Although the book doesn’t make the connection, it’s hard to read Barry Cahill’s new biography of mid-twentieth century politician J.L. Ilsley without drawing parallels with events unfolding today.
James Lorimer Ilsley, a Nova Scotia Liberal from the Annapolis Valley, was federal Minister of Finance during World War II. As a powerful member of Mackenzie King’s cabinet he built a reputation as the one responsible for making sure Canada had the financial wherewithal to contribute significantly to the war effort.
Just as with the current battle against COVID-19, the federal government of the day pulled out all the fiscal stops to confront the war challenge. Ilsley took over Finance in 1940 and under his guidance Canada went, in Barry Cahill’s words “from the laissez-faireism of balanced budgets and low government spending to Keynesian economics with its deficit financing, higher government spending, higher taxation and wholesale government intervention in the economy.”
Even more than in the current health crisis, waging war required the centralization of fiscal power in Ottawa, a task that fell to Ilsley. Raising enough revenue without subjecting the populace to double taxation meant convincing provincial governments to hand over personal and corporate income taxation and succession duties to the feds. Ilsley accomplished this by getting the provinces to sign onto tax rental agreements, surrendering those tax fields to Ottawa in return for federal subsidies.
Ilsley maintained that the tax rental agreements were essential to financing the war. They also had made possible unemployment insurance and the “baby bonus,” beginnings of an expanded welfare state. And the principle behind the agreements was a precursor to equalization, which despite some detractors has done as much as anything to hold the country together.
While Ilsley’s wartime achievements are interesting, it’s his post-war story that resonates with current events. Ilsley was not prepared to resume the old pre-war normal. He believed that Ottawa’s exclusive wartime control over income taxes and succession duties should extend to peacetime in order “to solve Canada’s post-war economic and financial problems.” In today’s parlance, he wanted to ‘build back better.’
The Liberal campaign slogan for the 1945 election – “Vote Liberal and Keep Building a New Social Order for Canada” – was in that vein. Many scholars have argued that slogan was empty rhetoric, successfully designed to ward off a threat from the left posed by Tommy Douglas and the CCF. But based on his subsequent actions, Ilsley seems to have taken the promise seriously, an attitude that may have led to his political demise.
Whether Ilsley was more committed than MacKenzie King and other members of the Liberal government is a matter for speculation because, as Cahill points out, “the tragic loss of his entire archive sometime after his death in 1967” leaves just the public record and the memoirs and papers of others.
What we know from those various sources is that King, the forever Prime Minister, did not like Ilsley, finding him “temperamental, weak and often on edge of emotional breakdown.” We know that at least part of this description was validated by Ilsley himself, who shortly after his retirement from politics spoke publicly of having several times been close to a “nervous breakdown.”
Cahill also reports that in 1944, when King was bedevilled by the controversy over conscription to increase troop strength, some members of cabinet were ready to replace King with Ilsley. King survived that crisis, but as he prepared to retire after nearly 30 years at the head of the Liberal party he did his best to ensure that Ilsley would not be his successor.
King wanted Louis St. Laurent, someone who, in Cahill’s judgment, would have lost to Ilsley in a leadership race. But by the time King stepped down in 1948, to be replaced by St. Laurent, Ilsley had left federal politics on his way to a new career as chief justice of Nova Scotia.
A full understanding how and why Ilsley went from heir apparent to the political wilderness in the space of a few years is hampered by the regrettable lack of personal records. But Cahill puts a lot of emphasis on the disappointing outcome of the Conference on Reconstruction that took place in August of 1945, just as the finale of World War II was playing out with the dropping of atomic bombs on Japan.
Ilsley went into that meeting looking for agreement from the provinces on a new fiscal framework that would help to finance the “New Social Order”- including national health insurance and better pensions for the elderly. He encountered fierce opposition from the Tory government of Ontario and Maurice Duplessis, the nationalistic Quebec Premier.
Cahill doesn’t seem to share Ilsley’s passion for an expanded welfare state led by a strong national government. He blames Ilsley’s take-it-or-leave-it approach to negotiating with the provinces for the failure of the conference. Others may argue that the project was a the victim of the political ambitions of Duplessis and Ontario Premier George Drew – soon to become federal Leader of the Opposition – steamrolling over the weak commitment to change of the King government.
Whatever the reason, the bold reconstruction plans of 1945 were abandoned, postponed or watered down. Ilsley was shuffled out of the finance portfolio in 1946 and left politics a year later. More than a decade would pass before the tax agreements evolved into the equalization program and it took over 20 years before national health insurance was introduced. What remained of “The New Social Order” took a generation to come about.
For what it’s worth, Ilsley has been modestly honoured in his home province with a school in Halifax bearing his name, and there’s an Ilsley Avenue in the Burnside industrial park. But his place in Canadian history has been under-appreciated. Both his successful role in funding Canada at war and his less successful effort to create a more equitable peace deserve greater attention. Barry Cahill’s J.L. Ilsley: A Political Biography (Formac, Halifax, 2021) has added to our understanding of this important figure at a time in our history when his story has resonance.