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Canada’s Evolving Economy
Furs and Logs
• Canada has dramatically evolved
economically since the European
settlement in the early 17th
century.
• Originally the economy of the
New World was based on what the
famed Canadian Historian Harold
Innis called “Staples”.
• He argued that Canada developed
on the basics of staples such as fur
and lumber.
• By the early 19th century the
region of British North America
was changing.
Breaking Sod
• The arrival of Loyalists and waves
of immigrants into the central part
of Canada created a demand for
finished goods.
• Upper and Lower Canada, and the
Maritimes had evolved to a point
that the fur trade was being
surplanted by agrarian interests.
• The wilderness was being tamed
and farmers were developing trade
with the small city centres of
Toronto, Montreal, Quebec, and
Halifax.
• At the same time the United States
was developing its manufacturing
base in New England and began to
sell its goods to Canadians.
• With Confederation came a rising
sense of nationalism and
protectionism.
• Sir John A. Macdonald developed
the National Policy as a way to
promote the development of local
manufacturing.
• Starting in the last decades of the
19th century Canadian companies
developed in Halifax, Montreal
and Toronto to supply the needs
of Canadians.
• The National Policy was based on
high tariffs for goods from the
United States and forcing locals to
buy, usually more expensive
goods, from local manufactures.
• The Liberals fought against the
policy as they felt it restricted real
growth of Canada and made it
hard for primary producers
(farmers and fishermen) to sell
their wares to other than the small
Canadian Market.
• The First World War saw the
development of more
manufactures due to the high
demand of goods by the
government.
• The growth was temporary as the
war was soon over and the
economy shrank.
• However, the concept of
consumerism and luxury had
taken root and Canadians began to
demand more goods than ever
before.
• This period saw the growth in
secondary industries such as pulp
and paper and mining which
predominately ended up going to
the United States.
• The Great Depression (1929 1939) curtailed consumer demand
and the Second World War again
absorbed the manufacturing
output of the nation.
Keeping Up with the Jones’
• Following the war, however, the
average Canadian was ready to
spend on them selves in a way that
had never been seen before.
• The war industries quickly
transitioned from war contracts to
consumer products to feed the
demand.
• Unlike the end of the First World
War, the Canadian manufacturing
base prospered under the residual
policies of the National Policies
and the amount of surplus money
most Canadians had.
Brave New Worlds
• They began to build homes and
furnish them with necessities and
luxuries as well as spending their
cash on unheard of things such as
family vacations.
• Of the industries developing
during the post war boom, the
tertiary sector was the fastest
growing.
• Luxury goods and services such as
tourism became the new indicators
of the health of the economy.
• By the 1960s, Canada’s economy
began to grow at a rate that some
feared would collapse in the same
manner as it had in the late 1920s.
• However, it continued to soar and
real growth was measurable
through the growth of Canada’s
Gross Domestic Product or GDP.
Year
GDP Per Capita
1960
$9,184
1970
$12,742
1980
$17,658
1990
$21,159
The Bursting Bubble
• The growth under lined a new and continuing trend.
• While North America grew in population it increasingly began to dominate
the world in terms of demand for raw resources.
• Although the United States only holds approximately 6% of the world’s
population, it has consumed one third of the world’s goods and services.
• A sign of warning in this tend was the oil crisis of 1973.
Black Gold
• In that year, the oil producers in the Middle East, namely, Oil and
Petroleum Exporting Countries (OPEC) became infuriated at Western
support for Israel and declared an embargo.
• The price of crude oil rose from $3 to $12 a barrel between 1973 and 1975.
• This created a ripple effect of panic and pushed the Canadian government to
explore domestically for other sources of oil.
• They turned to the untapped reserve of oil in Alberta’s oil sands.
• Seen as too expensive until then to exploit, the Energy Crisis of the early
1970s pushed companies to find solutions to extract the oil from the sand.
• Following this crisis the
governments of the West were
also faced with a renewed fear of
economic collapse in the early
1980s.
• In the United States and Great
Britain the governments of the day
opted to “ride out the storm” and
let the free market correct itself.
• This created high unemployment
and in the case of Great Britain
civil unrest.
• Canada, under Pierre Trudeau
and the Liberals, took a differing
view.
• Unlike with Mackenzie – King in
the 1930s, Trudeau opted to
spend federal money in order to
offset the economic troubles.
• He did this through increased
spending on public programs and
in controlling the prices of goods
such as oil and wheat.
• The effectiveness of this policy has
been debated since and helped
create animosity between the
western provinces and Ottawa.
• It also created a huge deficit that
subsequent governments in the
1980s and 1990s tried to reduce.
• One of the first efforts to reduce
the government’s debt was the
implementation of the Goods and
Services Tax (GST).
• It seemed to have little effect
accept annoy voters who sought to
punish the Conservatives for
creating it in 1990.
• They voted overwhelmingly for the
Liberals in 1993 election led by
Jean Chrétien.
End of an Era
• Concurrent to theses events was
the pronounced shift in the
structure of business in Canada.
• The Energy Crisis of the early
1970s lead to a shift in the
structure of businesses in Canada.
• Car makers from Japan began to
take more and more of the market
share with their smaller, better
priced and more economical
vehicles.
• This pushed many companies to
change their structures to become
leaner and meaner in order to
survive.
NAFTA
• This was helped in the late 1980s
with the development of the Free
Trade Agreement.
• In that year, the Conservative
government led by Brian
Mulroney and American Congress
signed an economic agreement to
lower tariffs between their
countries.
• In 1992, Mexico signed the
agreement. The North America
Free Trade Agreement was to
offer a balance to the European
Economic Market that had been
growing since being founded in
1958.
• In Canada, what it specifically meant was the final removal of the last vestiges
of Sir John A. Macdonald’s National Policy.