The Globe and Mail
John Turley-Ewart is a contributing columnist for The Globe and Mail, a regulatory compliance consultant and a Canadian banking historian.
“Give us a gun,” shouted someone in the front row. The Alberta premier had just announced that Ottawa had blocked attempts to opt out of the Canadian economic order. Provincial government sources told The Globe and Mail Alberta would be defiant. It would ignore federal edicts. Calgary’s mayor said the Alberta government was a “comic opera.”
This isn’t a report on a bleak future, but one from the past. The Globe and Mail’s reporting in August, 1937, depicts a country that feared for its future. Alberta wanted out of the financial system Ottawa presided over.
Almost 90 years on, Albertans will consider their place in the Canadian project in an Oct. 19th vote on the question. The events of 1937, and what led to them, remain instructive.
In 1935, William “Bible Bill” Aberhart mastered the magic of radio and closed the sale with Albertans on a way out of the Depression, drought and dust-bowl-summers that were eroding the people’s resolve. A new economic order based on social credit, seizing the means of finance to distribute millions in “dividends” and credit to Albertans, was the answer according to Aberhart and his Social Credit Party, even if it caused political chaos.
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Aberhart was elected premier to carry out the task and passed legislation to that end in 1937.
The Liberal government led by then-prime minister William Lyon Mackenzie King stood in the way, disallowing Social Credit legislation in August that year. Some Albertans thought it an affront to democracy, and dismissed Canada’s Constitution, the British North America Act, as illegitimate.
Ottawa saw Aberhart and Social Credit as the problem, rather than a symptom of a financial system that ignored the aspirations and needs of Alberta’s people and economy. The Canadian Bankers Association was equally myopic.
It collected intelligence on Social Credit supporters, launched its own propaganda campaign (referred to today as public relations) and, using an advertising firm, covertly hired famous political economist and humorist Stephen Leacock to tour Alberta and deliver lectures on financial literacy to Albertans. Leacock never knew it was the CBA paying his invoices.
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Canadian bankers were not joking, however, when they made clear they would close every bank branch in Alberta and pack up their capital if Aberhart imposed his unconstitutional social credit schemes on them. Boards of Trade across Alberta were beside themselves.
Banking in Canada is a federal jurisdiction, and banks were an easy target for a populist premier such as Aberhart. The Bank Act’s preference then for short-term financing to facilitate liquidity was best suited to Eastern Canada with its large merchants, industries, mixed farming and more predictable prices tied to domestic markets. Loans could be repaid with greater pace.
Alberta’s climate is drought-prone and its primary cash crop, wheat, suffers the vagaries of international markets, making prices less predictable. There was a need for longer-term bank financing to smooth volatility, yet banks were prohibited from mortgage lending at the time.
The Ottawa-mindset in 1935 was to de-risk the banking system. It encouraged consolidation after the First World War and imposed bank inspection to keep banks on the straight and liquid narrow. Long-term loans Albertans wanted were considered a threat to the financial sustainability of the country.
Some in Alberta had hoped that the launch of the Bank of Canada in 1935 would prove a catalyst for change, but ordinary people saw little of it in the financial system they encountered daily in Alberta.
This great showdown between Edmonton and Ottawa in 1937 was a culmination of years-long frustration. Albertans wondered why there must be, as Aberhart repeated, “poverty in the midst of plenty.” Social Credit supporters gave up trying to win change in Ottawa and took matters into their own hands.
That frustration persists. Rather than the world’s hunger for wheat it is its thirst for oil that raises the hopes of a more prosperous Alberta that Ottawa shouldn’t ignore.
In 1937, the Liberal government of the day rightly disallowed Social Credit legislation and neglectfully offered Albertans no material change. Nobody can credibly say Prime Minister Mark Carney is repeating the mistakes of Mackenzie King in the 1930s.
When a man shouted “Give us a gun” on Aug. 17, 1937, Aberhart did not ignore it. He knew there were radicals in his party and even in the front row listening to his speech. “No,” said Aberhart. “Nothing like that. Our action must be constitutional.”