Newfoundland and Labrador in Transition: from Commission of Government to the Present and Beyond: Paper 2

Newfoundland and Labrador in Transition: From Commission of Government to the Present and Beyond: Paper 2 Doug May, Patti Powers, Alton Hollett, and Wade Locke. Prologue To understand the challenges that we as a Province face today, one has to understand how we arrived here. The story, as we understand it, has an arbitrary beginning but is ongoing and therefore there is no conclusion. Moreover, as just noted, this is our understanding but we would no doubt benefit from others’ perspectives. There was the inclination to focus on the “economy” in transition and how it has changed and evolved over the years, but this approach ignores the other parts of our make-up, that is the culture, the geography, the politics and the social relationships and networks that combine and interact to influence the outcomes we describe. To understand the Newfoundland economy transition story, you have to understand the parts and then integrate them into the whole story. Omitting one part or meeting the challenge of one component will fail in the sense that it ignores the impacts on the other parts which are interdependent and important. The insight of economic thought is one of understanding trade-offs and balance amongst alternative choices in the face of constraints. The basic story then involves one around the Province “transitioning” while facing and, in response to various social, geographic and economic challenges. In the Beginning At the beginning of our story around 1932, for much of the population, the economy was substantially a non-cash, subsistence one focused on the salt-fish (cod) trade with Europe and the Caribbean. The fishery at that time was still tied to the British East Coast Country fishery which had existed over the centuries and which had evolved only to the extent that harvesters dealt directly with local merchants who were intermediaries with those on Britain. While we can write about “fishers”, a more accurate description would be the labour provided by fishing families with all hands, including children, on deck since all were involved in harvesting and processing. Families were often very large and therefore children were an important source of labour. More generally, these families were involved in “home production”, that is, any productive activity which kept the family, the extended family or neighbours capable of surviving. General hard work was required for such survival. These self-employed harvesters dealt with local merchants on the “truck” system in which processed salt fish was traded mostly for the manufactured necessities needed for fishing and living; these items might include sails, rope, utensils, clothes, sugar, teas and flour. 1 Given the truck system, the access to cash by fishing families was very limited. Any cash which could be had was likely to be used for church christenings, weddings and funerals. For some of the more successful family enterprises, cash could also be used to order goods from a catalogue or buy consumer goods that were not available in the settlement from the local merchant when visiting a larger community. For the most part, the fishery was inshore and accessible by small boats. This access to the fishery resource coupled with the use of wood to heat the homes, build the wharves, and dry the fish resulted in the settlement of smaller communities located in the bays along the island’s vast shoreline. Given the relative isolation, members of these settlements were often comprised of a small number of extended families. Social bonds were strong and helped to ensure survival under harsh and often varying conditions. Given the nature of the fishery, Newfoundland society, and that of coastal Labrador, was primarily made up of hundreds of small isolated communities (some 1325 in Newfoundland in 1949) called “outports”, mostly only accessible by water. These communities were dispersed over a very wide geographic region, along some 6,000 miles of coastline on the island. Churches played an important role in meeting the spiritual needs of the communities as well as their social life. The church also was involved in education and often in hospital care in the larger communities. Most of the European settlers were from southern Ireland, southern England or France. By this period, the indigenous population was Mi’kmaq, Innu or Inuit. As might be expected from a population dispersed over such a wide geographic, a portion of the population was of mixed ancestry. While the discussion thus far has concentrated on the Newfoundland fishery, the European Labrador fishery had existed before the European Newfoundland fishery starting around the 1540’s with Basque and Breton whalers and fishermen. The rich fisheries in the Labrador waters resulted in fierce and protracted competition amongst many groups. By the 1930’s the Labrador fishery was made up of two groups, those fishing families who lived on land (stationers) and those who came seasonally to Labrador on schooners (floaters). The latter group were based in island communities such as Harbour Grace or Brigus. A characteristic of the fisheries as with other staples, that is, natural resource products intended for export to wealthier and more industrialized economies, was that the value of the exports could vary greatly due to variations in the price of the export or the quantity of the commodity to be exported. Boom/bust cycles were a central characteristic of the export of such commodities and affected fishing families directly but transmitted the economic waves to the general economy. The early 1930’s was a “bust” period for the cod fishery and thus for Newfoundland’s economy. The fisheries’ failure was a major factor in bringing the Dominion to the point of bankruptcy. This cyclical pattern in the value staples exports continues to be a feature in our province’s and national economy today. 2 The cyclical nature of the fisheries economy was sometimes caused by too many fishers catching too much fish causing stocks to decline. The reality of economic uncertainty and an excess supply of labour provided a good motivation to look for other means of a livelihood. While for some families, this circumstance would imply emigration generally to Canada or to the New England states for others it meant searching for alternative employment within the Dominion. The construction of the railway in the latter part of the 19th century provided such alternatives. Jobs such as operating and maintaining the railway as well as building branch lines well into the 1930’s and beyond became available. The railway, which was built across the island along with its numerous branch lines, opened up the island’s interior. In doing so, the island’s other natural resources could be developed. For example, an abundance of forests provided wood for timber and logs for pulp to feed newsprint operations at Grand Falls and Corner Brook. These were model towns with relatively good- paying cash jobs. Similar observations could be made with respect to mining towns such as Buchans, Wabana and Baie Verte. Newfoundland’s and Labrador’s comparative economic advantage rested in its abundance of natural resources. The development of these natural resources and their export to foreign markets was the pattern for the history of the economic development of the Dominion. Most of the manufacturing industries as well as many service industries that existed at this time were tertiary to these natural resource industries. The other interesting characteristic of these natural resource industries related to the primary inputs of capital and labour services. The labour services were primarily provided by local residents with perhaps senior managers coming from outside the country. The financial capital for these operations came from outside developers. In reality, economic theory has identified three primary inputs associated with natural resource exploitation. The third input is the resource itself and its associated income are the “rents” that the resource can secure. While labour collected its labour income, the owners of capital collected not only the capital income but, as normally the case, also the resource rents. This same pattern existed very early on in the fisheries but then changed early on in the 19th century. As the inshore fishery developed, the small amount of fixed assets such as the boat and fishing equipment were supplied by the fishing families. Local merchants managed to secure some of the resource rents although much of the value-added associated with the export to markets rested in the transportation and distribution of the salt-cod in the final European markets. The result was that there were some very rich families associated with the fisheries in London and Poole. The same patterns of economic resource production and export exist to this day. The labour inputs are generally supplied locally while outside capital is used to start development and finance the operation. Resource rents often accrue to the “foreign” owners of the capital. Public support for development is generally related to the number of jobs that can be generated. The expectation of jobs offered by developers becomes a major selling feature to the public and governments. There are some interesting exceptions to this general observation but this would require a more detailed discussion than this paper covers. 3 The island’s urban centre and capital was, and is, St. John’s although there were other principal centres such as Carbonear, Grand Falls, Windsor, Botwood, Bishop Falls, Harbour Grace and Corner Brook that were relatively large in comparison to the smaller outports. In 1949, twenty- five communities had populations of 1,000 or more. In the various communities, merchants, if present, were at the top of the social ladder followed by clergy, doctors and civil servants, such as judges. In 1932, Newfoundland was one of six Dominions in the British Empire which had a British appointed Governor and 27 members elected to the House of Assembly.

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