Chapter 8. The Economy since 1920
Historians point to common and long-running themes in the history of the Canadian economy, the most venerable of which is the staples model. This interpretation sees Canada as a producer mainly of unprocessed goods that are shipped out to international markets. The staples theory is not merely descriptive, it is explanatory, and part of what it explains is the precariousness of the Canadian economy from one decade to the next and its struggles to evolve into something more complex. The staples theory can also be used to gain an understanding of Canadian society.
Fisheries to Fur Trade to Wheat Economy
From the 1600s to the 1800s, an important part of the economy of New France and then British North America (BNA) was the fur trade. In the case of New France and the European enterprise in Rupert’s Land, the fur trade was pivotal. It operated on principles associated with . That is, merchants in French or British ports extended the capital needed to purchase a fleet and to buy trade goods that were transported to the St. Lawrence Valley or to Hudson’s Bay. These goods then were warehoused and/or transported further along inland waterways and traded to Aboriginal merchants for a variety of pelts. Those furs were shipped directly to Europe because there was no market to speak of in New France or British North America. Similarly, the very first economic link between what is now Canada and Europe — the fisheries — was structured simply: send the ships, harvest the fish, and sail the ships back to Europe or to Europe’s slave colonies in the Caribbean. Again, the fisheries themselves had little in the way of a market in the colonies.
After 1783, and with the development of settlements in New Brunswick and Upper Canada (Ontario) as well as PEI and Nova Scotia, farming became more important. In the 1820s and 1830s, we see the emergence of a wheat economy in and around the Great Lakes. This, too, was geared for export (mostly to Britain), as was the forest industry that was found in almost every British North American colony between Lake Superior and St. John’s. A growing population in BNA, of course, consumed a growing share of output, but these economies could not sustain larger numbers, particularly since almost all of the staple industries were seasonal. Industrialization and urbanization created greater demands for food production and, increasingly, lumber, steel, and brick were diverted to domestic use. This was the era, of course, when Britain was the workshop of the world, so British North Americans never had to worry about the availability of manufactured goods. Instead, they had to be concerned that their own infant industries would be strangled in the cradle by cheap imports from both Britain and the United States. Unlike Canada, the United States could use tariff barriers to keep out British wares, and with its rapidly growing urban and slave population in the 19th century, the United States could absorb far more manufactured goods.
Confederation came along at a pivotal time for the Canadian economy as it industrialized and shifted from the countryside to the cities and towns. More Canadians were earning wages, and those wages could be spent on manufactured products, including clothing, hardware, furniture, books, and such middle-class accoutrements as pianos and early phonographs. Nevertheless, unlike Britain or the United States, Canada was not exporting much steel, farm tools, or cloth to a fully industrialized economy. The balance of trade continued to be achieved by exporting grain, timber, and fish.
The settlement of the West extended the staples economy and vastly increased it. The Wheat Boom of the late 19th century was driven by accelerated urbanization in Europe that led to a monoculture economy in the West. In this economy, the growing of wheat (and a few other grains) was worth pursuing to the exclusion of other options, which prevented a regional industrial revolution. Wheat was joined by some minerals in the menu of Canadian export commodities, but overwhelmingly this one staple remained dominant.
What did that mean for the Canadian economy and society? Wheat has a spatial component: large acreages, as we have seen, produce a particular pattern of residence and social interaction. It also has an annual life cycle that places heavy demands on the timing of ploughing, planting, harvest, transfer, movement, sale, and export. Grain elevators were built to contain huge quantities of grain, and railways were conscripted to the cause of decanting these prairie towers into boxcars that would take the year’s harvest to ports on the Pacific, Great Lakes, St. Lawrence, or Atlantic. Sometimes economists call grain elevators, transportation, and port facilities . One of the challenges with this forward linkage arrangement is that grain elevators can only be used for grain and the same is true for the sort of ships that carry grain. Neither can be viewed as an underutilized capacity that might be redeployed for, say, machinery production.
Also, throughout Canadian history, all of these forward linkages have been in the service of goods that are, for the most part, high bulk and low value. Furs are a little different, but only by degree. Logs and lumber, fish and whale oil, wheat and coal all are goods that are relatively cheap to buy but heavy and hard to move. (To suggest one radical contrast, a briefcase might contain enough diamonds to match the value of a whole freighter full of wheat.) The effect of the staples focus, then, is to specialize in economic flows and, through years of practice, in investments and projects that reinforce the production and shipment of those commodities.
The legacy of structural features associated with staples is seen in a variety of areas in the 20th century. Some of the following sections in this chapter explore the persistence of Canada’s staples economy from wheat and fish through oil and gas. Political leaders across the 20th century called for greater diversification of regional economies, some of which are more geared than others to staples production. In some quarters — the Atlantic provinces in particular — the limited impact of industrialization has led to less of a roller-coaster ride in the marketplace, but a lower level of prosperity overall.
- The Canadian economy has long been associated with the production and export of staples — largely unprocessed goods of relatively high bulk and low value.
- The intensified emphasis on the wheat economy in the late 19th century derived from a growing market size and demand.
- The demand for wheat and other staple commodities undermined attempts at diversification.
- The staples economy in Canada produced forward linkages that are difficult and expensive to redeploy to other purposes.
The system of economic relations established between European empires and their colonies; emphasis is on the use of merchants in the home country to establish production in the colony of largely unprocessed goods that would be shipped to the home ports; leaves colonies economically dependent and underdeveloped.
Other industries are developed or expanded to help to link a product or staple export from the suppliers to the customers, as part of the distribution chain, for example, transportation, grain elevators, and port facilities.