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1941 – Wage and Price Controls: Managing a Wartime Economy

The Second World War created an almost artificial economy in Canada. When war broke out in 1941, the economy had not yet recovered from the Great Depression. (See 1929 - 1939 —Great Depression.) Unemployment had been high. The war effort required massive government spending and called on hundreds of thousands of workers to make airplanes, ships, tanks and guns. Consumer spending was on the rise. Employment was rising, but because factories gave priority to making war materials, production of certain household goods was low.

These conditions were a recipe for inflation. In 1941, the Canadian government anticipated steep price increases and created the Wartime Prices and Trade Board.

In 1941, the Board imposed a general ceiling on prices, wages and rents. The board also rationed and controlled the production of certain necessary goods such as sugar and gasoline, to ensure that they were distributed fairly. Exports of wool, fish oil and other Canadian goods were controlled.

No one in Canada was untouched by the wage and price controls. Consumers were forced to ration necessary items. Workers had to accept wage freezes—something their unions reacted to angrily by calling for strikes. Employers, on the other hand, benefited from wage freezes but had to deal with the threat of strikes and a labour shortage. Businesses were not happy with price controls but co-operated with government. Entrepreneurs profited from the black market by selling unused ration coupons. Suppliers, merchants and farmers could not set their prices or production according to supply and demand. Landlords had lower incomes because of rent controls.

After the war ended in 1945, the wage and price ceilings were gradually eliminated and, in 1951, the Wartime Prices and Trade Board was dissolved.

Though the controls seemed drastic, they apparently worked. The annual rate of inflation was 6% in 1941, when wage and price controls were imposed.

Between October 1941 and April 1945, prices rose in Canada by a total of only 3.8%.

Similar controls would be implemented outside of wartime, in 1975. (See 1975—Wage and Price Controls Managed by Anti-Inflation Board.)

Links

Inflation
Source: Bank of Canada
http://www.bankofcanada.ca/en/inflation/index.htm

Latest Release from the CPI
Source: Statistics Canada
http://www.statcan.ca/english/Subjects/Cpi/cpi-en.htm

Your Guide to the Consumer Price Index
Source: Statistics Canada
http://www.statcan.ca/english/freepub/62-557-XIB/free.htm

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