The financing of the war and of the industrial expansion which
accompanied it was a heavy task. For years Canada had looked to
Great Britain for a large share alike of public and of private
borrowings. Now it became necessary not merely to find at home
all the capital required for ordinary development but to meet the
burden of war expenditure, and later to advance to Great Britain
the funds she required for her purchase of supplies in Canada.
The task was made easier by the effective working of a banking
system which had many times proved its soundness and its
flexibility. When the money market of Britain was no longer open
to overseas borrowers, the Dominion first turned to the United
States, where several federal and provincial loans were floated,
and later to her own resources. Domestic loans were issued on an
increasing scale and with increasing success, and the Victory
Loan of 1918 enrolled one out of every eight Canadians among its
subscribers. Taxation reached an adequate basis more slowly.
Inertia and the influence of business interests led the
Government to cling for the first two years to customs and excise
duties as its main reliance. Then excess profits and income taxes
of steadily increasing weight were imposed, and the burdens were
distributed more fairly. The Dominion was able not only to meet
the whole expenditure of its armed forces but to reverse the
relations which existed before the war and to become, as far as
current liabilities went, a creditor rather than a debtor of the
United Kingdom.
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