress it up as you will, is still a tariff—but an important start had been made in getting the politics out of the tariff.

Even beyond that dilution of politics in the tariff, in another echo of modern practices of reciprocity in trade liberalization, Laurier’s government introduced for the first time a tariff that would recognize and reward the efforts of countries that opened their markets to Canadian goods. In the words of Laurier’s minister of finance, William Stevens Fielding, there would now be “one tariff for countries which are willing to trade with us and a different one for countries which are not.”³⁶

The other aspect of Laurier’s plan to keep government small and costs under control was government borrowing. Laurier and Fielding were not anti-debt zealots. In most years, they borrowed a little. On the other hand, what constituted an acceptable level of borrowing for Laurier and Fielding was strictly limited by the interplay of three important factors.

First, given the extent to which the government was investing, as we have seen, in the development of a great deal of what we would call today infrastructure, and given the limited size of the borrowing in any year— usually well below 1 per cent of gross domestic product (or GDP)— borrowing was clearly being used solely to finance genuine investment.³⁷ Laurier was not borrowing to pay for current expenditures, such as civil service salaries or public services. He limited debt to its proper use: to finance assets with a long productive life, spreading the cost of their construction over a long period so that all of the people who benefited from them over time would contribute to their cost.³⁸ As Fielding explained, “In a new country like Canada with a great many public works requiring to be assisted with many demands on the treasury, it would not be surprising that each year we would not only be obliged to spend our ordinary revenue but to incur some debt in order to carry on our great public works.”³⁹

Second, borrowing, which allowed the government to spread the cost of major investments over time, made an important contribution to Laurier’s objective of keeping Canadian tax rates below those in the US. Laurier was balancing the demands of a growing nation against the need to keep the cost of government low.⁴⁰ Private finance built a lot of infrastructure, keeping the costs off the taxpayer’s back, while what public borrowing there was was designed to further ease the burden on the taxpayer by spreading over many years the cost of constructing bridges, railways, wharves, and courthouses.⁴¹

Finally, Laurier and Fielding kept an eagle eye on international financial markets to ensure that Canada never borrowed beyond what lenders thought the young Dominion could support. They clearly feared that excessive debt would trigger higher interest rates, which would be followed by higher taxes and the loss of competitive advantage vis-à-vis the US. Laurier’s legacy to us on this front was that reasonable levels of debt for the right purpose while living within the country’s means contributed to Canada’s well-being. But it was easy to get the balance wrong, and borrowing needed to be carried out carefully and in a disciplined way.⁴²

3. Self-confident engagement with the Americans

The third part of Laurier’s plan for the Canadian century was that Canada could not shrink before the challenge posed by American dynamism and proximity, but instead Canada must meet them head-on, turning them as best we could to our own account, especially as the British imperial power faded slowly from the scene. Laurier was a Canadian nationalist and a realist. He understood that Britain took but scant interest in Canada and that we were not strong enough to impose our will on America. Laurier believed, therefore, that we had to play cleverly and well the few cards that we had been dealt.

American arrogance and brashness; manifest destiny; hostility to the former colonial power, Britain, and its continued presence in North America; and the unsettled nature of the boundaries between much of Canada and the US helped to give rise to many conflicts between the two countries. Britain, which kept control over all questions of Canadian foreign policy—which they saw as merely a part of imperial policy—often sacrificed Canadian interests to further larger imperial objectives that required friendly relations with Washington.

Laurier lived through a classic example of Canada being sacrificed on the altar of British–US power politics in the resolution of the dispute over the border with Alaska in 1903. The three parties—Britain, the US, and Canada—had agreed to the creation of a joint commission to recommend how to resolve this long-festering issue. The issue had a special significance to Canada in that the Yukon gold rush was under way; Canada desperately wanted an outlet to the Pacific from the Yukon on Canadian soil so that Canadians would be the chief beneficiary of the wealth being created by the development of the Yukon’s gold deposits.⁴³ American interests were equally determined that Canada should gain no such outlet and that Alaska should capture much of the economic benefit of the gold rush.

The commission was composed of six people: three Americans, two Canadians, and a Briton. Laurier was horrified when he realized that the British member of the Canadian delegation had marching orders to give in to the US to preserve transatlantic relations. Lord Alverston, the British judge in question, gave his name to a newly coined verb, to Alverstonize, that for years was just as prominent in Canadian political vocabulary as Captain Boycott’s name became in Ireland’s. And it was just as uncomplimentary a reference.⁴⁴

The lesson that Laurier learned from disasters such as these was that Canada could not look to any power, whether Britain or the US, to protect the interests of Canada. We would always be sacrificed whenever it was convenient. Canada had to look to its own interests, while claiming from Britain increasing jurisdiction over its foreign relations. Beyond that, however, it had to seek to bind the more powerful nations to agreed and enforceable rules of behaviour that limit their ability to win their point through sheer brute force.

Moreover, Laurier understood that regardless of what Canada owed to Britain for its endowment of institutions and a culture of liberty, the rising power, and the one on Canada’s doorstep, was America.

The fact that Britain was now a free trade nation, plus the extra cost of transatlantic shipping for Canadian exporters, plus the failure of British politician Joseph Chamberlain’s scheme to create a free trade zone behind high tariff walls within the Empire, meant that Britain’s role as the major trading partner for Canada was fated to fade with time.

America was on its way up in the world, and within North America was the obvious trade and commercial partner to step into the void being created by Britain’s long goodbye.

During most of Laurier’s long period in office, however, America was in no mood to bind its power through the kind of long-term commitments Canada needed if it was to reduce its vulnerability to American unilateralism. For Canada to invest in the US–Canada trading relationship required some certainty about Canadian access to American markets and some rules about how the US would treat exports from Canada.

This was a period of Republican dominance, and the Republican Party was the party of the Northern industrial interests that favoured high tariffs and considered Canada a direct commercial threat on their doorstep. Americans were in an ebullient mood, mirroring no doubt that of their president, Teddy Roosevelt. Roosevelt had been a hero of the Spanish-American War, which in 1898 led to a large expansion of US overseas possessions and power. He took over and completed the construction of the Panama Canal. He won the Nobel Peace Prize for brokering a peace settlement between the Russians and the Japanese. In 1901, he famously summed up the principles that he thought should guide American foreign policy thus: “Speak softly and carry a big stick, and you will go far.”⁴⁵

When Roosevelt had been the vice-presidential candidate on the William McKinley ticket, both he and McKinley—who was later assassinated, making Roosevelt president—stumped for prosperity at home behind high tariff barriers. These were truly unprepossessing partners for a Canadian government seeking freer entry to American markets and a taming of US power to damage Canada, by binding the US through enforceable trade agreements.

On the other hand, excessive and heedless use of power by American governments has traditionally exacted its own costs on that country. While powerful, America always somehow comes to realize that even it is not omnipotent and that even superpowers need friends and allies. William Taft, who succeeded Roosevelt as Republican candidate and president in 1908, was a Northerner and a protectionist; yet he and Congress proved to be on the lookout for ways to improve relations with the rest of the world. After having had his advances constantly rebuffed for a decade, Laurier suddenly found Canada’s interest solicited in what we would call today an American charm offensive. Laurier lost no time in grasping the opportunity to put in place such a vital piece of his plan, binding the American colossus and subjecting its power to the rule of law, at least in its trade relations with Canada. But the chance slipped through his fingers—and ours. And thereby hangs a tale.

4. Free trade

Free trade deserves its own separate treatment as a central part of Laurier’s plan. While the object of his efforts to negotiate free trade was the United States, free trade on a broad scale was, in his view, an end in itself. The fourth piece of Laurier’s plan was therefore to move the country by degrees toward the regime of full free trade he so admired in Britain. Laurier believed that free and open trade was the cornerstone of economic prosperity and entrepreneurship and that government’s role included working to throw open foreign markets to Canadian products while not obstructing the entry of products from abroad.

There was, of course, the tariff. We’ve already seen how Laurier dealt with the Canadian tariff. America,⁴⁶ emerging as the only rival to Britain as our chief trading partner—in 1896, these two markets purchased more than 90 per cent of Canadian exports—was a relatively high-protection economy. Only Britain, workshop of the world, levied no tariffs at all and posed no barriers to Britons buying and selling as they pleased.

For Laurier and his cabinet colleagues, British free trade was the ideal but politically unattainable in the face of the powerful manufacturing interests that had grown up behind the tariff curtain of Sir John A. Macdonald’s National Policy.⁴⁷ In 1911, Laurier stoutly defended in the House of Commons his government’s commitment to finding new markets for the country’s burgeoning production: “Our policy has been, is and will be . . . to seek markets wherever markets are to be found.”⁴⁸

However much his eyes may have been fixed on markets wherever they were to be found, those same eyes could see clearly that the market that really mattered for the future was the United States. So the next major step in freeing Canadians’ access to foreign markets was securing more favourable terms for the entry of Canadian products into the US market. That effort was crowned with success in 1911 when, after protracted negotiations, his finance minister, Fielding, returned triumphantly from Washington with a new reciprocity agreement with the Americans, one that seemed to set extremely favourable terms for Canada. The Liberals were ecstatic and the Tories despondent, convinced that the old fox Laurier, with his “sunny ways,” had dished them yet again.⁴⁹

To the surprise of almost everyone at the time, the outcome of the 1911 election was the rejection of reciprocity by the voters, for a complex tangle of reasons that need not detain us too long. In English Canada, an aggressive British imperialist movement called for the Empire to be made a kind of free trade zone complete with tariffs to keep out goods from elsewhere, including the US. In French Canada, by contrast, Henri Bourassa, and the nationalist movement into which he had breathed such life, abandoned the Liberals for being insufficiently ardent defenders of an independent Canadian policy in the face of growing imperialist sentiment. Even though the reciprocity agreement with the US continued protection for Canadian manufacturers, Central Canadian industry feared the thin edge of a tariff-busting wedge.⁵⁰ And of course the Americans, with the tin ear so typical of their sensitivity to Canadian concerns, gave Laurier’s opponents lots of ammunition. Champ Clark, the speaker-designate of the House of Representatives, announced in Congress that “‘I hope to see the day when the American flag will float over every square foot of the British North American possessions clear to the North Pole.’”⁵¹ Reciprocity went down to defeat.

In our time, the anti-American protectionist crowd has so come to dominate the discussion of Canada–US relations in many universities and much of the media that many Canadians seem somehow to feel that Laurier’s abortive attempt to establish free—or at least freer—trade with the US was an aberration in our history, one happily seen off by a vigilant Canadian electorate when given the chance in the federal election of 1911.⁵²

One searches in vain for any justification for this view in the historical record.⁵³ Instead, it was the rejection of improved trade relations with the US that was the anomaly.

In fact, it would not be too much to say that Canada’s development, indeed its very existence as a nation, owes a very great deal to the evolution of trade relations with both Britain and the United States, as well as the associated development of the tariff. Laurier knew this all too well, having lived through the difficulties created for the Dominion and its predecessors by the machinations of its two chief trading partners.

Britain had not always been a free-trading nation. When the Corn Laws were abrogated in 1846, and Britain put protectionism behind it, the consequences for the United Province of Canada (the union of Upper and Lower Canada created in 1841) were severe. It was Canadian grain, among others, that had sheltered behind the preferential tariff of the mother country. When the Corn Laws went, so too did protected access to our most important market. By the following year, the situation was dire in Canada and the decision was made, with imperial blessing, to seek reciprocity with the US as an alternative to the lost markets of Britain.⁵⁴

While Canada was an ardent suitor, the Americans were a very discouraging object of our affections. They saw little benefit for themselves in such an arrangement, and Northern industrial interests were particularly leery. Moreover, the slave states, in this politically charged run-up to the Civil War, feared that reciprocity might lead to annexation and the reinforcement of anti-slavery forces in the Union. After all, slavery had been abolished peacefully by judicial fiat in Great Britain in 1772, and then throughout the Empire by simple act of Parliament in 1807, but America continued with what Southerners euphemistically called the “peculiar institution” until the issue was settled at the cost of many thousands of lives almost sixty years later.⁵⁵ The promise of access to Canadian waters for politically powerful New England fishing interests, however, ultimately tipped the balance within Congress, and a reciprocity agreement was signed in 1854. America, always the reluctant partner, gave in to protectionist pressures a mere twelve years later, abrogating the hapless and unloved agreement in 1866. Faced with no privileged access to either US or British markets, the third option for British North America was Confederation. Impelled chiefly by this economic logic, the federal union of three British colonies occurred the following year.⁵⁶

The expanded markets made possible by Confederation, however, remained small beer in global terms. Reciprocity with our southern neighbour remained the holy grail of Canadian politics; Sir John A. Macdonald pursued it energetically in the face of massive American indifference, until even Old Tomorrow had to resign himself to the evidence. To fill the vacuum, he came up with the National Policy, which even he regarded as a poor second best. The National Policy—high tariffs to protect domestic producers against American competition, plus the completion of transcontinental ties, and especially the railway—became his signature policy in 1878. But in an early precursor of R.B. Bennett’s boast that he would use high tariffs to “blast our way into the markets of the world or perish in the attempt,”⁵⁷ Macdonald was clear that his policy ought not to be taken as an alternative to reciprocity with the US, but rather as a strategy for obtaining it:

The welfare of Canada requires the adoption of a National Policy, which, by a judicious readjustment of the tariff, will benefit and foster the agricultural, the mining, the manufacturing and other interests of the Dominion; that such a policy . . . will prevent Canada from being made a sacrifice market . . . and moving (as it ought to do) in the direction of reciprocity of tariffs with our neighbours, so far as the varied interests of Canada may demand, will greatly tend to procure for this country, eventually a reciprocity of trade . . . It is only by closing our doors, and by cutting them out of our market, that they will open theirs to us . . . it is only by closing the door that we can get anything.⁵⁸

It was this policy that Laurier and his government inherited in 1896, that he moderated through tariff reform in the early days, and that he sought to subsume under a new reciprocity pact at the end of his reign. Surprisingly, the agreement Laurier negotiated would have left much of the protective tariff for Canadian manufactures in place but would have given free access for Canadian resources to US markets. A striking amount of the old National Policy would have remained intact. But the moment was not right. Laurier’s political skills were not equal to the task after the wear and tear of fifteen years in power, and this key part of Laurier’s vision became encrusted with a mythology of divisiveness and defeatism that would only be shaken off by slow degrees over the following century.