Confederation
1864-1949


Relations with Canada, 1895-1939

The Labrador Boundary

Newfoundland Crisis, 1929-1934

Related Heritage Partner Projects:

Confederation Debate: 50 Years and Counting

Let The People Decide: Newfoundland 1947-1949








One of the provisions of the 1774 Quebec Act was to transfer to Quebec all the "territories".
Canada and the Newfoundland Crisis, 1929-1934

The Great Depression hit Newfoundland hard. Its exposed, fragile economy contracted as export prices fell. Government tax revenues declined as well, and services could be maintained only by further borrowing.

But in May 1931 the Bank of Montreal, which handled the government's financial affairs, found that no more money could be raised on the bond market. The government was desperate, since it faced the prospect of defaulting on the payments on the public debt. This stood at about $100 million, and payments absorbed about 65 percent of current revenue. The premier, Sir Richard Squires, went to Ottawa to see the Canadian prime minister, R.B. Bennett.

R.B. Bennett R.B. Bennett, 1930.
Bennett was the prime minister of Canada from 1930 to 1935.

From Andrew MacLean, R.B. Bennett, Prime Minister of Canada (Toronto: Excellsior Publishing Company, 1935) 2.
Larger Version (31 kb)

Bennett decided that if Newfoundland defaulted, "it would be very injurious to Canada". He therefore asked the four Canadian banks operating on the island to make a loan. This they did, with some stringent conditions attached. The same situation occurred at the end of 1931. Pressured by Bennett, the banks agreed to another loan, again with strict conditions.

This was the last loan from the Canadian banks. In the spring of 1932 a desperate Squires government was driven to make a deal with Imperial Oil - the company would give a loan of $1.75 million in return for a monopoly on the sale of gasolene and other petroleum products. Soon after this, the Squires administration was defeated in an election, and a new government took office, led by Frederick C. Alderdice.

By the early fall, it was clear that default on the debt was a real possibility. In order to prevent this, the British and Canadian governments agreed to loan two-thirds of the money needed, but only on condition that Newfoundland accepted a British royal commission of enquiry, which would include a Canadian member. The Alderdice government agreed.

The royal commission, chaired by Lord Amulree, in fact included two Canadians - Charles A Magrath, appointed in consultation with the Canadian government, and Sir William Stavert, the Newfoundland nominee. A banker with close ties to the Bank of Montreal and to Bennett himself, Stavert was also financial advisor to the Newfoundland government. It was a curious choice.

Both Canadians favoured confederation for Newfoundland, and Magrath especially urged this on Bennett. He thought that formal union could not happen immediately, but that if Canada treated Newfoundland with generosity, then it would soon occur. The royal commission went to Ottawa, but came away empty-handed. Bennett and his ministers were faced with increasingly serious problems of their own. In effect, they walked away from Newfoundland. There was to be no further financial assistance, no confederation, and no purchase of Labrador (which had again been on the table). Newfoundland was Britain's problem. Britain's solution, detailed in the report of the Amulree Royal Commission (1933) was the suspension of responsible government, and the assumption of direct responsibility for the country's finances.

©1997, J.K. Hiller

Bibliography


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