Table of Contents
Canadian industry became more integrated into a North American system in the course of WWII. Reciprocity was established in the Hyde Park Declaration in 1941 with the American defense industry. The bulk of Canada's industrial output, including the production of military vehicles, was produced by at Canadian branches of American manufacturers. The effects of economic integration were dramatic. Imports from the United States tripled by the war's end, while imports from Britain remained static. The Canadian economy had made a hard pivot away from protected trading relationships within the British Empire towards its neighbor to the south. The size of the American economy made the pivot an inevitability, while financial stresses in post-War Britain sped the process along.
In the process of Continental integration, the political and economic elite were converted to a moderate version of Keynesianism. Mantras of 'sound finance' that dominated the Depression years were no longer heard; and would not be heard again until the 1970s, under the new name 'monetarism.' This does not mean that successive Canadian governments lost faith in the efficacy of the system of private enterprise. The Minister for Reconstruction, C.D. Howe, while accepting the need for some social reforms, steered the Canada into an ever-closer economic relationship with the United States.
Many of the Crown Corporations formed during the war were sold off to American interests at what seemed to critics as fire-sale prices. Canada tended to export natural resources and import manufactured goods, so the trade balance between the two countries naturally favored the Americans. A workable solution came in the form of Marshall Plan aid money, first made available in 1947, which was used to purchase both American and Canadian products. Canada joined the General Agreement on Tariffs and Trade (GATT), which significantly lowered trade barriers between signatory members. The issue of trade would not become an issue again until the 1980s.
Canada's economic entanglement with the United States accelerated further as the world became mired in the ideological conflict of the Cold War. Ostensibly the new non-war pitted democratic freedoms against the communist tyranny. In reality, the free world was motivated as much, and perhaps much more, by demands for new markets, and intervened in Latin and South American, especially, to prevent the spread of communism. By and large, Canada followed where the United States led, though in the early 1950s, it still held out hope for good relations with the Soviet Union.
On the home front, the government used the Cold War as a pretext to intervene in Canadian society. Liberal governments suppressed dissenters in the universities and professions. The Cold War also provided ideological cover for government intervention in labor disputes. Communist organizations, trade unions and other 'progressive' organization were infiltrated for the purpose of gathering information. Canadian McCarthyism was comparatively juvenile by comparison to its American counterpart. The population largely acquiesced to the government's direction. The broad ethos of 1950s conformism allowed the label of Communist to be attached to most any 'progressive' policy, including such things as feminist support for day-care. To tolerate Communists was to concede the enemy's viewpoint; to criticize the capitalist system, abetting the 'commies.'