Boom to Bust: The Canadian Economy, 1945–1982

From war factories to family cars

During the Second World War, Canada's factories built ships, planes and trucks. In 1945 many people feared that when war orders stopped, the unemployment of the 1930s would return. Instead, factories converted to making cars, fridges, washing machines and televisions, and Canadians, who had saved money during the war, were eager to buy them.

From the late 1940s to the early 1970s, Canada had a long economic boom. Wages rose, more families owned homes and cars, and a growing middle class filled the new suburbs. Then, in the 1970s, the boom ran into trouble. In this lesson you will trace both the boom and the bust, and explain how they affected different Canadians.

Unions and the Rand Formula

In 1945, thousands of workers at the Ford plant in Windsor, Ontario, went on strike for 99 days. A key issue was union security: the union wanted to be sure it had enough money and members to bargain with a large company.

The dispute was sent to Supreme Court Justice Ivan Rand. In January 1946, he decided that every worker covered by a union contract must pay union dues, because every worker gets the benefits the union wins, but no worker can be forced to join the union. This became known as the Rand Formula, and it spread across Canada.

Consequences: unions became financially stable and grew stronger. Union membership grew in the 1950s and 1960s, and in 1967 federal public servants gained the right to bargain collectively. Unions won higher wages, pensions, paid vacations and safer workplaces, which helped build the middle class. Some employers and workers objected to paying dues to a union they did not want to join.

Consumers, credit and the shopping mall

The boom created a consumer society: an economy and culture built around buying goods.

• Advertising on radio, in magazines and soon on television encouraged people to buy the newest products.
• Shopping centres were built near the new suburbs. Park Royal in West Vancouver, opened in 1950, is often called Canada's first shopping centre.
• Credit made it possible to buy now and pay later. Department stores had offered credit accounts for years; in 1968, a group of Canadian banks launched the Chargex card, which later became Visa.

Credit helped families afford big purchases, but it also meant more household debt, which became painful when interest rates rose sharply in the early 1980s.

Resources, pipelines and the North

• After the Leduc oil strike in 1947, Alberta became a major oil and gas producer. Pipelines carried oil and gas to markets in Canada and the U.S. The fight over financing the TransCanada natural gas pipeline (the Pipeline Debate of 1956) helped defeat the Liberal government in 1957.
• Mining grew across the North and the Shield: iron ore in Labrador and Quebec, uranium at Elliot Lake in Ontario, and other minerals. Mines brought jobs, but they also brought roads, pollution and outsiders onto Indigenous lands, often without consultation.
• Inuit art became a source of income for many Inuit communities. Artists in Kinngait (Cape Dorset) formed a co-operative, the West Baffin Eskimo Co-operative, in 1959; the Hudson's Bay Company and government programs were for years major buyers and sellers of Inuit carvings and prints in southern markets.

Who owns Canada's economy?

American companies invested heavily in Canada after the war. Many opened branch plants: Canadian factories owned by a parent company in the U.S. Branch plants created jobs, but they raised hard questions:

• Decisions about research, new products and closing plants were made in the U.S.
• Much of the profit flowed back to the U.S.
• Canadian economic independence seemed at risk.

Reports such as the Watkins Report (1968) and the Gray Report (1972) studied foreign ownership. In response, the government created the Foreign Investment Review Agency (FIRA) in 1973 to review foreign takeovers, and Petro-Canada, a government-owned oil company, in 1975.

The 1970s: oil shocks and stagflation

In 1973, Arab oil-producing countries cut oil supplies to countries that supported Israel in the October war. World oil prices roughly quadrupled. A second price shock came in 1979 after the revolution in Iran.

Canada was affected in two very different ways: oil-producing Alberta boomed, while oil-consuming Ontario and Quebec faced higher costs. High energy prices helped cause stagflation: inflation (rising prices) at the same time as slow growth and rising unemployment. Economists had thought those two rarely happened together.

• In 1975 the federal government introduced wage and price controls through the Anti-Inflation Board, limiting how much wages and prices could rise.
• In 1980 the federal government introduced the National Energy Program (NEP) to increase Canadian ownership of the oil industry and keep oil prices in Canada lower than world prices. Many Albertans saw it as Ottawa taking control of their resources, and it deepened Western alienation.
• In 1981–1982, interest rates rose above 20 percent to fight inflation. The result was a severe recession: businesses failed, families lost homes, and unemployment rose to about 12 percent.