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The Economic Development Of Canada History Essay

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Published: Mon, 5 Dec 2016

This paper will discuss the overall economic history of Canada following the same structure and context of the excerpt from Alan Beattie’s “False Economy – A Surprising Economic History of the World”. Starting from before the development of our oldest company in 1670 all the way to the financial crisis happening now, this paper will look at the political, social, geographical, technological, and of course economical decisions and factors that have made us into the country we are today. Furthermore, references will be made to Beattie’s excerpt as to which country Canada most resembles; Argentina or the United States, as far as it’s economic development is concerned.

Similar to the US and Argentina, Canada started off roughly the same with Europeans coming over to use our staples. With farming and agriculture being the primary staples of the US and Argentina, Canada (New France) was first approached as a fishing ground around the start of the 16th century because of it’s vast amounts of cod. This allowed for some settlement along the coasts of Newfoundland and Nova Scotia however it was mostly temporary. For the first part of the 16th century all the way to the later part of the 17th century, Canada was essentially a trading post for Europeans and Native Americans. This mercantile approach lead to, what is argued to be the one of the most important factors in Canada’s development, the fur trade. Essentially Europeans would bring over things like weapons, jewellery and clothing and trade with the Native Americans for animal pelts which had a large demand back in Europe. The result of this was the beginning of colonization to the inner parts of Canada not just the coast line. This created Canada’s oldest company in 1670 which is still around today, the Hudson’s Bay Company. The fur trade also brought about many wars between the British and French for control of the trade until 1759 at the Battle of the Plains of Abraham; the British prevailed and were in complete control of Canada. In 1763, it became official when the Treaty of Paris was signed giving control of Canada to the British. The British control over Canada influenced many political, economical and social decisions. After the American Revolution, Canada remained loyal to Britain and similar to Argentina, solely relied on them for exporting goods. The Treaty of Paris that ended the American Revolution brought about some changes to Canada as well. Fisheries were developed in Cape Breton, Gaspe, Labrador and the Gulf of St. Lawrence by Americans from New Jersey and New England. Furthermore, the vast opportunities for other staples inland were still not being capitalized on. Colonies were either established on the shores of the Atlantic for fisheries or along the St. Lawrence and Hudson Bay area for fur trading. It wasn’t until the early 19th century when Canada found probably its best and most successful staple, wood. As a result of the American Revolution, Britain lost its key supplier of wood (New England) and had to look north for other alternatives. The wood supply in Canada was massive and was initially supplied from three main regions, Saint John River, the St. Lawrence River, and the Ottawa River. The ones supplied from the Saint John River were shipped to Saint John, N.B. then to England. The wood supplied from the St. Lawrence and Ottawa River was shipped to Quebec City then to Europe. “In one summer, 1200 ships were loaded with timber at Quebec City alone, and it became by far British North America’s most important commodity”. Overall, the wood staple brought in immigration to Canada and created jobs as well as other complimenting staples. With the increasing number of logging camps and establishments, a greater demand for food was created and therefore started the farming and agriculture staple.

We’ll continue on where Alan Beattie started his comparison between the United States and Argentina; their independence. Canada’s independence was achieved July 1st 1867. With it brought a very centralized form of government and National Policy. Local decisions such as health care and education were made provincially while taxes and large expenditures were handled by the federal government. Canada’s first Prime Minister, Sir John A. MacDonald introduced National Policy as a new economic program. The premise behind it was essentially to protect Canadian manufacturing by introducing tariffs on foreign manufactured goods and reducing custom duties on necessary factors of production. Furthermore, MacDonald proposed to tie in this new National Policy with the construction of two railways, the Canadian Pacific Railway and the Intercolonial Railway which would aid in the transportation of goods from one end of Canada to the other. The move westward for Canadians was more closely related to the States rather than Argentina but still held significant differences. Overpopulation problems in the eastern and central areas of Canada drove settlers and new immigrants westward or, more commonly, down to the States. Although Canada was open to immigration, it still held ethnic barriers towards anyone who wasn’t from the British Isles or American farmer looking to settle in the west. Sir Clifford Sifton, Minister of the Interior under Sir Wilfred Laurier, finally allowed more ethnic groups to come to Canada however he “listed ideal settlers in a descending preference. British and American agriculturalists were followed by French, Belgians, Dutch, Scandinavians, Swiss, Finns, Russians, Austro-Hungarians, Germans, Ukrainians and Poles.” This allowed for sufficient colonization of the west and the beginning of the cultivation of the Prairies. Quebec however created their own immigration department in hopes of encouraging French Canadians working in New England to return back to Quebec.

The “Golden Age” of globalization, as Alan Beattie describes it, was really when the Canadian economy started to soar. Having the west settled and producing massive amounts of wheat, Canada was in prime position to capitalize on the lower transportation costs and technological advances (dry farming, combine) within the agricultural sector. And sure enough it did sparking what is known as the “wheat boom”. “Wheat production shot up from 8 million bushels in 1896 to 231 million bushels in 1911”. This in turn attracted many investors into the Canadian economy and increased the population of the industrialized cities of Toronto and Montreal. The increasing population in the western provinces drove manufacturing in the eastern provinces (ex. steel for agricultural machinery and railways). Furthermore, agriculture, fish, and timber weren’t the only staples Canada possessed. During the construction of the CP rail, nickel was found in Sudbury. By “1913 the International Nickel Company and the Mond Nickel Company supplied 69% per cent. of the world’s production.” In addition, silver and gold were discovered while building the CP rail in the early 20th century which created rushes and attracted many visitors to the central and western provinces of Canada. Similar to the United States, Canada relied on exporting their staples however it was never became absolutely dependant on it like Argentina. It developed a manufacturing industry to come up with better technologies which in turn enhanced its ability to extract its staples. With these new technologies and method of harvesting, different provinces were able to specialize in certain areas of staples. The Prairies had wheat, PEI had fox-farming and potatoes, Annapolis valley had apples, the St. Lawrence region had to focus on the dairy industry to meet urban demands, and so on.

World War I brought a few ups and downs and a couple changes to Canada’s economy. At the very start of the war, Canada’s economy wasn’t doing the best in respect to its wheat and railway sector. A severe drought hit which made meeting the wheat yield extremely difficult and in addition, the railway sector lost a large number of jobs because of the massive amount of debt. Furthermore, “more than 600,000 men, about 20% of the pre-war labour force, were in uniform at a time when the total population of Canada was less than 8 million.” As the war progressed, Canada became the supplier of arms and wheat for the allies and the Imperial Munitions Board (IMB) was established. The IMB mostly produced shells and became Canada’s largest employer with 250,000 workers. Unemployment in Canada was no longer a problem in 1916 in fact there was a labour shortage with all the production needed for the war. In 1917, income tax was introduced to Canada with the Income War Tax Act. Obviously with the massive increase in production in all sectors of the economy during the war, the end of the war brought about a severe recession as the economy had to readjust to the decrease in production. It took Canada until about 1921 to recover from the recession and start expanding again. The economy then continued to boom right up until 1928.

Like the US and Argentina, among many other countries as well, Canada got hit hard by the Great Depression. The causes of the Great Depression in Canada were strongly linked to those of the US. However, it is not as much a question of how the Great Depression came to hit that distinguishes countries’ development rather it’s how those countries recovered. Beattie describes America taking a more democratic approach and Argentina sticking to a dictatorship as a means of recovering. The attempt to recover was lead by Conservative party’s R.B Bennett. At first, Bennett increased tariffs and spent more on things like welfare and other assistance programs. Sure enough, this dug a deeper hole for Canada economically creating large federal deficits. Bennett then tried to mimic FDR’s “New Deal” which implemented things like minimum wage and unemployment insurance. Again, this worked to no avail. Similar to the US, Canada did not fully recover from the depression until the build-up of World War II where vast manufacturing output was needed. Although the Great Depression was a terrible time, two things were created which helped shape Canada into the country it is today; the Canadian Broadcasting Company (CBC) and the Bank of Canada. CBC was a radio program that was used to keep the spirits of Canadians high in times of despair. The Bank of Canada was “used to regulate currency and credit which had been horribly managed amongst Canadian citizens in the prior years. It was also set up to serve as a private banker’s bank and to assist and advise the Canadian government on its own debts and financial matters”. The Bank of Canada was a significant influence on the Canadian economy and still continues to be today. So overall, Canada handled the Great Depression very similar to the United States.

Not only did the Second World War bring Canada fully out of the depression and put them back on track, it also brought forth many changes politically. At the end of the war in 1945, the Liberal party was brought back into power with the election of Mackenzie King. This was a benefit to Canada in that King pumped more money into social welfare programs and started applying the Keynesian management style to the economy. These social welfare incentives attracted more workers and farmers to the Canadian economy. The Keynesian management style brought stability to the Canadian economy by monitoring and controlling variables such as inflation, interest rates, unemployment, and output through fiscal and monetary policies. Just like the United States, the twenty-five to thirty years after World War II could have been called the “Second Golden Age” for Canada. Unemployment rate for the most part stayed low, wartime production turned into manufacturing plants for other goods, and even addition industries started to open up such as aerospace (Avro Arrow – 1949). Furthermore, by the end of the war, the United States became the most powerful economy in the world which was a huge help to Canada as far as exporting and growth was concerned considering the newly signed Bretton-Woods Agreement.

In the 1970’s, just like the States, the Canadian economy wasn’t doing the best because of the rapid acceleration of inflation and wage rates. To combat this, Canada introduced the Anti-Inflation Act. Essentially, the Act implemented a ceiling on wage increases per year and on government expenditures. From Alan Beattie’s excerpt, it sounds like the Americans did relatively the same thing by increasing unemployment. 1989 brought about a huge change in US – Canada relations and served as a catalyst in future acts of globalization. The CUSFTA (Canada – United States Free Trade Agreement) allowed Canada and the United States to trade freely. Even before CUSFTA, Canada and the United States were each others largest trading partner therefore this new movement was a huge benefit to both parties. The economies became integrated sharing technologies, telecommunications and services such as consulting. More importantly than the initial benefits of CUSFTA was what it went on to become in 1994, NAFTA. “NAFTA created the largest free trade area in the world, covering at the time some 360 million people and nearly C$500 billion in yearly trade and investment.”

Today, just like every other major event in US history, the current financial crisis in the States has created a ripple effect impacting Canada. “Roughly 75 per cent of all Canadian exports wind up south of the border”. This is a huge number considering the financial position of the consumers in the United States. In hard times, people buy less therefore the demand for products decrease which in turn decreases the demand for imports. As a result, that 75% of Canadian exports takes a crucial hit. Although usually historically tied to the States, Canada did not get dragged into the recession the US had. Our banking system and other big Canadian commodity exports like gas, oil, and metals kept us above the water with respect to our financial position.

When looking at the economic development of Argentina and the United States, we can conclude that our own nation’s economic development most closely resembles that of the United States. Although all three countries started off relatively the same as staples countries, over the years Canada and the United States took a more democratic approach to governing their countries rather than the dictatorship approach Argentina took. Furthermore, with every financial and social crisis, Canada has essentially mimicked the recovery methods of the United States thus placing them on parallel paths.

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