Winning the Peace: Canadian Economic and Political Security, 1943-1948 by Philippe Lagasse A thesis submitted to the Faculty of Graduate Studies and Research in partial fulfillment of the requirements for the degree of Doctor of Philosophy Department of Political Science Carleton University Ottawa, Ontario December 2007 © 2007 Philippe Lagasse Library and Bibliotheque et 1*1 Archives Canada Archives Canada Published Heritage Direction du Branch Patrimoine de I'edition 395 Wellington Street 395, rue Wellington Ottawa ON K1A0N4 Ottawa ON K1A0N4 Canada Canada Your file Votre reference ISBN: 978-0-494-40527-7 Our file Notre reference ISBN: 978-0-494-40527-7 NOTICE: AVIS: The author has granted a non­ L'auteur a accorde une licence non exclusive exclusive license allowing Library permettant a la Bibliotheque et Archives and Archives Canada to reproduce, Canada de reproduire, publier, archiver, publish, archive, preserve, conserve, sauvegarder, conserver, transmettre au public communicate to the public by par telecommunication ou par Plntemet, prefer, telecommunication or on the Internet, distribuer et vendre des theses partout dans loan, distribute and sell theses le monde, a des fins commerciales ou autres, worldwide, for commercial or non­ sur support microforme, papier, electronique commercial purposes, in microform, et/ou autres formats. paper, electronic and/or any other formats. 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Canada Abstract This dissertation develops a novel concept of national economic security by adapting the idea of national security devised by Barry Buzan. While retaining Buzan's notion that states are threatened militarily, politically, socially, and ecologically, the new framework proposes that states also face economic threats to their security and that these threats target a specific component of the state, the economic base. Recognizing this economic aspect of national security, it is argued, provides a fuller understanding of national security. The dissertation applies its framework to the case of Canada between 1943-1948. In line with Buzan's notion of national security, it is shown that Canadian decisionmakers perceived a political threat to their state. When applying the framework developed in this dissertation, it is further demonstrated that decisionmakers identified purely economic threats to the Canadian state as the Second World War came to an end. Decisionmakers feared that mass inflation threatened to push Canada's postwar economy into a severe recession, as happened in the aftermath of the First World War. Were a severe economic downturn to occur, furthermore, decisionmakers feared that Canadians would abandon Canada's traditional ideologies of liberal-democratic capitalism in favour of a socialist form of government. Were either of these fears realized, Canada win the war but losing the peace. To guard against these outcomes, the government of William Lyon Mackenzie King implemented a set of postwar reconstruction polices designed to protect the Canada's peacetime economy against a severe recession and preserve the public's fragile faith in the free market. Rather than merely moving Canada back to a peacetime 1 economy, it is proposed that the King government's reconstruction policies were fashioned to protect Canada's national economic and political security. The dissertation then traces the implementation of the King government's reconstruction measures from the end of the Second World War to 1948. It is shown that, despite a number of setbacks and difficulties, the government's reconstruction policies met their objectives by protecting the postwar Canadian economy and the public's acceptance of the re­ established free market. Accordingly, the dissertation concludes that the government's reconstruction policies were instrumental in winning the peace for Canada. ii Acknowledgements Many are owed thanks for their support and help during the writing of this dissertation. Carleton University provided generous financial assistance throughout my doctoral studies, including a five-year tuition remission scholarship endowed by the late Edward Bower Carty. My research was funded by a Canada Graduate Scholarship (Doctoral), awarded in 2004 by the Social Science and Humanities Research Council. My thesis supervisor, Norman Hillmer, was always available to offer advice, guidance, and encouragement while the dissertation progressed. Brian Schmidt counseled me on the theoretical framework, and Harald von Riekhoff wisely stressed the value of limiting the dissertation's girth. Many former professors, including Joel Sokolsky, Peter Emberley, and Randall Germain, clarified my understanding of a dissertation's function. My mother, Renee Boire Lagasse, soothed my pessimism and patiently listened to my repeated rants and lamentations. Jacques Lagasse, my father, kept me focused and ensured that I was free of financial stress. Lastly, my wife, Marie-Eve Desrosiers, loved and fulfilled me during the last year and a half of this endeavor. iii Table of Contents Abstract i Acknowledgements iii Table of Contents iv Introduction: Canadian Economic and Political Security, 1943-1948 1 I. Dissertation Type 5 II. Originality 6 III. Scope 10 IV. Sources and Data Selection 13 V. Chapter Overviews 14 1) National Security and National Economies 17 1.1) Schools and Theories ofNational Security 18 1.2) Refining Comprehensive Theories ofNational Security and National Economic Security 71 1.3) Canada, 1943-1948: A National Economic and Political Security Case Study 85 2) Securitizing Canadian Postwar Reconstruction 95 2.1) Capitalism, Liberal-Democracy, and the Canadian State 99 2.2) Securitizing Liberal-Democratic Capitalism 103 2.3) Securitizing the Postwar Economic Base 128 2.4) Reconversion, Stabilization, and Reform 150 3) Settling the Reconstruction Debate, January 1943 - August 1945 168 3.1) The Reformist Push, 1943-1944 170 3.2) Reconversion and Stabilization to the Fore, 1944-1945 194 3.3) Further Reform Blocked, Summer 1945 209 4) Implementing Reconstruction Policy, 1945-1946 220 4.1) Reconstruction as Challenge and Emergency Condition 222 4.2) From Concern to Enthusiasm, September 1945 - February 1946 231 4.3) Curbing the Enthusiasm, March-December 1946 244 5) Success Amidst Consternation, 1947-1948 268 5.1) Abbott's Accelerated Approach, 1947 270 5.2) Climax and Denouement, January-October 1948 292 5.3) A Peace Won 302 Conclusion: Canadian Reconstruction and National Security 306 Bibliography 319 iv Introduction Canadian Economic and Political Security, 1943-1948 Economic issues occupy a controversial place in the study of national security. Though realist, neo-realist, neo-liberal, and constructivist scholars of international relations acknowledged that states pursue economic interests, and that they seek to protect or enhance their economic standing, scholars disagree over whether states treat the protection their economies or resources as matters of national security. Economic security skeptics argue that states cannot defend their economies in a fashion that resembles the protection of their territory, interests, or sovereignty, the traditional concerns of state security. National economies, they contend, are too risk-prone and fluid to be defended or threatened. Economic security adherents, on the other hand, argue that national economies are essential components of states and that, as such, states do work to protect and defend their economies. For adherents, the history of modern international relations is filled with examples of economic competition, economic warfare, and the defence of national economies by states. Because adherents disagree about exactly how state's defend their national economies and precisely how states are threatened economically, however, the debate is at an impasse. To help move this debate forward, this dissertation addresses two research questions: • Are states threatened economically? • If so, how are they threatened economically, and how do we recognize when economic threats to states are addressed as national security issues? 1 To answer these questions, the dissertation first adapts, then applies, a national security framework developed by Barry Buzan in People, States and Fear} For Buzan, national security involves the protection of the state's essential components. These components are the idea of the state, the institutions of the state, and the physical base of the state. He also shows that these elements are threatened in five ways: militarily, politically, ecologically, socially, and economically. According to Buzan, states are only threatened economically when economic conditions undermine other aspects of their national security, such as