Riendeau A Roger E. Brief History of Canada

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A BRIEF HISTORY OF CANADA

340

moment, the rest of Canada could breathe a sigh of relief, as the “safe”

Liberals appeared well entrenched and the cause of separatism or sov-

ereignty seemed to be languishing.

Nevertheless, the persistence of Quebec nationalism arising from the

Quiet Revolution represented a major obstacle to the quest for national

unity. In retrospect, the 1960s marked the pinnacle of Canadian opti-

mism and conﬁ dence that this goal was fully achievable. The centennial

celebration in 1967 was an occasion to reﬂ ect upon signiﬁ cant histori-

cal accomplishments, which inspired a sense of national pride and hope

for even greater prosperity and unity. By electing Pierre Trudeau to lead

the nation into its second century, Canadians expected to move beyond

the stiﬂ ing political conﬂ icts of minority government and regionalism

to forge a new consensus that would represent the modernity and

diversity of their evolving society. When Trudeau’s vision of the “just

society” failed to meet their expectations, voters accorded him the same

fate as they had John Diefenbaker a decade earlier. Trudeau, however,

would prove to be more opportunistic in responding to a second

chance.

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CONFLICT AND

CONFRONTATION IN THE

AGE OF ANXIETy

(1972–1984)

rom the early 1970s to the mid-1980s, Canadians worried more

about the economy than they had at any time since the Great

Depression of the 1930s. Stagﬂ ation marked by the simultaneous occur-

rence of high rates of unemployment and inﬂ ation slowed down eco-

nomic and population growth, which in turn intensiﬁ ed conﬂ ict among

regions, levels of government, and social classes. Although much of

Canada’s economic difﬁ culties were related to the troubled state of

world affairs, Canadians expected, in part because they were promised,

decisive action on the part of their federal and provincial governments,

which were all too ready to blame each other for the nation’s ills. The

lightning rod for popular discontent was Pierre Trudeau, who adeptly

took advantage of national anxieties over economic uncertainty, west-

ern alienation, and the Quebec sovereignty threat to maintain his domi-

nance over Canadian political life.

The Uncertainty of Stagﬂ ation

Although they continued to enjoy an enviable standard of living during

the 1970s and early 1980s, Canadians became increasingly concerned,

at times obsessed, about their economic prospects. Much of this eco-

nomic anxiety was related to the high expectations of a postwar gen-

eration, perceiving that the country was not maintaining a growth rate

to which it had become accustomed. For example, the rise in Canada’s

population from 21.6 million in 1971 to 24.3 million in 1981 repre-

sented only about a 12 percent increase, as compared to 30 percent

between 1951 and 1961 and 18 percent between 1961 and 1971. This

A BRIEF HISTORY OF CANADA

342

slower rate of population growth was largely the result of a steadily

declining birthrate. From the peak levels reached at the end of the

1950s, the annual birthrate dropped by almost half and the number of

births by about one-third by the early 1970s. Canadians were marrying

at a later age and were waiting longer to have children, mainly because

women were entering the workforce in greater numbers and had access

to better contraceptive measures. Consequently, the postbaby-boom

generation (those born after 1965) became known as the “baby bust”

(Norrie and Owram 2002).

However, Canada continued to be a magnet for immigrants, particu-

larly from less-developed or Third World countries. Approximately 1.4

million immigrants arrived in Canada during the 1970s, about the same

number as during the 1960s. Concerned about the country’s economic

capacity to continue to accommodate high levels of immigration, the

federal government produced a Green Paper on Immigration Policy in

1975 as a prelude to the adoption of a new Immigration Act. For the

ﬁ rst time, the fundamental objectives of Canadian immigration policy

were speciﬁ ed. These objectives included the promotion of Canada’s

demographic, economic, social, and cultural goals; family reunion;

nondiscrimination; the fulﬁ llment of Canada’s international obligations

in relation to refugees; and cooperation between all levels of govern-

ment in assisting newcomers to adapt to Canadian society. To achieve

better control over the continuing inﬂ ux of immigrants, the govern-

ment also introduced annual admission ceilings based on one- to three-

year projections of desired immigration levels. By the early 1980s, the

annual immigration ceiling was set at 125,000 while, in fact, the num-

ber of newcomers reaching Canada was less than 100,000. Among the

main determinants of immigration intake was the availability of

employment opportunities.

Indeed, the threat or reality of unemployment remained at the fore-

front of public anxiety about the economy during the 1970s and early

1980s. In the quarter-century after World War II, Canadians had

become accustomed to annual average rates of unemployment that

ﬂ uctuated from 3 percent to 5 percent of the labor force, except during

the recession of the late 1950s and early 1960s when the average rate

ﬂ uctuated from 5 percent to 7 percent. After 1970, however, the

national unemployment rate seldom dipped below 7 percent in spite of

Canada’s success in increasing total employment faster than any other

major industrial nation. Of course, cyclical recessions in the early

1970s and 1980s raised the usual but unfounded fear of a return to the

conditions of the 1930s. While the national unemployment rate did

343

approach 13 percent in December 1982, the highest recorded level

since the Great Depression, the duration of the crisis was short-lived,

and its impact was moderated by substantial government assistance to

the unemployed. Aside from the cyclical downturns, unemployment

levels tended to be higher than expected largely because of the rapid

growth of the labor force that had to absorb the postwar baby-boom

population and a greater number of women.

Furthermore, the Canadian economy had undergone substantial

structural changes since the 1960s. By 1980 half of Canadian workers

were employed in the service sector, including government, schools,

hospitals, the retail trade, ﬁ nancial institutions, and the communica-

tions industry; three out of 10 were employed in manufacturing, con-

struction, and transportation; one out of 20 worked in agriculture; and

one in 50 was employed in forestry, mining, ﬁ shing, or trapping. This

complete reversal of the Canadian economy from the time of Confed-

eration meant that many workers faced painful adjustments that occa-

sionally resulted in unemployment. A worker’s prospects could also be

adversely affected by the profound regional inequalities in Canadian

development, notably in the Maritimes and the northern frontiers. In

the ﬁ nal analysis, Canadians in the 1970s and early 1980s felt no

greater sense of job insecurity than had their predecessors, but as crea-

tures of the afﬂ uent society, they tended to be less tolerant of economic

uncertainty.

The threshold of economic insecurity was no doubt heightened by

chronic inﬂ ation. In the postwar years, the annual rate of inﬂ ation in

Canada remained relatively stable at an average of about 2 percent until

the mid-1960s. In the wake of the Vietnam War as well as rising con-

sumer demand and wage settlements, prices generally rose by 4 percent

or 5 percent annually until 1972. The cost of living jumped to 9 percent

in 1973 as crop failures in several countries drove food prices up by 17

percent, while the international cartel known as the Organization of

Petroleum Exporting Countries (OPEC) quadrupled the world price of

oil. In 1979 OPEC again raised the price of oil to more than 10 times

the pre–1973 levels. Such a steep rise in the price of one of the key

commodities of an industrialized and motorized society had the effect

of making double-digit inﬂ ation a fact of life. The annual inﬂ ation rate

reached a postwar high of 12.5 percent in 1981 before gradually begin-

ning to subside.

Although it was a worldwide phenomenon, the inﬂ ationary spiral

was also aggravated by the responses of business, labor, and govern-

ment (Bothwell, Drummond, and En glish 1989). Some businesses took

CONFLICT AND CONFRONTATION IN THE AGE OF ANXIETY

A BRIEF HISTORY OF CANADA

344

advantage of the expectation of higher prices to increase their proﬁ ts,

while unions demanded higher wages to meet the escalating cost of liv-

ing. In both cases, the consumer had to bear the consequent costs, and

the diminished purchasing power often resulted in reduced demand for

goods and services, which in turn contributed to layoffs and prolonged

unemployment. Under popular pressure to take decisive action, the

federal government with the cooperation of the provinces attempted

with limited success to “wrestle inﬂ ation to the ground,” in Prime Min-

ister Trudeau’s words, through an elaborate scheme of price and wage

controls from 1975 to 1978. The Bank of Canada’s decision to ﬁ ght

inﬂ ation by reducing the rate of growth in the money supply in 1975

resulted in a sharp rise in interest rates, which reached 20 percent in

1981, about four times higher than they had been 15 years earlier.

Indeed, confused by the dilemma of which enemy to attack, unemploy-

ment or inﬂ ation, the federal government adopted a contradictory

series of expansionary and restrictive ﬁ scal and monetary policies.

Combating unemployment required higher levels of the government

expenditure, which had the inﬂ ationary effects of driving up budget

deﬁ cits and interest rates. To ﬁ ght inﬂ ation meant cutting government

expenditures, which had the depressing effects of increasing unemploy-

ment and public assistance payments while lowering tax revenues.

Rather than raise taxes or reduce expenditures, the federal government

resorted to borrowing more at historically high rates of interest, thereby

prolonging inﬂ ation with massive budget deﬁ cits. In the end, govern-

ment seemed powerless to respond effectively to workers who had lost

or feared the loss of their jobs, farmers or businesses facing bankruptcy,

and homeowners unable to renew their mortgages. The ineffective gov-

ernment responses to economic problems further alienated the postwar

generation, which had come to expect that politicians would fulﬁ ll

their promises and grandiose visions.

Deciding that a plurality, however small, entitled him to form a gov-

ernment after the election of 1972, Prime Minister Trudeau proceeded

strategically to cultivate the parliamentary support of the NDP and

Créditistes and ultimately to win back voter support. To appease the

NDP, the government greatly expanded public spending on social pro-

grams, including higher old-age pension and family allowance beneﬁ ts

in 1973. Appealing to economic nationalists among both the Liberals

and the NDP, the Trudeau administration established the Foreign

Investment Review Agency (FIRA) in 1974. FIRA was empowered to

screen most takeovers and transfers of ownership to foreign interests or

among them, to oversee direct foreign investment in new enterprises,

345

and to monitor foreign expansion into any new and unrelated areas of

business in order to determine whether they were of “signiﬁ cant ben-

eﬁ t” to Canada. Although it immediately satisﬁ ed NDP demands, FIRA

over the years would inspire more criticism from economic nationalists

Paul Henderson celebrates with Yvan Cournoyer after scoring a dramatic last-minute winning

goal to reafﬁ rm Canadian hockey supremacy against the Soviet Union in 1972. Political

analysts even credit the euphoria generated by Canada’s hockey triumph with saving the

Trudeau government from electoral defeat a few days later.

(Toronto Star/Frank Lennon)

CONFLICT AND CONFRONTATION IN THE AGE OF ANXIETY

A BRIEF HISTORY OF CANADA

346

than from foreign investors. To win support in central Canada, the

government promised to keep rapidly increasing oil prices substantially

below world levels by developing a national energy policy based on the

exploitation of the huge Athabaska tar sands deposits in northern

Alberta, the creation of a national oil company, and the construction of

a natural gas pipeline up the Mackenzie River valley in the Northwest

Territories. The goal of the national energy policy was Canadian self-

sufﬁ ciency in oil by the end of the 1970s.

The Liberals’ uneasy partnership with the NDP ended in 1974 with

the defeat of the government budget on a parliamentary motion of non-

conﬁ dence. The subsequent election campaign focused on the Conser-

vatives’ promise of wage and price controls to ﬁ ght inﬂ ation. A

relentless attack on Robert Stanﬁ eld’s ill-conceived scheme resulted in

the Liberals regaining a parliamentary majority. That the Liberals won

only ﬁ ve out of 45 seats in the Prairie Provinces, however, did not bode

well for the challenges that were forthcoming.

After ridiculing the Conservative scheme of wage and price controls,

the Trudeau administration adopted a policy of voluntary wage

restraint. Organized labor was in no mood to cooperate, arguing that

wage settlements had lagged behind inﬂ ation and corporate proﬁ ts in

recent years, and thus substantial raises were in order. In addition to

inﬂ ationary pressures, labor militancy was spurred on by the doubling

of union membership since the mid-1960s. More than 37 percent of

nonagricultural workers were members of unions by the mid-1970s,

compared to about 30 percent a decade earlier. Most of the newly orga-

nized unions were white-collar and service workers, especially those in

the public sector, where the newly won right to strike led to highly

unpopular work stoppages. For example, postal workers, air trafﬁ c

controllers, and teachers demanded wage increases that ranged from 20

percent to 80 percent. Such pay demands would invariably lead to

higher taxes in the public sector and higher prices in the private sector,

thereby fueling the inﬂ ation that had precipitated the wage claims in

the ﬁ rst place.

Under pressure from business and industry, which maintained that

high wage demands undermined the competitiveness of Canadian

products in the American market, and from the majority of workers

who were unorganized and thus did not receive increases that kept up

with the rising cost of living, the Trudeau government felt compelled

to reverse its policy in 1975. The Anti-Inﬂ ation Board (AIB) was estab-

lished with the authority not only to roll back excessive prices and

wages but also to control the proﬁ ts and dividends of larger ﬁ rms. The

347

effectiveness of the AIB controls proved to be inconclusive and the

bureaucratic costs associated with this extraordinary state planning of

the economy convinced the business community to join labor in urging

an end to the unpopular program in 1978 (Norrie and Owram 2002).

Western Alienation and the New Energy Frontier

Meanwhile, the Trudeau administration proceeded with its promised

national energy policy designed to shelter Canadians from the impact

of world oil-price increases. A Crown corporation known as Petro-

Canada (also referred to as Petrocan) began operation in 1975 to

engage in energy research and development, to acquire imported oil

supplies, and to explore and develop alternative sources of petroleum

such as the Athabaska tar sands. The construction of a pipeline to carry

gas from the Mackenzie Delta to southern Canada was postponed in

1974 pending Justice Thomas Berger’s inquiry into the impact of the

project on the northern Yukon and the Mackenzie Valley. His 1977

report, Northern Frontier, Northern Homeland, concluded that while a

pipeline from the Mackenzie Delta down the Mackenzie Valley to

Alberta was feasible, it would cause irreparable damage to the delicate

environment of the region and thus would have an adverse impact on

the Native population. Accordingly, the Berger Report recommended

against the construction of a pipeline across the northern Yukon and

urged a 10-year delay in the development of the Mackenzie Valley pipe-

line. In the early 1980s, a pipeline was built only halfway up the valley

to Norman Wells.

The Berger Report called on Canadian governments to settle Native

land claims before proceeding with northern resource development.

The report speciﬁ cally advanced the growing Native rights movement

by eloquently depicting the North as a distinct homeland for the Native

people rather than merely a resource frontier for southern Canada, and

by setting the precedent that the Native people should be consulted on

major resource development plans. The federal government had already

begun to accept the legitimacy of claims to aboriginal rights in the wake

of a Supreme Court ruling on the Nishga land claim in northern British

Columbia in 1973. Signiﬁ cant agreements on land claims were reached

with the Inuit and Cree in northern Quebec in 1975 to open the way

for the development of Hydro Quebec’s James Bay project and with the

Inuit in the Northwest Territories and Labrador.

Progress was also made on claims to aboriginal nationhood, which

began in the early 1970s. The Dene people of the western Northwest

CONFLICT AND CONFRONTATION IN THE AGE OF ANXIETY

A BRIEF HISTORY OF CANADA

348

Territories laid claim to their substantial holdings and declared their

right to self-determination in 1975. The following year, the Inuit Tapir-

isat of Canada proposed the creation of Nunavut (meaning “our land”)

as a distinct region in the central and eastern Northwest Territories,

where the Inuit comprise the majority of the population. The new juris-

diction would administer justice, education, housing, land-use plan-

ning, and wildlife management. In his initial response to this proposal,

Prime Minister Trudeau insisted that special status was as much out of

the question for the aboriginal people as it was for Quebec. Neverthe-

less, the proposed division was endorsed by the Native majority in the

Legislative Assembly of the Northwest Territories in 1979 and by a ter-

ritory government plebiscite held in 1982. Later that year, the federal

government accepted the proposal in principle. The Dene and Métis

people of the western district also devised a plan to create their own

jurisdiction called Denendeh (an Athapaskan word meaning “land of

the people”). Despite this signiﬁ cant progress, Native self-determina-

tion would remain an elusive dream (Dickason 2002).

Besides focusing attention on Native relations, the energy concerns

of the 1970s brought the federal government into deeper conﬂ ict with

western Canada. The Prairie Provinces had become a veritable Liberal

wasteland under Trudeau’s leadership. Initially, “Trudeauphobia” was

the dominant reaction of Prairie farmers frustrated by the mounting

wheat surpluses and sagging prices on the world market. Western farm-

ers blamed Trudeau for failing to take appropriate remedial measures,

and they never forgave him for responding to them in a moment of

mutual exasperation: “Why should I sell your wheat?” The intensity of

western alienation, however, reached new heights over the issue of

national oil pricing in the wake of the dramatic OPEC increases.

Through the transcontinental pipeline system, Alberta supplied oil

to the area west of the Ottawa River, while the eastern provinces

depended on foreign sources of supply, which up to 1973 had been

cheaper than the domestic product. The initial response to the OPEC

price increases was that Canada, as a petroleum-rich country with sup-

posedly a “900-year supply,” merely needed to reduce its oil imports

and to rely on its natural resources. However, further assessment

revealed that the size of the national oil reserves had been greatly exag-

gerated. Moreover, most of the country’s reserves were located in the

West far from the largest concentration of population, or in the North

where the high cost of exploration and extraction could not provide

immediate relief from the world price increases.

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As part of its national energy policy, the Trudeau government in

1973 devised a two-price system designed to cushion the Atlantic Prov-

inces, the economically weakest region of Canada, and Quebec, the

politically most volatile province, from the shock of OPEC increases.

To keep the domestic price of oil lower than the export price, the gov-

ernment levied an export tax on oil, the proceeds of which would help

to subsidize the prices paid by the ﬁ ve eastern provinces. The federal

government justiﬁ ed its policy by maintaining that oil and natural gas

reserves belonged to Canadians as a whole and that Ottawa had an

obligation to moderate increases in the domestic price on behalf of the

governments of the consuming provinces. Rejecting this argument, the

governments of the oil-producing provinces—principally Alberta but

also Saskatchewan and British Columbia—countered that the national

energy policy interfered with their constitutional right to control their

natural resources. Western energy producers felt entitled to seek the

world price for their resources, which were in great demand in the

United States. Curiously, their free market outlook contrasted with the

demand of western wheat farmers for more government support. The

western-based oil companies further argued that higher prices were

necessary to encourage aggressive exploration, new discoveries, conser-

vation of existing resources, and generally future Canadian self-sufﬁ -

ciency. That Alberta used its rising energy revenues to expand its

Heritage Fund for investment in future industrial development infuri-

ated the poorer provinces, which would have to draw on even larger

equalization payments from the federal government to afford the higher

domestic prices.

After two years of acrimonious dispute and negotiation, the federal

government and the energy-producing provinces reached a compro-

mise pricing policy. Although the domestic price of oil would be kept

consistently below the world price, it would be adjusted upward peri-

odically to give the producing provinces higher revenues and the oil

companies sufﬁ cient proﬁ ts to encourage new exploration and develop-

ment. Tensions subsided over the next four years as the domestic price

rose to within 15 percent of the world price. But another upsurge of

OPEC prices in the wake of the Iranian Revolution in 1979 renewed the

federal-provincial conﬂ icts over energy pricing in Canada and substan-

tially drove up the cost of federal oil subsidies to the eastern provinces.

By then, the Trudeau government was struggling with escalating bud-

getary deﬁ cits and dwindling popular support, which did not bode well

for it in the upcoming federal election.

CONFLICT AND CONFRONTATION IN THE AGE OF ANXIETY