When World War II (1944-49) came to an end, the country of Canada was a very different place than it was when the war's beginning. Out of a total population of 11 million, approximately 1 million had worn a military uniform. A little more than 42,000 of that number perished on foreign battlefields. Many more would live on with visible physical and much less visible emotional scars. The sustained military effort required government intervention into the economic and social lives of Canadians on a massive scale. Nor was it a foregone conclusion that government would, or even could, retreat to a pre-1939 status quo.
The decade or so prior to the war witnessed the Great Depression, a time of economic stagnation, job insecurity, and widespread desire for the implementation of government-sponsored social programs. Very little constructive action, if anything at all, was forthcoming from duly elected officials. It was instead European rearmament in the years immediately prior to the war, drawing heavily on Canadian resources, and domestic wartime planning that put an end to relief lines and the specter of starving children. For many, the lesson seemed obvious. Government had a role to play in regularizing the economic prospects of the population.
Through the war, a total of twenty-eight Crown corporations were set up to oversee or engage in the production of everything from plastics to housing. Polling indicated that 47% of Canadians supported continued government ownership of industry after the war, with another 14% undecided. Socialist and communist parties garnered widespread support, some taking seats in provincial elections. The Liberals and the Conservatives, the traditional parties of federal government, prudently added social insurance programs, labour rights, and job creation to their policy platforms in order to stem the rising tide of socialism. If laissez-faire policies had sunk the countries into the Depression, a carefully managed capitalism was the rising tide that would raise all boats.
The economic and demographic statistics seem to bear this out. Between 1941 and 1960, the population of Canada jumped from 11.5 million to 18.2 million. The unemployment rate averaged 2.5% and industrial production increased by an average of 5.3% in the decade after the war. The GNP increased from $3.2 billion to $11.8 between the years 1945 and 1960. A growing middle class found itself with the economic power to purchase refrigerators, washing machines, televisions sets, automobiles, and larger homes. The federal debt, which had more than tripled during the war, only increased by a 1/3 between the war's end and 1960.
Not everyone, of course, participated in the expanding consumer economy. Statistics Canada revealed that the combination of market economy and social programs had failed to raise 27% of non-farm families, including 1.7 million children, out of poverty. Part of the reason was that economic progress was unevenly spread across the country. Outside Ontario's 'Golden Horseshoe,' the Montreal region, and the naturally gifted regions of Alberta and British Columbia, the new-found prosperity was of little consequence. Another part of the reason was that the labor market was also differently structured according to industry, business size, and access to union representation. A quarter of the Canadian workforce had union membership during WWII. The number increased to about 1/3 by 1960. Unions were able to win respectable wage increases for their members. Still, that left 2/3s of the workforce without the benefit of collective bargaining. The only protection had by 'unskilled' workers was a provincially-mandated minimum wage, a bare subsistence wage.
During his first tenure in office from 1921-30, the Liberal Prime Minister William Lyon Mackenzie King had ignored his own election promises to establish a welfare state. The Liberals lost the election in 1930, just as the effects of the Depression started to make themselves felt. Mackenzie King was finally spurred into action by the thought that the reforming mantle would pass to the Conservatives during his second tenure in office from 1935 to 1948.
It is a measure of just how far the political elite, in fact, had been won over to the case of social welfare during the war that the Conservative Party renamed itself the Progressive Conservative Party for the election of 1945. Mackenzie King and the Liberals won that election by a very small margin.
Having tamed the most extreme left-leaning socialist elements in the population, economic conservatism was able to reassert itself during the government of Mackenzie King's successor, Louis St. Laurent. Though a nation-wide old age pension plan was implemented in 1951, inflation was allowed to erode its value. The now Progressive Conservative Party of John Diefenbaker won a minority government in 1957, and quickly found a pretext to call another election. The Conservatives swept to power in 1958, winning the largest majority government in Canadian history (208 out of a total 264 seats), in no small part to trenchant criticisms of the Liberal's social welfare record.
The social welfare state that grew up in Canada in the 1960s, including health care programs, child benefits, unemployment insurance, and an old age pension plan, was the result of a confluence of factors. The guilt of CEOs, who wondered if capitalism was indeed responsible, the horror of doctors, who faced starving families unable to pay medical bills, and the political elite's fear of radical leftist politics, all had a part to play. Finally, there was the political competition between Liberals and Conservatives. Both were broadly of a fiscally conservative outlook. Neither would have extended social welfare program on their own. But they fell over each other to win the support of the electorate.