Prairie Farm Debt and the Financial Crisis of 1914

THE OUTBREAK OF WAR in August 1914 punctured Canada's golden age of prosperity. It marked a turning point in Canadian history, though there were plenty of portents that an economic crisis was pending. The cracks inthe economic edifice were obvious in one of the most dynamic sectors prairie farming. The crisis of 1914, and the financial stress which accompanied it, seriously aggravated the problem of farm debt. Prairie provinces and the federal government were confronted with a financial crisis which foreshadowed later events in the 195os. It is surprising that this episode should go little noticed by historians. Not only was it the first massive financially induced crisis since 1873, but also it exemplified clearly the prairie and national status in the world economy as major debtors, and the perils of such a status when world financial markets slumped. Canada and the west were, until •9•4, the great beneficiaries of overseas finance, generated largely in London. Huge sums of money found their way from Europe to the hands of prairie farmers. This network proved successful instimulating expansion for two decades prior to the war, albeit with occasional hiccups. But when capital markets froze in late July 19 • 4, the western economy went practically bust in a matter of weeks. Regional expansion of the prairie staple economy required outside investment: local savings were simply insufficient to fuel farm investment. This meant borrowing from capital surplus regions of the country, such as the east, and from abroad. The age of western expansion coincided with a period of considerable innovation and