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ECON 2P19 (11)

Chapter 10.docx

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Indra Hardeen

Chapter 10 – Confederation and the British North America Act Economic Integration Before 1867 • The Constitutional Act of 1791 divided Quebec into two colonies: Upper and Lower Canada • This arrangement led to considerable dispute between the two colonies • The first problem concerned the division of tariff and excise revenue • All imports from overseas landed first in Lower Canada, where they were taxed • If the products were intended for consumption in Lower Canada, then there was no problem • If they were to be forwarded to consumers in Upper Canada, then the tariff revenue properly belonged to that legislature • This issue only disappeared with the union of Upper and Lower Canada in 1841 • The other challenge to the customs union arrangement came from the fact that tariffs and excise duties were the main revenue source for the colonial governments • As long as most imports came up the St. Lawrence River and no duties on inter-colonial shipments were possible, there was little Upper Canada could do about this situation • In 1850, the colonies did offer each other free trade from a list of foodstuffs and raw materials • The first proposal for a rail line running from Saint John to Quebec appeared in 1827, and a preliminary reconnaissance of the route was completed in 1835 The Colonial Economies at Confederation • The BNA colonies seemed to have experienced roughly similar aggregate growth rates in the 1850s and 1860s • Canada’s population was about 80% rural in 1867 • Montreal was by far the largest city with 100000 inhabitants • Quebec City followed with a population of 60000, and then Toronto with about 50000 • Halifax had slightly fewer than 30000 residents in 1867 • Saint John about 700 fewer than Halifax • Nearly 1/3 of Canada’s GDP in 1870 came from services, such as construction, transportation, government services, and wholesale and retail trade • The remaining 2/3 came from commodity production, including agriculture, forestry, hunting, trapping, fishing, mining, and manufacturing • Agriculture was by far the largest sector accounting for 54% of commodity income for Canada as a whole • Ontario was most dependent on farm production, relying on it for nearly 60% of total commodity income • This sector accounted for 49% of Quebec’s commodity income, 47% of New Brunswick’s and 46% of Nova Scotia’s • Most agriculture was not this commercially oriented • Manufacturing was the second largest community producing sector in Canada as a whole, as well as in each of the provincial economies • Quebec and New Brunswick were the most dependent on forestry • Fishing was relatively most important in Nova Scotia and contributed as much to commodity output for that province as forestry • Eastern and northern Canada was poor because fishing, mining, and forestry were unable to compensate for the relatively low levels of agricultural income Confederation • Newfoundland showed little interest, in the idea of Confederation or even of Maritime union • Two major groups on the island opposed any such moves • Roman Catholics did so because they were predominantly Irish, and Confederation smacked of British conquest • Merchants opposed it because they saw it as leading to higher tariffs on supplies to the fisheries and a financial commitment to a government primarily obsessed with furthering the defense and economic development interests of the central provinces • PEI share many of these fears, as well as being mired in local political rivalries that involved personality, old wounds left by absentee landlords, most genuinely, a realization of just what a small power this province would be in a Canadian federation • Proponents of Confederation in Nova Scotia and New Brunswick saw two main advantages to union • Ports such as Halifax and Saint John could serve a year round, ice free outlets for Canadian and even American products on their way to Europe • The large and growing central Canadian market beckoned as well for everything from coal to manufactured goods • Most common was the fear that Canada would threaten the Maritime economy with a high tariff structure and with a high debt charge from profligate canal and railway constructions • The main enthusiasm for political union lay in central Canada • Central Canadian business interests were a confident of capturing Maritime markets for primary and manufactured products as were their counterparts of the reverse, to be sure • The real prize lay in establishing a transcontinental economy along the lines of the obviously successful one to the south • Transcontinental expansion was difficult • Political union would create larger fiscal base with which to attract British investors The British North America Act • Canada was constituted as a federation by the BNAAct in 1867 • Two orders of government were created: federal and provincial, each with a designed set of powers and each deemed sovereign in its sphere of jurisdiction • Of particular interest for economic development are the regulation of trade and
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