The “New Industries”
If the drive to create “new industries” came from J.R. Smallwood, who appointed himself Minister of Economic Development, his instrument was the Latvian economist Alfred Valdmanis, who became Director of Economic Development in 1950.
Unable to find investors willing to come to Newfoundland, Smallwood encouraged Valdmanis to cultivate his business contacts in Germany, and persuade German businessmen to set up shop in the province. As a result, German firms established thirteen of the sixteen manufacturing plants created in Newfoundland during the 1950s.
Government Plant Construction
Smallwood had set a high priority on building a cement plant on the west coast, and this became the first “new industry.” Valdmanis arranged for the German firm MIAG to build the plant (North Star Cement) at Corner Brook in 1951-1952. It was paid for by the provincial government, and MIAG operated the plant until 1959. The government also paid for another “new industry” at Corner Brook, a gypsum plant to manufacture plaster and wallboard. This was built by the German firm Benno Schilde.
Photograph by Rocky Schulstad. Reproduced by permission of Archives and Special Collections (Coll. 075, 5.04.741), Queen Elizabeth II Library, Memorial University of Newfoundland, St. John's, NL.
These were the only plants to be built entirely by the government, which had counted on selling them to private operators. When this did not happen immediately, the government adopted a new approach: partnership. The government would provide loans and loan guarantees to companies to be incorporated in Newfoundland by German interests, which would in turn bring machinery and expertise. The loans would enable these companies to build and equip their plants and begin operations. This scheme also recognized that German businesses faced restrictions on the export of capital in the postwar period, and could not easily invest their own money abroad.
Loans were available to non-Germans as well. In 1951 Newfoundland Hardwoods Ltd. was established at Donovans by the local businessman Chester Dawe to process Newfoundland birch. The founders of Atlantic Films and Electronics Ltd., which opened in St. John's in 1951, were Latvian refugees who knew Valdmanis. But most of those who took advantage of the government's generosity were Germans, anxious to get a foothold in North America.
Reproduced by permission of Archives and Special Collections (Coll. 075, 5.05.369), Queen Elizabeth II Library, Memorial University of Newfoundland, St. John's, NL.
United Cotton Mills was established in St. John's by the German textile industrialists, Raw and Company, to make clothing and other items from imported cotton. The same year, 1952, Moser and Sons of Schramberg established Newfoundland Hardboard Inc. next to the Hardwoods plant at Donovans to turn its waste into fiberboard. Dr. Wilhelm Dorn, originally from Czechoslovakia, was induced to establish Newfoundland Tanneries Ltd. at Carbonear, and at Octagon Pond, near St. John's, MIAG erected a factory to make machinery - the Canadian Machinery and Industry Construction Ltd.
Reproduced by permission of Archives and Special Collections (Coll. 075, 5.05.382), Queen Elizabeth II Library, Memorial University of Newfoundland, St. John's, NL.
More “new industries” followed a tour of Germany by Smallwood and Valdmanis. Some were designed to integrate with the tannery. Koch Shoes Ltd. opened in Harbour Grace in 1953; G. Hahlbrock of Hamelin established Atlantic Gloves Ltd. in Carbonear in 1954; and, rather later, in 1957, Gold Sail Leather Goods Ltd. began operations in Harbour Grace.
Valdmanis and Smallwood parted company in 1954, in part because the former began to have doubts about the viability of the industrialization programme. Smallwood did not, and more plants made their appearance. That year, a battery manufacturing plant was established at Topsail by Hanning and Kahl; a factory to make rubber boots and clothing at Holyrood by Ludwig Grube; and Terra Nova Textiles, to make work clothes, at Harbour Grace by Fritz Stobbe.
Reproduced by permission of Archives and Special Collections (Coll. 075, 5.04.858), Queen Elizabeth II Library, Memorial University of Newfoundland, St. John's, NL.
Two more industries followed. Eckhardt Knitting Mills, operated by an Austrian manufacturer, was established in Brigus in 1955. One year later, Smallwood convinced A. Adler, an English chocolate maker, to shut down his factory in England and move it to Bay Roberts in 1956.
Issues with Industrialization
By the end of the 1957-58 financial year, the government was owed $26.3 million by these new enterprises - and had probably spent double that figure. Moreover, most of them were in trouble, in spite of the government's financial generosity. Newfoundland's domestic market was tiny, and the new industries found it difficult to break into markets elsewhere. Transportation costs were high, imported raw materials were expensive, and there was a shortage of skilled labour. Even in Newfoundland, goods from Canada could be sold more cheaply than those produced by local manufacturers - as older industries established before confederation were finding out, to their cost.
In addition, there were complaints about the quality of the leather produced at the Carbonear tannery, and Superior Rubber Ltd. at Holyrood was not only badly managed, but turned out defective boots with second-hand machinery.
In 1957 Smallwood hired an American consulting firm, Arthur D. Little Inc., to study the situation. The report recommended that the Conception Bay leather industries should be closed, the battery plant sold, the textile plants merged, and Newfoundland Hardwoods reorganized. It was pessimistic about the future of the other industries.
There could be no question that Smallwood's programme of forced industrialization had been an expensive failure. At least six of the “new industries” had closed by 1960, others during the years that followed. The cement plant lasted until 2000. The only survivors today (2006) are Terra Nova Shoes - formerly Koch Shoes - at Harbour Grace, and Atlantic Gypsum at Corner Brook, now operated by Lafarge Canada.