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The Role of Capital in Canadian Economic Development Before 1875*

Published online by Cambridge University Press:  07 November 2014

H. C. Pentland
H. C. Pentland*
Affiliation:
The University of Manitoba
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Extract

This discussion of capital grows out of investigation of the history of labour in Canada. Four major systems of organizing labour for the production of goods may be distinguished in the course of Canadian history. Each of these involved its peculiar methods of production, of organizing the labour market, and its characteristic attitudes of employers and employees. The change from one system to another is what is meant by economic development in this paper. The questions inevitably arise, why a period features one type of labour organization rather than another and why one system is displaced by another. These questions have led to concern with capital accumulation, importation, and investment, for it would appear that the availability and uses of capital are crucial to the answers. The role of capital is important, no doubt, to other fields of study as well. Many useful things about capital have been said by Canadian scholars, but no broad and coherent review of the whole subject appears to exist. The present is an exploratory paper, covering approximately two of the stages of development remarked above, and the change from one to the other.

About the middle of the nineteenth century, the Province of Canada was transformed from a raw, staple-producing area to a rounded, integrated economy that might be called metropolitan. Signs of the change were visible in 1830, unmistakable in 1840. By 1850 change had gone too far to be turned back, and 1860 and 1870 can denote only the filling out of the home-market exchange economy already implicit. Purely extractive industry was overlaid with a secondary development involving an elaborate transportation system, a capitalistic agriculture, an extensive list of manufactures that appear to have been efficient in their day, and a creditable financial structure. Probably the most telling evidence of the transformation was the fact that this colony, so recently at the mercy of the fluctuations of imperial markets for one or two commodities, could undertake successfully to swallow an empire of its own in the years after 1867.

Type
Articles
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 16 , Issue 4 , November 1950 , pp. 457 - 474
Copyright
Copyright © Canadian Political Science Association 1950

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Footnotes

*

Paper presented at the annual meeting of the Canadian Political Science Association, Kingston, June 9, 1950.

References

1 The close connection between jobs on the public works and the volume of employment is put forcefully in a statement by D'Arcy Magee, 1863, quoted in Fowke, V. C., Canadian Agricultural Policy: The Historical Pattern (Toronto, 1946), p. 136.Google Scholar

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10 Todd and McGill estimated Canada's balance of payments in 1804 as follows: Imports, £500,000; Fur exports, £250,000; Payments on military account in Canada, £150,000 or £200,000. Lord Selkirk Diary, vol. III, pp. 121-30.

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20 McDougall, J. L., “The Weiland Canal to 1841,” M.A. thesis, University of Toronto, 1923, pp. 15, 37.Google Scholar Funds were a great deal more plentiful in Upper Canada after canal construction began, as bank subscriptions attest ( Shortt, Adam, “History of Canadian Currency, Banking, and Exchange,” Journal of the Canadian Bankers' Association, 04, 1901, pp. 227–43)Google Scholar, but scarcely of the order to finance railroads.

21 Hobson, C. K., The Export of Capital (London, 1914), pp. 28–9, 124–5.Google Scholar

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23 Ibid., 1850, App. HH.

24 This is the figure given by Innis, H. A. and Lower, A. R. M., Select Documents in Canadian Economic History, 1783-1885 (Toronto, 1933), p. 655.Google Scholar Commodity trade figures from the same source (p. 644) give a deficit of the same order, $85 million, for the decade 1851-1859. However, Scobie and Balfour's Canadian Almanac for 1857 asserted that £20 million of railway capital had already been invested by the end of 1856. About 400 miles more were built before 1860.

25 See Shortt, Adam, “Railroad Construction and National Prosperity: an Historical Parallel,” Transactions of the Royal Society of Canada, Series 3, vol. VIII (1914), Section II, pp. 295–308.Google Scholar

26 The figures for 1861-7 are from Innis and Lower, Select Documents, 1783-1885, pp. 644-5. Commodity trade figures for the period 1868-75 have been presented in various forms by the Dominion Bureau of Statistics. Unfortunately, the Bureau's explanation of the meanings of some of these figures is not at all clear (Canada Year Book, 1916-17, pp. 294-5; 1920, pp. 336-7). The figures used by Viner, Jacob (Canada's Balance of International Indebtedness, 1900-1913, Cambridge, Mass., 1924, p. 36)Google Scholar are the old “Total Imports” and “Total Exports” figures presented until 1917. Besides a standard correction for Canadian exports to the United States assumed not to have been declared, they include specie movements and all foreign produce as imports and (when re-exported) as exports. These appear to be the appropriate figures for calculating capital movements (Viner, chap. II). These data give a deficit of exactly $200 million on commodity trade for the years 1868-75. The figures in Innis and Lower, Select Documents, 1783-1885, pp. 810-15 are the same except that they follow the procedure of the Bureau of Statistics after 1917 of excluding foreign produce not entered for home consumption from import figures—but not from export figures. Hence figures from this source underestimate the commodity trade deficit by the amount of foreign (bonded) produce that was counted in exports but not in imports, i.e., by $26 million, 1868-75.

27 That very delicate indicator of economic activity, the volume of immigration, demonstrates that the seventies were less active, proportionally, than the fifties. Peak year figures (for the area of the Dominion) are given as follows:

28 Public Archives of Canada, E.C.O. Put By No. 302 and E.C.O. Put By No. 176 are memoranda on the assistance by European and American state governments to railroads in the forties and fifties. They were filed on behalf of the Grand Trunk and Great Western, respectively, and the first is by Brassey, Thomas. Rae, J. B., “Federal Land Grants in Aid of Canals,” Journal of Economic History, 11, 1944, p. 167 Google Scholar, gives useful information on American canal policies.

29 Hartz, Louis, Economic Policy and Democratic Thought: Pennsylvania, 1776-1860 (Cambridge, Mass., 1948), pp. 290, 297.CrossRefGoogle Scholar

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40 Canada, Sessional Papers, 1847, App. AAAGoogle Scholar; Public Archives of Canada, E.C.O. 1849, No. 80.

41 Canada, Sessional Papers, 1846, App. I.Google Scholar

42 Skelton, , Life and Times of A. T. Galt, pp. 68–70.Google Scholar The Montreal and Lachine Railroad was completed in 1848, but its total cost was only £62,000.

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44 The rapid spread of the gospel of self-sufficiency in Canada in the late forties has been overshadowed by other questions, but it was of great significance to later developments.

45 Scobie and Balfour, Canadian Almanac, 1857, p. 32.Google Scholar

46 Hamilton Spectator, “Saturday Musings,” various issues (Hamilton Public Library Collection).

47 By E. Wiman, Commercial Reporter for the Globe, Toronto, n.d.

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51 Easterbrook, W. T., Farm Credit in Canada (Toronto, 1938), pp. 26–8.Google Scholar

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53 For the early history of Canadian banking see Breckenridge, R. M., The Canadian Banking System, 1817-1890 (New York, 1895)Google Scholar; Ross, Victor, History of the Canadian Bank of Commerce, vols. I and II (Toronto, 1920 and 1922)Google Scholar; and the writings of Shortt, Adam, particularly “The Early History of Canadian Banking,” Journal of the Canadian Bankers' Association, vol. IV, nos. 1-4 and vol. V, no. 1 (10, 1896 to October, 1897)Google Scholar and “The History of Canadian Currency, Banking and Exchange,” Journal of the Canadian Bankers' Association, vol. VII, nos. 3 and 4, vol. VIII, nos. 1-4 (April, 1900 to 07 1901).Google Scholar An interpretation of American banking which is here adapted to Canada is found in Hammond, Bray, “Long and Short Term Credit in Early American Banking,” Quarterly Journal of Economics, vol. XL, 11. 1934, pp. 79–103 CrossRefGoogle Scholar; also Hammond, , “Banking in the Early West: Monopoly, Prohibition, and Laissez Faire,” Journal of Economic History, 05, 1948, pp. 1–25.Google Scholar

54 Except for the Bank of Upper Canada, in which merchants played a minor part.

55 Innis, and Lower, , Select Documents in Canadian Economic History, 1783-1885, pp. 373–4.Google Scholar

56 Breckenridge, , The Canadian Banking System, p. 79.Google Scholar

57 Hammond, , “Long and Short Term Credit” in Early American Banking, p. 95.Google Scholar

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60 “It was popularly assumed in both [Canada and the United States] that the chartered banks were intended to act as public servants, for the general benefit of those engaged in trade and industry.” ( Shortt, , “History of Canadian Currency, Banking and Exchange,” Journal of the Canadian Bankers' Association, 01, 1901, p. 146.Google Scholar) The anti-trust element that sought to outflank the chartered banks with a publicly-owned Provincial Bank on one hand, and “Free Banking” on the other, based itself on the failure of the banks to recognize their public responsibilities. W. H. Merritt, who took a leading part in both types of attack, undoubtedly was influenced by the failure of the banks to assume their duties to that quasi-public institution, the Weiland Canal Company. See Upper Canada Sundries: W. H. Merritt to J. Joseph, April 29, 1836; W. Allen to J. Joseph, May 3, 1836; J. H. Dunn to J. Joseph, May 6, 1836 (P.A.C.).