“Our Way is with John Bull”: The Irony of Canadian Imperial Economic Diplomacy, 1930-1933 by Patrick Bruce Rayfuse A thesis submitted to the Faculty of Graduate and Postdoctoral Affairs in partial fulfillment of the requirements for the degree of Master of Arts in History Carleton University Ottawa, Ontario © 2014, Patrick Bruce Rayfuse Abstract In response to the Great Depression and an increasingly protectionist United States, both major political parties in Canada in 1930 declared their intentions to switch trade from the United States to the British Empire. A slogan carried in the Globe in the 1930 election campaign was “Let Uncle Sam Go His Own Way – Our Way is With John Bull.” The Conservatives, led by the reputed anglophile, Richard Bedford Bennett won the election. The centrepiece of his Empire economic strategy was an Imperial Economic Conference hosted in Ottawa in the summer of 1932. Ironically, however, within six months of that Conference, Bennett was seeking a trade agreement with the United States as well as the means to conduct an independent monetary policy. To see how such ironies arise in foreign economic policy, this thesis examines Canadian experience in the 1930-1933 period, drawing upon international relations theoretical literature. As predicted by realist theory, far from exhibiting cooperative behaviour, the governments of both Canada and Britain attempted to maximize their own gains from a trade deal. The Ottawa Conference thus marked a further weakening of Empire bonds. ii Acknowledgements The author would like to thank Professor Matthew Bellamy whose advice and encouragement made completion of this thesis possible. iii Table of Contents Abstract ii Acknowledgements iii Table of Contents iv Introduction: The Ironic Decade 1 1. Historiography: A Small Power in an Anarchic World 11 2. Canada First, Then the Empire 61 3. Sparks from the Rim: The Imperial Conference of 1930 101 4. The 1932 Imperial Economic Conference: Opportunities Missed and 143 Conversations Postponed 5. After Ottawa: The Turn to America 194 Conclusion: The Irony of Imperial Conference Diplomacy 218 Bibliography 230 iv Introduction The Ironic Decade Some years ago, James Eayrs took W.H. Auden’s phrase “a low, dishonest decade” in the title of his survey of Canada’s external policy in the 1930s.1 A survey of Canada’s foreign economic policy in that period could perhaps be more accurately entitled “An Ironic Decade,” in that so often the outcome of policies were different from or even contrary to the declared intent of the policy. It was a decade that began with an election in which both major political parties competed with each other in declaring their intentions to build a closer economic relationship with the British Empire2 and to reduce Canada’s reliance on ties to the United States. For several days leading up to the election the Liberal-supporting Globe ran a banner front-page headline declaring, “Let Uncle Sam Go His Own Way – Our Way is With John Bull.”3 The 1930 election was won by the Conservative Party, led by the reputed anglophile, Richard Bedford Bennett. The centrepiece of his Empire economic strategy was to be an Imperial Economic Conference hosted in Ottawa in the summer of 1932. Yet, within six months of that Conference, Bennett publicly committed to seeking a trade agreement with the United States. By the end of the decade Canada had signed two trade-liberalizing agreements with the United States.4 Nor was trade the only ironic aspect of Canadian economic policy of the time. It was a time when, as the 1 James Eayrs, “’A Low, Dishonest Decade’: Aspects of Canadian External Policy, 1931-1939,” in Hugh L. Keenleyside et al. The Growth of Canadian Policies in External Affairs (Durham, North Carolina: Duke University Press, 1960), 59-80. The phrase is, of course, from Auden`s poem “September 1, 1939” – “As the clever hopes expire/Of a low dishonest decade,” The Collected Poetry of W.H. Auden (New York: Random House, 1945), 57. 2 The terminology used to refer to the collectivity that included Great Britain, the self-governing dominions, such as Canada, the colonies and dependent territories, and territories of intermediate status, such as India, was constantly changing in the inter-war period. Officially the dominions were part of a commonwealth. The term British Empire, however, continued to be used, especially in every-day parlance, to refer to the collectivity. See Ian M. Drummond, British Economic Policy and the Empire, 1919-1939 (London: George Allen and Unwin Ltd. 1972), 9. In this thesis the terms Commonwealth and Empire will be used interchangeably. 3 See Globe, 14-22 July 1930, 1. 4 These were the trade agreements of 1935 and 1938. See Ina M. Drummond and Norman Hillmer, Negotiating Freer Trade: The United Kingdom, the United States, Canada and the Trade Agreements of 1938 (Waterloo, Ont.: Wilfrid Laurier University Press, 1989). 1 international gold standard was breaking down, Prime Minister Bennett would proclaim Canada’s determination to adhere to it – not realizing that Canada had already effectively abandoned it. Under Prime Minister Bennett, the supposedly ardent imperialist and adherent to the gold standard, Canada would acquire a central bank, the instrument it needed to conduct independent monetary policy. To see how such ironies arise in foreign economic policy, this thesis examines the Canadian experience in the 1930-1933 period, an experience that greatly shaped Canadian policy for the rest of the decade and beyond. In looking at the sources of these ironies, this thesis will draw upon several strains of the international relations theoretical literature. International relations theory as an academic discipline originated in the period between the two World Wars – Alfred Zimmern became the first professor of international relations anywhere in the world in 1919, when he was appointed to the Woodrow Wilson Chair at the University College of Wales, Aberystwyth.5 Ironies, of course, abound in the development of international relations theory as an academic discipline. Academic interest in international relations began with the hope, arising out of the horrors of the First World War, that a peaceful world order could be constructed if human reason was applied to the study of the causes of war and to the design of an international system based not on the “balance of power” but rather on collective security and the rule of law. And since war arose at least partly out of economic causes, the search for a more just economic order was part of the quest for a more peaceful world. This came to be called the “idealist” or “utopian” vision of international relations.6 5 Paul Rich, “Alfred Zimmern’s Cautious Idealism: The League of Nations, International Education, and the Commonwealth,” in Peter Wilson and David Long (eds.), Thinkers of the Twenty-Years’ Crisis: Inter-war Idealism Reassessed (Oxford, New York: Clarendon Press, Oxford University Press, 1995), 79. 6 Peter Wilson, “Introduction: The Twenty Years’ Crisis and the Category of ‘Idealism’ in International Relations,” in Wilson and Long, 1-24. 2 On the political-military side of international relations, new procedures and mechanisms were deemed necessary to the establishment of this more just, peaceful order. On the economic side, however, success was thought to lie in the re-establishment of what was sometimes seen as the golden age of the pre-war order, and especially of the international gold standard. Thus, when studying the economic aspects of international relations in the interwar period, “It is,” according to Robert Keohane and Joseph Nye, “difficult to understand later events without realizing that the minds of officials in the late 1920s and even thereafter were cluttered with images of the prewar system, which many saw as an ideal to which the world should return.”7 The attempt to construct a new international order led to a series of international meetings and conferences. The first decade after the Great War thus became the age of the international conference. On the political-security side, the League of Nations was established, albeit without the participation of the United States. Conferences were held in Washington in 1922, London in 1930 and in Geneva in 1932-1933 all with the intention of reducing arms. Pacts settling borders and outlawing war as a means of dispute settlement were signed in 1925 (Locarno Treaties) and 1928 (the Kellogg-Briand Pact). On the economic side, conferences were held in Brussels in 1920, in Genoa in 1922 and in Geneva in 1927, all in the attempt to re-establish a monetary and trade system that would support peace. The Dawes Plan in 1924, the Young Plan in 1930 and the Lausanne Agreement of 1932 appeared to solve the difficulties arising out of German reparations and inter-Allied war debts. With the return of Britain to the gold standard in 1925, and of France and Germany in 1928, the issue of the world monetary regime appeared to have been settled. Thus, by the mid-1920s, prosperity appeared to be returning to Europe and to the 7 Robert O. Keohane and Joseph S. Nye, Power and Interdependence Fourth Edition (Boston: Longman, (1977) 2012), 58. 3 world economy, largely underwritten by American lending.8 Despite the protestations in favour of and attempts to produce a cooperative international economic system, the interwar years have been called “the most conflictual in modern economic history.”9 The economic conflicts were of course a prelude to the military conflict that ended the decade. It is surely ironic