Lot of traffic from Facebook looking for socialist beer and the British Empire. Weird.
This post is a brief comment on a weird episode in North American history. Basically, the Dominion of Newfoundland went bankrupt at the beginning of the Great Depression. The U.K. sent over an investigatory commission (its full report is here) which bizarrely ignored the fact that the country was, you know, hit badly by the Depression. Unsurprisingly, it recommended against default, since no part of the British Empire had ever defaulted. But it also recognized that Newfoundland could not pay. So it recommended that British taxpayers should assume future deficits ... in return for which the Dominion of Newfoundland would suspend democracy by putting the Governor (for some reason there was no “General” after Governor in the Dominion of Newfoundland) and a six-person Commission in charge of the country.
I managed to cobble together some statistics from various sources. (The link goes to the main one.) Looks like the Commission managed to reform bloody little.
First, British aid essentially matched Newfoundland’s interest payments: $20 million in aid against $21 million in interest. That was not a coincidence. Basically, Newfoundland ran at a primary surplus, just as it would have done had the country just up and defaulted.
Second, the territory’s finances began to recover in 1935. (Page 390.) It would be nice to think that this was due to putting steely-eyed incorruptible Britons in charge of the financial system. Instead it seems to have come almost entirely due to an increase in customs revenue ... less than the increase in trade. Customs revenue went up 32% because imports went up 74%. That is, the economy recovered and so did revenues.
And what drove the economic recovery? Well, iron exports started to increase in 1935 and skyrocketed in 1937 ... driven by exports to Germany. Oh boy. More seriously, Newfoundland’s exports recovered because of the U.S. devaluation in 1933-34. (Newfoundland used the dollar pegged one-to-one to the U.S. dollar; see comments.) The dollar plunged from £0.28 when Roosevelt took office in March 1933 to £0.20 when it finally settled down at the beginning of 1935.
Third, public services did not really get better. Infant mortality skyrocketed from 106 per 1,000 in 1933 to 123 by 1937, before suddenly (and weirdly) plunging to 93 in 1938 and then rising back . (Page 258; it was 40 in the United States.) School enrollment went up a bit, from 67% in 1933 to 69% by 1940. (Page 67.) I think it would be unfair to blame the Commission for the first but also find it hard to credit them for the second. Would a self-governing country have done worse?
In short, the episode seems bizarre and pointless. I can understand why Newfoundland might have preferred British aid to default. And I can understand why Britain did want a Dominion to default and go off with its own unilateral devaluation. But the Newfoundland government had to spend as if it had defaulted and recovery happened because the United States devalued. And having British bureaucrats take over the government appears to have accomplished little. So as a lesson in the merits of modern-day imperialism, it is not.
Any implications for the European Union are left as an exercise for the reader.