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.
It was not merely the financial relations of Canada with the United Kingdom which required readjustment.The service and the sacrifices which the Dominions had made in the common cause rendered it imperative that the political relations between the different parts of the Empire should be put on a more definite and equal basis.The feeling was widespread that the last remnants of the old colonial subordination must be removed and that the control exercised by the Dominions should be extended over the whole field of foreign affairs.
The Imperial Conference met in London in the spring of 1917.At special War Cabinet meetings the representatives of the Dominions discussed war plans and peace terms with the leaders of Britain.
It was decided to hold a Conference immediately after the end of the war to discuss the future constitutional organization of the Empire.Premier Borden and General Smuts both came out strongly against the projects of imperial parliamentary federation which aggressive organizations in Britain and in some of the Dominions had been urging.The Conference of 1917 recorded its view that any coming readjustment must be based on a full recognition of the Dominions as autonomous nations of an imperial commonwealth;that it should recognize the right of the Dominions and of India to an adequate voice in foreign policy; and that it should provide effective arrangements for continuous consultation in all important matters of common concern and for such concerted action as the several Governments should determine.The policy of alliance, of cooperation between the Governments of the equal and independent states of the Empire, searchingly tested and amply justified by the war, had compelled assent.
The coming of peace gave occasion for a wider and more formal recognition of the new international status of the Dominions.It had first been proposed that the British Empire should appear as a unit, with the representatives of the Dominions present merely in an advisory capacity or participating in turn as members of the British delegation.The Dominion statesmen assembled in London and Paris declined to assent to this proposal, and insisted upon representation in the Peace Conference and in the League of Nations in their own right.The British Government, after some debate, acceded, and, with more difficulty, the consent of the leading Allies was won.The representatives of the Dominions signed the treaty with Germany on behalf of their respective countries, and each Dominion, with India, was made a member of the League.At the same time only the British Empire, and not any of the Dominions, was given a place in the real organ of power, the Executive Council of the League, and in many respects the exact relationship between the United Kingdom and the other parts of the Empire in international affairs was left ambiguous, for later events and counsel to determine.Many French and American observers who had not kept in close touch with the growth of national consciousness within the British Empire were apprehensive lest this plan should prove a deep-laid scheme for multiplying British influence in the Conference and the League.
Some misunderstanding was natural in view not only of the unprecedented character of the Empire's development and polity, but of the incomplete and ambiguous nature of the compromise affected at Paris between the nationalist and the imperialist tendencies within the Empire.Yet the reluctance of the British imperialists of the straiter sect to accede to the new arrangement, and the independence of action of the Dominion representatives at the Conference, as in the stand of Premier Hughes of Australia on the Japanese demand for recognition of racial equality and in the statement of protest by General Smuts of South Africa on signing the treaty, made it clear that the Dominions would not be merely echoes.Borden and Botha and Smuts, though new to the ways of diplomacy, proved that in clear understanding of the broader issues and in moderation of policy and temper they could bear comparison with any of the leaders of the older nations.
