"What if Frederick C. Alderdice had Lost the 1932 Election?"
— Dr. Mike O'Brien, MUN History Professor
Patrick O'Flaherty: "If Alderdice lost, [Sir Richard] Squires and the Liberals would have won. (Let's assume it was a clear victory.) What would he and they have done?
First, I don't think Squires would have bartered away the independence of the country, as Alderdice did. I say this because of Squires's attitude following the events of 1933. He was a sleeveen, for sure, but he was a democrat too and he resented the imposition of the Commission system on the country by the British Government. In 1937 the British official Eric Machtig noted that Squires had told him: 'We Newfoundlanders deeply resent having our franchise taken away from us'. I find this view in other things Squires said.
But the public debt in 1932-3 was approaching $100 million, and the annual interest payment was $5 million. Newfoundland couldn't pay it. Something drastic had to be done. I think Squires, had he won the election, would have adjusted the debt to Newfoundland's advantage (just as Alderdice threatened to do before being talked out of it by London). Many of the loans that went to make up the public debt had interest rates set at between 3.5% and 5.5%; one was 6.5%. Squires would have either (a) converted them to, say, 3%, as in fact the British did in their bailout of Alderdice; or (b) imposed a moratorium on interest payments for a number of years. This was defaulting, of course; but the Newfoundland government had taken very severe measures since 1931 to meet interest payments and so, as the scholar A.F.W. Plumptre said, had 'an honourable case for default'. In 1936 Alberta defaulted on its bonds; why couldn't Newfoundland do the same? (In fact, [Government leader Sir Hugh] Hoyles in the 1860s had 'converted' a loan, so there was a precedent for it in the country's own history.)
What would have happened then? Would the country be 'ruined' in such a scenario, as many feared — or at least said? Would it never again be given credit? I doubt doomsday would have awaited it. For one thing, there would be no likelihood that the value of its currency would fall (as Iceland's did recently) because — luckily! — it used the Canadian dollar. And in any case the history of the world shows that where there is money to be made, even in countries beset with problems far worse than what Newfoundland was experiencing, investors and loansharks will not be slow to come and try to get their hands on some of it. After the Bank Crash of 1894, when you might think caution would be the watchword in financiers' dealings with Newfoundland, Canadian banks raced to St. John's to see what they could rescue from the flotsam. It would likely have been the same in 1932 in Newfoundland if there was a default.
What would have happened then? Would the country be 'ruined' in such a scenario, as many feared — or at least said? Would it never again be given credit? I doubt doomsday would have awaited it. For one thing, there would be no likelihood that the value of its currency would fall (as Iceland's did recently) because — luckily! — it used the Canadian dollar. And in any case the history of the world shows that where there is money to be made, even in countries beset with problems far worse than what Newfoundland was experiencing, investors and loansharks will not be slow to come and try to get their hands on some of it. After the Bank Crash of 1894, when you might think caution would be the watchword in financiers' dealings with Newfoundland, Canadian banks raced to St. John's to see what they could rescue from the flotsam. It would likely have been the same in 1932 in Newfoundland if there was a default.
It is even possible that when Canada heard of the imminence of default in Newfoundland, it might have intervened, without reference to Britain, with a series of timely loans to get its 'sister Dominion' out of the hole it was in. The Canadian government was understandably a bit nervous about default occurring in a country using its currency.
And then what? What else would Squires try? In 1939, shortly before the visit of George VI and his Queen to Newfoundland, Squires urged that the royal visit 'be made the occasion for taking Newfoundland into the Canadian Confederation'. This, he said, would be 'to carry out the intention of the Fathers of Confederation'. It appears that he was a closet Confederate all along; and if he'd beaten Alderdice, we might have ended up as a province of Canada well before 1949."
Patrick O'Flaherty is a writer, academic and historian.
