Hostname: page-component-6b989bf9dc-pmhlf Total loading time: 0 Render date: 2024-04-15T01:00:28.084Z Has data issue: false hasContentIssue false

Political Economy of Financial Development: Canada and the United States in the Mirror of the Other, 1790–1840

Published online by Cambridge University Press:  18 February 2015


A meeting of the Business History Conference in Toronto with “The Political Economy of Enterprise” as its theme provides an opportunity to consider some historical similarities and differences between the climates of enterprise in Canada and the United States. Because much of my recent work has been on financial development in the United States in the early decades, 1790–1840, I shall focus on that period. During that period, finance, enterprise, and economic development in the United States made great strides. Across the border in British North America, progress in all three areas was limited. The contrast sheds some light on the political conditions that favor financial development, flourishing enterprise, and modern economic growth.

Presidential Address
Copyright © The Author(s) 2006. Published by Cambridge University Press on behalf of the Business History Conference. All rights reserved.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


1. Egnal, Marc, New World Economies: The Growth of the Thirteen Colonies and Early Canada (New York, 1998)Google Scholar and Egnal, , Divergent Paths: How Culture and Institutions Have Shaped North American Growth (New York, 1996)Google Scholar.

2. Egnal, Divergent Paths, viii.

3. Nelles, H. V., A Little History of Canada (Oxford, U.K., 2004).Google Scholar

4. Marr, William L. and Paterson, Donald G., Canada: An Economic History (Toronto, 1980), 3Google Scholar.

5. Most of the factual information in this section is based on a number of papers of my own and some with collaborators, some published and others still working papers. In the published category, see Sylla, Richard, “US Securities Markets and the Banking System, 1790-1840,Federal Reserve Bank of St. Louis Review 80 (May/June 1998): 8398Google Scholar; Sylla, , “Financial Systems and Economic Modernization,Journal of Economic History 62 (June 2002): 277–92Google Scholar; and Rousseau, Peter L. and Sylla, Richard, “Emerging Financial Markets and Early US Growth,Explorations in Economic History 42 (Jan. 2005): 126CrossRefGoogle Scholar. A pertinent working paper is Sylla, “Comparing the UK and US Financial Systems, 1790-1830,” (2006).

6. For industrial production, see Davis, Joseph H., “A Quantity-Based Annual Index of U.S. Industrial Production, 1790-1915,Quarterly Journal of Economics 119 (Nov. 2004): 11771215CrossRefGoogle Scholar; for real GDP per capita, see Johnston, Louis D. and Williamson, Samuel H., “The Annual Real and Nominal GDP for the United States, 1790-present,2006 Economic History Services, URL: (accessed 20 May 2006).Google Scholar

7. Canada was vulnerable on at least three occasions. Americans, whose offers to Canada to join the American union had been spurned during the eighteenth century, wanted to annex Canada by force during the War of 1812, but the ineptitude of U.S. political and military leaders prevented realization of that objective. In the 1840s, the Americans expressed a desire to annex much of western Canada with the slogan, “54 40 or fight,” but Lord Ashburton of the United Kingdom and Daniel Webster of the United States settled on an extension of the border to the Pacific along the 49th parallel (49 0 and peace). After the U.S. Civil War, some American leaders pushed for Britain to hand over Canada as reparations for British aid to the rebel Confederacy, which they contended had increased the Lincoln government’s war costs by some $2 billion. But the United States, after Britain effectively granted Canada independence in 1867, settled with Britain for considerably less in reparations. See Cook, Adrian, The Alabama Claims: American Politics and Anglo-American Relations, 1865-1872 (Ithaca, N.Y., 1975).Google Scholar

8. Canada’s population figures for 1806 and 1851 are reported by Marr, and Paterson, , Canada, Table 6:1, p. 151Google Scholar, and are compared here with the “bordering” U.S. states of New England (6), New York, New Jersey, and Pennsylvania, and the five states of the Old Northwest Territory, as reported by the U.S. censuses of 1800 and 1850.

9. Nelles, Little History, 104. This and the preceding paragraph draw on pages 99–112 of same.

10. [Buchanan, James], Report and Observations on the Banks, and Other Incorporated Institutions in the State of New York (New York, 1828)Google Scholar, Goldsmiths’-Kress library of economic literature, no. 25589.

11. Nelles, Little History, 97.

12. Godley, John Robert, Letters from America (London, 1844)Google Scholar, as reproduced in Craig, Gerald, ed., Early Travellers in the Canadas, 1791-1867 (Toronto, 1955)Google Scholar.

13. Egnal, , Divergent Paths, 20, citing Lucas, C. P., ed., Lord Durham’s Report on the Affairs of British North America, 3 vols. (Oxford, U.K., 1912) with quotes from vol. II, pp. 211–12, 99.Google Scholar

14. See note 7 above, and Meinig, D. W., The Shaping of America: A Geographical Perspective on 500 Years of History, 3 vols. (New Haven, Conn., 1986–2004)Google Scholar, vol. 2, Continental America, 1800-1867.

15. Counterfactually, the liberation might have come earlier, but with Canada’s annexation by the United States rather than its independence. On the 200th anniversary of Alexander Hamilton’s death after an 1804 duel with Vice President Aaron Burr, U.S. historian Thomas Fleming posted an essay asking, “What if Burr had missed?” General Hamilton—he became a major general and inspector general of the U.S. army when war with France seemed possible from 1798 to 1800—would, according to Fleming, have been elected president in 1808, given the unpopularity of Jefferson’s embargo that year. Among other things, President Hamilton would have demanded that the British stop harassing U.S. shipping, fully expecting non-compliance. Then Hamilton would have organized a large professional army (not the amateurish militias sent in the War of 1812 by Madison) and invaded Canada successfully, making it part of the United States. Hamilton would then have offered the British most-favored-nation status to mollify them, and much subsequent North American history would have been different from what it was. When I mentioned Fleming’s counterfactual account to a Canadian MBA student of mine, he said he would tell people back in Canada that they ought to replace the queen’s visage on the Canadian $20 dollar bill with that of Aaron Burr!

16. See Marr, and Paterson, , Canada, 153, 179.Google Scholar