A Year of Discovery

As 1958 dawned amid economic thunderheads rolling in from the South, the Toronto Star grimly warned Canadians: "Major recession has already set in. The bases for confidence in the immediate future are flimsy." At first reading there was indeed cause for worry. By tradition Canada follows the U.S. economy, and signs seemed to indicate that she would follow the U.S. into recession. Factories were on short time, unemployment was climbing toward a postwar peak, and the stock market was a growling bear, with prices near the lowest levels in a year.

The year proved the gloomsayers wrong. Just as the U.S. learned to under stand its new economy, so Canadians discovered that their young, dynamic land was increasingly able to stand on its own feet. Canada did not tumble into the V-shaped chasm that threatened briefly to trap the U.S. economy. If anything, Canada's recession was milder than the slump in the U.S. Except in the winter months, unemployment hit a smaller part of the working force in Canada. Industrial production sagged less sharply, recovered earlier. At year's end Canadians added up a new $32 billion record for Gross National Product.

In recession, Canada's own underdevelopment was one of its biggest assets. Even giant projects get lost in the huge U.S. economy. In Canada's relatively small economy, the sheer momentum of big basic projects (TransCanada gas pipeline, St. Lawrence Seaway) kept payrolls and profits at near-record levels. Unlike the U.S. Government, Prime Minister John Diefenbaker's Tory government found it feasible to finance antirecession measures. Tax cuts and increased social-welfare payments encouraged consumers to buy at record rates. A $350 million government mortgage-loan program pushed housing to an alltime peak (160,000 starts) and touched off subsidiary booms in a dozen supply industries. A good farm and fishery year pushed exports of wheat, cattle and salmon to high levels, kept foreign money flowing in.

The lessons of 1958 did not mean that 1959 will be all beer and skittles. Wintertime unemployment is a major problem; so is a wage-price inflation. But the year showed--and Canadians understood, as demonstrated by new highs for the Toronto stock market in 1958--that the U.S. has a strong, increasingly independent neighbor to the north, whose past growth is only a hint of its future promise.

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