Alexander Mackenzie’s government did not go well. It was not easy struggling with the “spoilt child of Confederation” (British Columbia), the Pacific railway, the finishing of the Intercolonial, and, not least, the depression of 1874-78. Losing one by-election after another, the Liberal majority sank from seventy-one to forty-two. What mainly brought about the Conservative resurgence, apart from Macdonald himself, was the failure of the Liberal government to do anything about the depression of the 1870s and its effects upon Canada. It may not have been possible to mitigate those effects; that was the position of the finance minister. Sir Richard Cartwright. But the fact that he said he couldn’t (“We have as much power as a set of flies on a wheel and no more”) and believed it did the Liberal party no good at the polls.
Sir John A. Macdonald had been persuaded by a group of Montreal manufacturers to accept the idea of a protective system of higher tariffs, and in the summers of 1876 and 1877 he pushed the idea where he was at his best—at political picnics. Fundamentally, the Liberal leaders were free traders who believed that governments could not tinker with economic laws—this despite the fact that the United States had been tinkering freely with them to protect their home industries; the American high tariff system had been in place since the Civil War. Mackenzie and Cartwright believed that tariffs were a necessity in Canada, not for protection but only because they were the main source of the Dominion government’s revenue—77 per cent of such revenue came from them. (Even in 1900, 73 per cent of federal revenue would still come from tariffs.)
There was a spectrum of opinion across the Liberal party on tariffs. At one end were the free-trade leaders. Others reached towards what was called incidental protection—the point, say 20 per cent, where a tariff began to protect Canadian manufacturers from foreign (mostly American) competition; this position could be said to represent the more metropolitan opinions of the party, of Edward Blake, the Toronto lawyer who would be leader of the Liberal party from 1880 to 1887. But Blake was in and out of the government in the 1870s, and the counsels listened to were those of Mackenzie and Cartwright, who wanted only a revenue tariff—a tariff as low as possible consistent with the government’s revenue needs.
What exacerbated the problem of the 1870s was slaughter selling (what we now call “dumping”) by the Americans. American manufacturers were badly affected by the drying up of their own markets in the depression and found it helpful to sell their goods in Canada, often at less than cost, simply to clear inventory. Edward Gurney, who made stoves in Hamilton, told a House of Commons committee in 1876 that his Buffalo competitors were putting stoves into Canada at half the Canadian price. This was done not only to unload inventory; it also had the incidental purpose of driving Gurney out of business. There is a cartoon in Grip of February 1876 showing a Ganadian factory closed down; in front Uncle Sam is beating Canadian industry, prostrate on the ground, with a large stick (the American protective tariff), while the Canadian’s tariff stick is small, insignificant, and useless. Nearby is Prime Minister Mackenzie, dressed as a policeman, standing idly by with his government truncheon in his hand, ruminating, “Why do I hesitate?” The Grip cartoonist was quite definite as to what was needed. Underneath is written, in large letters, “WANTED— PROTECTION!!”
World History
