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Though he tried, Diefenbaker could not wholly conceal Canada's economic difficulties during the 1962 campaign. Canada's dollar, at a high of $1.06 U.S., had long been a hurdle to Canadian exporters. Instead of devaluing it (as the Liberals urged), the Government had uncertainly talked it down. Investors started pulling out. During the five months preceding the election, Canada's foreign exchange reserves plummeted $560 million, reaching a crisis low of $1.1 billion—despite Diefenbaker's panicked mid-campaign devaluation and pegging of the dollar to 92½ cents U.S. If the drain had continued an other three or four weeks, Canada conceivably would have become an international bankrupt.
Six days after the election, Diefenbaker announced a program of mild austerity at home and a massive borrowing from abroad, claiming that the crisis had become serious "only in very recent days.'' The U.S., Britain and the International Monetary Fund threw a line of credit and a loan for $1.05 billion. To cap his program, Diefenbaker slapped surcharges atop Canada's tariffs—in effect, punishing the neighbors that had bailed Canada out. But the flighty capital returned, and Canada's economy—aided by devaluation on the one hand and high tariffs on the other—turned in an impressive growth rate of 8% for the year 1962, higher than any other nation in the Atlantic Alliance.
Liberal Plan. The new Pearson Government is, by common consent, better staffed with Cabinet talent, and has a clearer view of the direction it intends to take than any previous incoming Canadian administration. It has thought out its position on defense, on foreign affairs, on biculturalism, and it has done its homework in economics.
Canada's economy, as every Canadian likes to say, is "basically sound." But its rate of unemployment (8.4% in February) is the highest of any industrialized nation in the West. Its fundamental trou ble is that it is a "branch-plant economy.'' Canada desperately needs a larger market than its 18.8 million home consumers.
Though Canada has a trade surplus with almost every nation but the U.S., the interest and dividends on U.S. investment in Canada—$570 million last year (boosted another $246 million by management services to mostly U.S.-owned firms) —make up by far the largest part of an annual balance-of-payments deficit that last year totaled $848 million.
Walter Gordon, 57, the professorial Toronto management consultant who is virtually certain to become Pearson's Finance Minister, cites the $200 million in parts that the Canadian auto industry imported last year from the U.S. Through tax incentives, Gordon hopes to encourage the industry to make more parts in Canada and export more of them to the U.S.