GEORGE M. WRONG, Professor of History, University of Toronto.
15i. CANADIAN WAR ECONOMICS. In common with most commercial countries, Canada had enjoyed a period of remarkable expansion and prosperity, for at least 10 years previous to 1913. During this period her inter nal economic expansion and external trade in creased in an exceptional ratio. This was chiefly due to the fact that Canada presented the largest remaining area of unoccupied lands and other virgin natural resources, under climatic and social conditions attractive to European and American settlers. With an in flux of over 2,000,000 immigrants, accompanied by over $1,000,000,000 of foreign capital, it was inevitable that values, even on the soundest basis, should very rapidly increase, and equally inevitable, under conditions of free individual investment, that speculative values should rise still higher. The growth of western towns and cities in particular, and some of the newer railroad developments, outran the adjoining agricultural developments on which, however, they must ultimately depend. When, therefore, the optimistic spirit of investment which per vaded the older countries had received a check in 1912-13, and the pendulum began to swing toward greater caution in investments, many Canadian enterprises were caught in an incom plete or relatively unproductive condition. The sudden arrest of a number of these undertak ings not only checked general speculation, but brought about a rather severe reaction in the older industries dependent on the regions of special expansions. These in turn checked en terprise in many other lines of trade. In brief, a period of stagnation and readjustment had set in during 1913-14.
Such was the condition of Canada when the European War burst upon the world. Naturally the Canadian situation was not improved by the initial paralysis produced by the declaration of war, and the dislocation of international trade. Within a few months, however, the demand for men and equipment relieved the growing stag nation of the labor market and stimulated those industries and trading houses which were able to furnish the various lines of army equipment, or could most rapidly adapt themselves to the new and urgent demands occasioned by the war. The rapid enlistment of many thousands of men involved the employment of many others in furnishing sustenance, equipment and trans portation. The Canadian forces when equipped were rapidly sent overseas. The government, for the first time in its history, undertook to bear the whole expense of equipping, trans porting and maintaining at the front its entire force. This involved very important conse
quences for Canadian trade and exchange, and, incidently, for the statistics of import and ex port.
The expansion of Canada for the decade from 1903-13 having been accomplished very largely through foreign capital, practically the whole of this capital came to the country in the shape of goods, thus enormously increasing the imports. Since, however, only a limited number of immigrants were at first employed in meeting their own primary wants, the feeding, housing and general maintenance of a rapidly increasing population made great demands upon the agricultural and other products of the country which would otherwise have been sent abroad increasing the export returns. Thus the epoch of internal prosperity and expansion of 1903-13 was marked by rapidly increasing imports, without any corresponding increase in exports. For the fiscal year 1912-13, the excess of imports over exports amounted to $298,750, 000, on a total trade of $1,095,000,000. The sud den arrest of imports through the falling off of foreign investment and the corresponding re lease for export of much Canadian produce formerly required in the country rapidly re adjusted the balance of trade. Within two years, including the first eight months of the war, the adverse balance of imports had been reduced from $298,000,000 to $36,000,000. There after the effect of the war became very evident. Supplies for the maintenance of the men abroad, and the war equipment sent to them, so far as produced in Canada now appeared as exports. On the other hand, such foreign supplies as they were furnished with in Europe did not appear as imports to Canada. Taking the latest returns available, we find that for the 12 months, ending November 1917, the Canadian exports exceeded the imports by over $563,000, 000 in a total trade of $2,586,000,000. In point of percentage this slightly more than reverses the exceptional excess of imports over exports before the war. Nothing more directly illus trates the remarkable revolution in Canadian external trade in passing from a condition of domestic expansion, through immigration and foreign investment, to the participation in a world war requiring the export of all available resources for the supply of the Canadian army and the needs of the Allies.