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of mining and pulp and paper exports, kept Canada afloat economically

until the global depression of the 1930s.

Depression and War

The depression of the 1930s was probably the end of the last upswing based

on investment in railways and of the first upswing based on investment in

paper, minerals, and consumer capital goods [cars, wash machines, radios,

and other electricity dependent production and consumption goods]. The

expansion of real GDP having outrun the expansion of the gold base of

of the monetary system, during this remarkable, double Kondratief recovery

and boom, a shortage of currency was given as one cause of the depression.

Accordingly, the Gold Standard was abandoned, globally. This was

accompanied by competitive devaluation of currencies and increasing

protectionism, as countries tried to export unemployment with so-called

“begger thy neighbour” policies.

Perhaps the severity of the depression was passing by 1939, but it was

the Second World War that brought a return to prosperity in North America.

It brought devastation to Europe and Japan.

After the War

Following the War there was a concerted effort, through the International

Monetary Fund, the World Bank, and the GATT,

to prevent the disorderly economic nationalism of the Nineteen Thirties.

But, more importantly, the Cold War set in. North America, having

emerged from the War industrially intact, found itself facing great demand

for its goods. The United States was wealthy enough to lend the

money needed to buy them. [This was the source of "Euro dollars"]

The U.S.’s consequent great expansion required

even more natural resources that its great expanse held. It developed

new sources in Canada, Latin America, and the Middle East. In this

however, the politics of the Cold War had as much influence as

merely economic concerns.

It has to be noted here that the GATT was successful in reducing tariffs

around the world, remarkably successful. By the time of the Canada-

United States Free Trade Agreement in the late 1980s, fully 80% of the

formal tariff barriers to trade between the two countries had been

removed. However, the reduction in tariffs was accompanied by

a global proliferation of non-tariff

barriers: quotas, voluntary export restraints, safety regulations

government procurment quotas, labour regulations, content regulations

subsidies and financial supports in the form of unemployment, housing

and social policies. Out of this “New Mercantilism” emerged the

United States – Canada Free Trade Agreement.

For Canada the period was marked by a resource boom, and an increase in

U.S. ownership of Canadian industry. Manufactured exports to the U.S.

increased, particularly by way of the 1950s “Auto Pact”, which generated

a common continental market in automobile production. In this period the

value of the Canadian dollar was controlled by the Balance of Payments

modified by the Bank of Canada’s ability to alter the money supply.

Under the pressures of the time it rose to $1.10 (U.S.) Canada became

the second richest country [measured by average standard of living] in the

world.

The effect of this, of course, was that Imperialism, Nationalism, and

Regionalism – the three corners of the 19th century Canadian Triangle – had

transmogrified into Continentalism, Nationalism, and Regionalism; with

Regionalism supported by Continentalism though differently from the way

that Nationalism had been supported by Imperialism in the late nineteenth

century.

Eventually Europe and Japan recovered. Europe began the process of forming

a single, continental European economy, and Britain chose to join. This

left Canada in a dilemna: to stay with Britain, or make common cause with

the United States in a North American Common Market. Recovery in Europe

and Japan brought an end to expansion in North America, and a recession

between 1957 and 1962. Thereafter North America expanded again on the

demand generated by industrial expansion in Europe, Asia, and other

rapidly developing countries.

The Relative Decline of North America

The United States, caught up in the cold War, and eventually the war

in Asia, fell behind Europe and Japan in economic growth and growth of

productivity. The excesses of currency expansion, as the world tested

fiat monetary systems, led to inflation, as did the inflationary financing

of the Vietnam War, and the United States response to the OPEC oil cartel.

[The source of "Petro Dollars"]

Then it was that the United States continuing deficit in international

trade, emerging from the advances of Europe and Japan, was funded by

capital imports as foreign interests purchased United States concerns. The

capital inflow was not enough to prevent the eventual devaluation of

the United States dollar, and the end of the so-called Breton Woods system

in which the United States dollar was used as the reserve currency of

the world, just as gold had been used under the Gold Standard.

[Yet another factor in the importance of Euro and Petro Dollars.]

The Canadian dollar fell with the American dollar. Indeed, as

United States investment leaned toward Asia, away from Canada, and Canada

inflated its currency supply [and its rate of inflation] beyond that of

the United

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