Early Twentieth Century Business Cycles in Canada

Abstract

Canada's economic development during the first two decades of the twentieth century has been examined intensively by such writers as Viner, Meier, and Ingram. Viner claimed that Canadian experience from 1900–1913 clearly demonstrated the working of the classic specie flow mechanism and the international operation of the quantity theory of money. Meier re-examined the period, and in the light of additional evidence concluded that dynamic forces of economic development (expansion of the wheat economy, and later capital inflows) dominated the Canadian record during the period. Ingram also argued that rapid expansion of the economy after 1900 created investment opportunities and attracted an inflow of foreign funds that was closely linked to the development boom. More recently, Borts has suggested an important role for export prices in inaugurating the era of expansion.This emphasis on long-run economic performance has detracted attention from short-run variations in the Canadian economy during the pre-war period. Some work in this area was attempted by Taylor and Michell, who built a composite annual index of prosperity to define cyclical swings in a rough way, and by Mitchell and Thorp who provided an annual sketch of conditions in several countries including Canada.The precise dating of business cycle turning points in Canada owes much to the pioneering work of Chambers. He has produced tentative reference cycle turning points for the last quarter of the nineteenth century, and for the period from 1919 to 1955. The only portion of the post-Confederation century yet to be analysed in this manner is therefore the period from 1900 to 1919.