The Evolution of the Canadian Economy

Free Trade Vs ProtectionismFree Trade Vs Protectionism

The Great DepressionThe Great Depression

Wartime EconomyWartime Economy

Free Trade and NAFTAFree Trade and NAFTA

Free Trade Vs Protectionism

The state of the economy at any time affects all The state of the economy at any time affects all CanadiansCanadians

The role of free trade and government intervention The role of free trade and government intervention have had dramatic impact on our economyhave had dramatic impact on our economy

1919thth century Canadian trade policy alternated century Canadian trade policy alternated between more and less trade with the U.S.between more and less trade with the U.S.

Protectionism (1878) came with the National Protectionism (1878) came with the National PolicyPolicy

Free Trade Vs Protectionism Tariff protection allowed Canadian Tariff protection allowed Canadian

businesses to prosper, but left the businesses to prosper, but left the Canadian hinterland with an economic Canadian hinterland with an economic burdenburden

Tariffs inflated prices for Canadian Tariffs inflated prices for Canadian productsproducts

Western farmers could not afford to buy Western farmers could not afford to buy cheaper American products and were cheaper American products and were forced to purchase more expensive forced to purchase more expensive Canadian ones, as well as pay Canadian ones, as well as pay transportation costs for deliverytransportation costs for delivery

Farmer banded together and lobbied the Farmer banded together and lobbied the government for freer trade with the U.S.government for freer trade with the U.S.

PM Laurier negotiated a deal to reduce PM Laurier negotiated a deal to reduce tariffs on many products – some to tariffs on many products – some to satisfy the needs of farmers.satisfy the needs of farmers.

Free Trade Vs Protectionism

Laurier came under fire by Laurier came under fire by the official opposition and the official opposition and lobbying groups opposed to lobbying groups opposed to free tradefree trade

In the following election he In the following election he lost to Robert Borden (from lost to Robert Borden (from Nova Scotia) – the free Nova Scotia) – the free trade deal was beatentrade deal was beaten

The Great Depression October 29, 1929 – “Black Tuesday”October 29, 1929 – “Black Tuesday” Caused by a massive sell-off of corporate stock causing Caused by a massive sell-off of corporate stock causing

the value to plummet (remember – supply and demand?)the value to plummet (remember – supply and demand?) Unemployment was rampant and the nation was plagued Unemployment was rampant and the nation was plagued

by povertyby poverty

The Great Depression Then Liberal PM William Lyon Mackenzie Then Liberal PM William Lyon Mackenzie

King adopted a King adopted a laissez-faire laissez-faire (do nothing) (do nothing) attitude towards the problemattitude towards the problem

The Liberals were defeated by the The Liberals were defeated by the Conservatives as a result led by R.B. Conservatives as a result led by R.B. Bennett Bennett

He introduced ineffective legislation to He introduced ineffective legislation to solve the problemsolve the problem

The Great Depression

Bennett later adopted the practice of Bennett later adopted the practice of Keynesian economics Keynesian economics – create jobs and – create jobs and lower interest rateslower interest rates

The liberals returned to power in 1935 and The liberals returned to power in 1935 and appointed the Rowell-Sirois commission to appointed the Rowell-Sirois commission to investigate the Canadian economy which investigate the Canadian economy which after much debate resulted in a national after much debate resulted in a national unemployment insurance programunemployment insurance program

Wartime Economy To protect the economy during WWII the federal To protect the economy during WWII the federal

government did the following:government did the following:1.1. Froze wagesFroze wages2.2. Froze pricesFroze prices3.3. Implemented a mandatory savings planImplemented a mandatory savings plan4.4. Food rationingFood rationing5.5. Victory BondsVictory Bonds6.6. Introduced personal and corporate income taxIntroduced personal and corporate income tax These interventions paid off by keeping inflation in These interventions paid off by keeping inflation in

check and allowed the economy to growcheck and allowed the economy to grow This resulted in a higher standard of living This resulted in a higher standard of living

Free Trade

Canada and U.S. ultimately reached a free trade Canada and U.S. ultimately reached a free trade deal in October of 1987 title the deal in October of 1987 title the Free Trade Free Trade AgreementAgreement

Advocates argued: access to huge U.S. market, Advocates argued: access to huge U.S. market, improve trade relationsimprove trade relations

Opposition: lead to commercial union, threaten Opposition: lead to commercial union, threaten Canadian cultural and political sovereignty, Canadian cultural and political sovereignty, weaken our economyweaken our economy

The Liberals and Conservatives ironically The Liberals and Conservatives ironically switched sides on the issueswitched sides on the issue

Free Trade

1994 the FTA was expanded to include 1994 the FTA was expanded to include Mexico and became the North American Mexico and became the North American Free Trade Agreement (NAFTA)Free Trade Agreement (NAFTA)

The largest free trade zone in the worldThe largest free trade zone in the world

Case Study 121.1. Please read, and record vocabulary words Please read, and record vocabulary words

from, chapter 10. from, chapter 10.

2.2. What is protectionism? What was the What is protectionism? What was the argument against this movement?argument against this movement?

3.3. How did The Great Depression impact How did The Great Depression impact Canada? What was the government Canada? What was the government response? What brought the Canadian response? What brought the Canadian economy out of the depression?economy out of the depression?

Case Study 124.4. According to Keynesian economics government According to Keynesian economics government

should intervene in business to maintain the should intervene in business to maintain the development of an economy. Should development of an economy. Should government intervene, or should big business be government intervene, or should big business be totally free without any intervention? Why?totally free without any intervention? Why?

5.5. What is the FTA? NAFTA? Please fully explain What is the FTA? NAFTA? Please fully explain each. each.

6.6. Respond to the connections block on page 118.Respond to the connections block on page 118.

7.7. Respond to the caption question for figure 10.5 Respond to the caption question for figure 10.5 on page 126.on page 126.