In the 1930s, it was commonly believed that democracy produced bad economic policy. The most dramatic illustration of this contempt for democracy was in the oldest dominion of the British Empire, Newfoundland.

Newfoundland incurred a large debt to finance its role in World War I and was unable to pursue fiscal austerity during the 1920s. In 1933, the government lost its ability to borrow and turned to the British government for help. London dispatched a royal commission to St. John's, which proposed -- radically -- that Newfoundland should be given debt relief in return for surrendering democracy and sovereignty. The Newfoundland Parliament voted unanimously for the proposals to abolish itself because in 1933 it was considered inconceivable that a British dominion should default on its debt. In place of an elected parliament, the government of Newfoundland was turned over to a commission of six civil servants, who ruled the territory until it voted to Canada in 1949 [sic]. (The IMF was established in 1945 in order to assure that countries would not face the same dilemma as Newfoundland ever again. In fact, the IMF now insists that countries receiving financial assistance have democratic forms of government.)