Genevieve Simms

“The old order is gone, it will not return.”

R.B. Bennett

“Those are my principles. If you don’t like them, I have others.”

Groucho Marx

Urgent times call for drastic measures. Two weeks ago, the U.S. Congress passed legislation that will likely pour in excess of $1 trillion into the American economy in the hope of kick-starting consumer confidence. Here in Canada, Prime Minister Stephen Harper announced a similar bailout package that will result in a federal deficit of at least $85 million by 2013.

Urgent times, indeed. So urgent, in fact, that economic commentators who long avoided using the dreaded “R” word are now beginning to whisper the even scarier “D” word: Depression. Is history really about to repeat itself?

Eighty years ago, a decade of apparent global prosperity suddenly halted. The Wall Street Crash of October 1929 shook investors and creditors, and the failure of virtually every government to respond either promptly or effectively to the collapse soon plunged the world into a depression that lasted, on and off, for the next decade.

I’ve long been fascinated with the causes, circumstances and conditions of the Great Depression. When I studied history at the University of Calgary, the first two papers I wrote were, respectively, on the flawed responses of both the federal Conservatives and Liberals in the 1930s and on the more radical proposals being offered by William Aberhart’s Social Credit government in Alberta.

As background reading for both papers, I relied heavily on Blair Neatby’s history of Canada in the ’30s, aptly titled The Politics of Chaos. It offers a sharp, succinct appraisal of the depression itself and the politicians who inadvertently added to its chaos.

With news of our current crisis darkening by the day, I picked up Neatby’s book again to see if the comparison between then and now was merited. What struck me more was how our current prime minister and leader of the opposition are eerie echoes of their counterparts all those years ago.

For example, our Calgary-based Conservative prime minister suddenly abandoned his deeply held faith in fiscal restraint and free market enterprise and converted instead to the cause of deficit financing on an unprecedented scale. The same description also applies to R.B. Bennett, who governed Canada during the first (and worst) five years of the 1930s.

Despite the worsening scale of unemployment, Bennett clung to the goal of balanced budgets. Only on the eve of the 1935 election, facing almost certain defeat, did he abandon this approach and instead promise Canadians their own “New Deal” of public works programs.

Michel Ignatieff, the Harvard-educated Liberal who spent much of his time outside Canada before returning to help heal his defeated and embattled party, assumed his leadership role relatively late in life and is not always comfortable with its public demands. The same was true of William Lyon Mackenzie King.

King led the Liberals in the 1920s and 1930s, going down to defeat in 1930 when he failed to demonstrate any understanding of the crisis then facing Canada, only to be restored five years later when the same public refused to be fooled by Bennett’s death-bed conversion to Keynesianism. Adopting many of the ideas being proposed by a new breed of university-educated civil servant, King’s second stint in government paved the way for Canada’s post-war social democratic welfare state.

There are other parallels in Neatby’s book. NDP leader Jack Layton somewhat resembles his CCF forebear James Woodsworth, while Gilles Duceppe’s fuzzy brand of Quebec sovereignty echoes the goal of “autonomy” pursued by the Union Nationale’s Maurice Duplessis in the ’30s. Yet of all the leaders portrayed by Neatby, there’s one who lacks any obvious modern counterpart: Alberta’s William Aberhart.

Aberhart came late (and reluctantly) into politics. A teacher by profession and preacher by vocation, his regular Sunday night radio sermons had made him one of the most listened to voices in Canada by the late ’20s. At the time, Alberta hurtled towards bankruptcy under the combined collapse of the financial system, widespread unemployment that undercut consumer demand and years of severe drought that wiped out countless farmsteads. Aberhart began preaching a political message of faith and hope that, in 1935, unexpectedly swept him into office.

Aberhart’s message was simple. At any given time, the sum of wages earned by workers was less — had to be less — than the value of all the products they produced, as revenues obviously also had to cover other costs such as rent, capital and profits. The result, Aberhart explained, was that production would always outpace consumption, a situation that had precisely led to the crash of 1929.

The solution was to supplement wages with “social credit” — government-issued vouchers that would be as good as money as long as Alberta’s workers, merchants and vendors had faith in the idea. On this foundation of faith, consumption would increase once more, and prosperity would return.

Aberhart’s plan was, in effect, the original stimulus package. In envisaging an economy based on credit, Aberhart anticipated the post-war boom era symbolized by easy credit terms and even easier access to credit cards. It’s also the grandfather of President Barack Obama’s hope-based recovery plan.

Unfortunately for Aberhart, the proposal was also unconstitutional in its infringement on the Bank of Canada’s control of the money supply and was never implemented. Still, amid the newborn love affair with Keynesian spending and rush to leap aboard the stimulus bandwagon, perhaps it’s time to give Aberhart’s original proposal some credit after all.