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Midterm

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Department
Administrative Studies
Course
ADMS 1010
Professor
Troy Young
Semester
Winter

Description
PART 1: LAYING THE FOUNDATIONS (1850-1905) OVERVIEW: Introduction:  1850, British North America → made up the UPC, NS, NB, PEI Newfie, and Vancouver  interior of northern part of BNA contained Rupert‟s Land (owned by HBC); NWT, and NC  1867, parliament passed BNA Act creating the Dominion of Can. → Canadas + NS + NB becoming provinces of the new Dominion.  1869, Dominion of Can. expanding quickly and acquired Rupert‟s Land from HBC  early 20C, Can. had become a great colony of the crown and was on its way to becoming a nation. growing geographically and economically  1850-early 20C, Can‟s GDP more than double; 10 richest nation in the world  accomplished through a blend of public policy, sound financial system, energetic entrepreneurship, and large non-corporations Public Policy: late 19C → BNA of 1867 and NP of 1878  1854, Lord Elgin British GG of Can. → Washington to negotiate reciprocity treaty in natural unprocessed goods between US and BNA  1860, reciprocity treaty short-lived when protectionist Republicans was voted into power  1864, conferences held in Charlottetown and Quebec City by the Parliament that later passed the BNA  1867, BNA Act was passed creating the Dominion; act allocated responsibility between the provincial and federal authorities → regulation of commerce, currency, and banking  BNA Act, specific provisions to an intercolonial railway and to Rupert‟s land  Dominion was created former Province of Can. agreed to reduce its tariffs to bring them closer into line with those in the Maritimes  1878, Macdonald of the Conservative won and passed the National Policy  consisting of settlement of the west, the building of transcontinental railway; and protective tariff  protective tariff, Macdonald influenced by the history of trade and by the American policy  tool to get the Americans back to the bargaining table → reciprocity of trade  perfectly willing to trade on equal terms; but will not consent to open markets if US remains closed to us  1878-1896, Liberals in opposition: 1891, election called for unrestricted trade w/ US; 1896, Liberals gained power and supported the tariff  1897, Liberals entered into a preferential trading relationship with the mother country (imperial preference)  prevailing attitude of government was “encouragement of industry, not its discouragement, is the office and duty of government  gov‟t have played an important role in the development of business in Canada Financial Systems:  quarrels between centralist and decentralist occurred from 1791 (introduced the First Bank of US) until 1836 (vetoed the Second Bank)  as per BNA act, feds were granted responsibility over currency banking and life insurance → Can. avoided quarrels that occurred in the US  or concern over the failure in 1866, Bank of Upper Canada and 1867, Commercial Bank → two major banks in Can. West  1871, fact is Bank Act ensured sound currency and nationally regulated banking system → necessity for any successful economy  requirement for decennial revisions → regular re-examination to determine whether it was still suitable to changing times  late 19C; 1870s, stock exchanges were incorporated in both MTL and TOR; 1875, superintendent of insurance was appointed, 1890s, mining exchanges were formed in TOR that merged into a single exchange (Standard Stock and Mining Exchange)  Banking: early years of Confederation most major financial institutions  1867, 22 banks operating → BMO the largest by far; 2 largest (Canadian Bank of Commerce in Toronto→ inc. in 1867)  1905, banks increased to 37 → assets of all banks increased > ninefold; and branches proliferated between 1867 and 1905  process of consolidation started → ↓ # banks w/ head offices in Maritimes; concentration of financial power ↑ in MTL & TOR  between 1867-1905, % share of financial intermediary assets decreased  1899-1905, formation of Canada‟s first three investment banks  chartered banks not allowed to lend money for real property purchases → gov‟t believed the risks were too great  Other Financial Intermediaries: mortgage loan, life insurance, and trust companies emerged with % share ↑ dramatically nd  mortgage loan companies provided what the banks were not allowed → quickly became the 2 largest financial intermediary  % share of assets nearly doubled between 1867-1905; Canada Permanent Building and Savings Society (largest and oldest)  life insurance companies, grew remarkably 1875, deemed important that the gov‟t appointed a superintendent to oversee the industry  1890s, life insurance salesmen traveled the world opening new markets importing capital to Can.  1899, life insurance companies permitted to invest in Can. utility industry → liberated hundreds of millions of $ for investing  trust companies, filled in the when British and American firms left Can. due to legislation requiring to keep sufficient assets in Can.  by 20C, Can. had both a legislative framework for a sound financial system and a healthy number of financial corporations in operation Entrepreneurs: Can. never short of entrepreneurs since the beginning of European settlement in 17C  Pierre-Esprit Radisson and Medard Chouart des Groseillers → earliest entrepreneurs rejecting the policies of the gov‟t of New France went over to the English and helped establish the HBC  18C, Montreal-based Scottish entrepreneurs rebelling against HBC‟s monopoly created a number of trading partnerships  prior to the 1821 merger, North West Company became HBC‟s major rival → Simon McTavish and William McGillivray (early leadears)  John Molson, English entrepreneur whose beer is still sold today; 19C progressed financial system in place made it simpler to obtain capital  Frencis Hector Clergue of the Lake Superior Corporation → American entrepreneur  Samuel Cunard and Hugh Allan (shipping); George Stephen and Donald Smith (involved in BMO, CPR, HBC); Hart Massey and Alanson Harris(farm machinery); George Gooderham and Hiram Walker(distilling); Timothy Eaton and Robert Simpson(retail); William Mackenzie, Henry Pellatt, Frederic Nicholls, and James Ross(railway, public utility); William Neilson(ice-cream frame) Large Non-Financial Corporations:  1850s, agriculture played a dominant role in the economy; largest employer by far. HBC, MTL Telegraph Company, Consumers Gas Company (TOR), Richelieu Navigation Company and a few fledgling railway and mining companies  Railways: first large corporate enterprises requiring the separation of ownership and management → pioneers in modern management  1850s, stagecoach & steamboats (main transportations); less than 1K miles of track has only been laid → travel by rail in its infancy  1880s, hundreds of railway charters granted before the companies consolidated into few large corporations  1884, Dow Jones Index was created consisting of 11 corporation9 of them railroads  stagecoach and steamboat companies had all disappeared as the age of steam ushered in. by 1900s, railways dominant means of transportation; and the largest of them were the biggest businesses in Canada nd  1875-1905, railway capital in Can. ↑ > fourfold; by 1905, CPR (transcontinental railway); GTR (had just been authorized to build 2 railway); and the Mackenzie and Mann interests were active in starting the Canadian Northern Railway → big three of their day  Extractive Sector: fish, fur forest and farm in 1850s, mainly of small, family-owned businesses (except for HBC)  1867, coal accounted for < 10% of Can. total energy production, by 1900s surpassed the wood as the nation‟s leading energy source resulting in emergence of a number of coal-mining companies located mainly in Cape Breton and BC near the mineral source  1894, Clergue estalished Lake Superior Corporation in Sault Ste Marie → largest and most complex canadian extractive company  1902, consolidated companies – hydroelectric power plant, pulp and paper mill iron ore mine, rail road, iron and steel works  early 20C, 3 major coal and base metal companies located in Cape Breton → Dominion Iron and Steel bein the largest  though smaller than the Cape Bretons; 3 large BC mining companies prospered → access to coal, lead and copper  for most of 19C, forestry operations were run by small owner/operators rather than large corporations  changed due to ↑ importance of pulp and paper as demanded by US → inspired the William Price to rescue a failing company  evolved from a series of small, family-owned businesses to la sector with major players. US, MTL and TOR capital heavily involved  Public Utilities: 1850s, BNA lacked electric lighting and telephony → Consumers Gas was the major public utility providng fuel for lighting  early 1800s, electricity discovered and was used for telegraphic and telephony; it was until the 1870s, that it could be used for power  breakthroughs of electricity & telephony, businessmen mobilizing in creation of public utilities in Canada and abroad  early 20C, investor-owned electrical public utilities → largest grouping among major canaadian Corporations located  Quebec; MTL Light, Heat and Power Company (major public utility and one of the largest non-financial), Shawinigan Water and Power Company (largest Quebec-based generator and transmitter of electricity), MTL Street railway Company; and Quebec railway Light and Power company (holding company) → 4 largest quebec-based electrical utilities (2 were holdings, 1 single-purposed entity, 1 long-distance distributor of electrivity)  Ontario; EDC (rival to 2 US generating companies using Niagara Falls); early electrical in TOR influenced by Mackenzie, Pelatt and Nicholls; Catract Power Company (electrical generation in Hamilton and street railway service after 1899)  3 large, investor-owned eletrical ustilities in Winnipeg, Vancouver and as far as Brazil  most cities, small thermal electic plants which providedstreet and home lighting → 315 electric light companies, 198 in ONT  1905, zenith of this industry → challenged first by the local then by provincial gov‟t ↔ municipalities granted operating rights and attempted to regulate but complaints of poor service were becoming numeroes from citizens  1880, MTL Bell started telephony by 1902, faced > 50 competitions but an ace “mandate to operate nationally” since 1880 except BC.  early 20C, Bell under supervision of an independent regulatory commission, Board of Railway Commissioners. public utilities companies fell under provincial government control → Bell, Brookfield Properties of the Sao Paulo Tramway, Light and Pwer Company, and Power Corporations a reminder of the early benefits of investing in electrical utilities  Manufacturing: 1850s, less significant role than agriculture principally concerned with meeting domestic demands for processed goods  1878, under National Policy tariffs ↑ to 35% on manufactured imports in response to Can. manufacturers facing tariffs on exports to US  unclear if tariff encouraged domestic manufacturing; but played no role in getting US to negotiate a reciprocal agreement  tariff resulted in ↑ US investment settinng up branch plants to avoid tariff; Canadians on the other hand did not followe suit  early 20C, manufacturing grew = to agriculture by % of GDP → helped due to the application of electricity for manufacturing purposes  consolidation significantly ↓ the number of establishments but manufacturing concerns remained small relative to other industry  by 1905, only 5 concerns; Massey Harris & Canadian General Electric (2 largest, TOR-based & producer oriented), Ogilvie Flour Mills, MTL Cotton, and Lake of the Wood Milling (3 smaller, MTL-based, consumer-oriented, strong ties to BMO and CPR)  Massey Harris, biggest manufacturer in Can. and larger than any other in British Empire → from fmily business to prof. mngmt.  Retail: 1850s, local affair with barter the main means of conducting transactions → HBC active in BNA primary business was the fur trade  by 1900s, retail was still a local affair, but had grown to include large retailers in MTL (Morgan‟s and Ogilvy‟s), TOR (Eaton‟s and Simpson‟s), Winnipeg (HBC), and Vancouver (Woodward‟s) st nd  1905, Eaton established the 1 national department store chain opening a 2 store in Winnipeg of which other retailers followed suit.  issuing a direct challenge to HBC, HBC was mainly confined to the fur trade (dying) and land development (booming)  retail, by comparison took a back seat Conclusion: 1850s-early1900s, dramatic changes took place  creative and destructive forces of capitalism at work: old staple replaced by newer industries; railways, mines, and public utilities all with great demands for capital. and growth in the fledgling manufacturing and national retail industry  public policy at work, BNA Act ( feds to financial area, building interprovincial railway, purchase of western lands from HBC); National Policy (settlement of the west, construction of a transcontinental railway and protective tariff)  sound financial system, Bank act passed by the fed parliament ensured sound currency and stable banking system; legislation passed in regulating insurance at fed level; mortgage, loan and trust companies at the provincial level.  financial intermediary assets grew quickly with mortgage, loan and insurance outpacing the banks (still the largest players though)  sound financial system encouraged and provided much of the capital needed by entrepreneurs financing their newly companies  many individual or family-owned firms replaced by larger corporations CASE 1: ORIGINS OF FINANCIAL STABILITY IN CANADA: THE BANK ACT OF 1871 Introduction:  after WW2, 1945, reconstruction marked by creation of IMF and the World bank  domestic regulation of banking systems globally was gradually being modified and extended to cover: growing complex economy  due to ↑ (consumer credit, property ownership, global trade and investment); there is also the expansion of gov‟t oversight and international cooperation in financial governance st  Canadian Banking System, surviving the huge stress better than others (relative stability can be trace back to the 1 Bank Act of 1871  1869, Macdonald and Hinck discussing unsatisfactory state of affairs in Canadian banking  existing bank charters in the 4 provinces expires in 1871 → need for a more comprehensive act to replace them  concludes with Hinck‟s recommendations for converting the banking laws of the four provinces into a national banking act  critical feature determined in the BNA act is exclusive authority to the new Dominion gov‟t over banking, currency, interest  related challenge was to ensure a national currency and coinage → Mac&Hincks recognized that it will enhance national unity  gov‟t-issued paper currency alongside/instead of paper noted issued by a variety of chartered banks → unsettled  Dominion then, Mac ocuppied w/ extending it from sea to sea → essential that all would be subject to new banking and currency laws  already purchased Rupert‟s Land from HBC; Manitoba came into existence (1870), working on getting PEI (east) and the BC (west)  BC already had 2 existing colonial banks that will be brought under control of the Dominion gov‟t if BC joined Confederation  political goal was financial stability; and managerial challenge was to create the institutional and regulatory framework to carry it out Coversation of Macdonald and Hincks (Sept. 1869)  Hincks, leadership on financial questions in 1840s and well respected in the House.  Mac’s problem: most banks are coming up for renewal and have been unable to resolve the differences between BMO and the rest  since Civil War in States, we have been flooded with US silver coins which has no official standing; Can. no national currency  John Rose, minister of Finance resigned; constantly pressing BMO views on the House → Ont. supporters uneasy as well as Maritimes bankers → Rose‟s notion of copying the US free banking system  wants Hincks to prepare a document reviewing the Dominion‟s financial history going back to the change of regime in 1763 till 1869  explain how our financial system got us to where we are; how we can resolve our differences; sound national currency  provide proposals for a new federal Bank Act to be presented to the House as our new minister of finance Abbot Report (Feb. 1870)  Banking in early Can. (1759-1817):  before the passing of power in Can. from France to Britain in 1759-1763; no financial system; large supply of paper currency in circulation in Lower Canada, issued by French gov‟t → not regarded as safe store of value by Canadiens (kept their savings in specie)  1759, fall of Quebec; paper money became worthless  1759-1820, British military governors of Quebec and aristocratic seigneurs in Lower Canada → lack of interest in trade and finace  both were contemptuous of merchants and traders → there was no thought of financial legislation  this hampered domestic trade and financing of exports and imports until well into the 19C  1770, 70K people in Lower Can (5K were Anglophone) → conjectured tht farmers in Can. cannot be posswessed of < 1M pounds sterling in specie (hoard up money to portion their children: neither lend it for interest nor expend it to purchase lands)  1770-1870, lack of money to carry ordinary business continue to plague the economy  little help from Britain where conditions are not much better; no reliable form of money as means of payment or to store value or to even help gov‟t with their own finances.  most commonly used currencies were gold&silver coins  Spanish doubloon = 4 pounds sterling; French crown = 5 English shillings; Spanish/US $ = 5 shillings  English and French coins were both legal tender in Lower Canada  Upper Canada; accounts were kept in York currency (8 shillings instead of 5)  clever merchants would arbitrage between MTL, TOR, NYC and London → required capital and patience because cost of transporting specie, risk of theft,and long overseas shipping route implied high risk  shortage of specie led to improvisation of paper money in Quebec → promisory notes (bon-pours); British army began issuing its own paper money (army bills) to buy provisions. → but lack of large denomination of money still hampered foreign trade  1810, market in bills of exchange developed (orders on the buyer issued by the seller and payable to a third party)  but great distance and tipe lapse of 6 months to 2 yars between the transaction and the final payment resulted in dishonesty between buyers in London and importers in Can. → hence, role of a financial intermediary was to buy the bill of exchange at a discount (became the chief functions of banks in providing credit to acilitate trade)  First Bank of the US  US face same problems in financing ovrseas trade in Boston and New York (growing proportion of Can. import-export business)  1791, the First Bank of US authored by Hamilton, opened in Phil. and became the model for the Canadian banking system  first attemptsto define a bank charter in Canadas were copied almost word for word from the charter of the First Bank of US  5 state-chartered banks were already in existence in 5 US cities (constitution of 1787 silent whether banking was a fed/state)  fundamental difference between US/Can banking system, but assigned power to issue and regulate coinage to the fed;  states prohibited from issuing paper money; gold&silver as only legal tender st  opposition of Hamilton in Congress were bankers in NY and Boston, resented ste location of the 1 Bank  Hamilton got his way with Washington‟s support and the 1 Bank of US was endorsed by the congress  authorized capital of $10M = $2M (allocated to gov‟t) + $8M (issued to the public)  heavily oversubscribed; stock rose $25-$300/share; unclear if required min 20% subscription in specie was ever achieved by public  could use as safe depository for taxes & provide loans to gov‟t; modeled after BankofEngland commercial bank & chosen gov‟t bank st  keep control over state-chartered banks by requiring every issuer of bank notes to convert its own bank notes into specie → 1 Bank could and did accumulate banks notes it considered unsound; and presented them all at once for redemption in specie → killed any bank that had overextended itself by too much leverage of its own issue of bank notes on its reserves of specie  limited to 20 years and upon renewal in 1811, it was killed by enemies in Congress (partly b/c it had been doing its job so well)  critical factor, much of the public issue of stock acquired by British investors and was with Britain was imminent  1812-1812 war years, specie be the only legal tender suspended → country flooded w/ paper money issued by dubious banks  1816, charter of 1 Bank revived as the 2 Bank (20-year charter) → again by 1836, killed for the same reasons in 1811  limit of 6% to be charged on advances to borrowers → followed in by the Canadia charters ( no political concern)  Can. railways able borrow for long-term in LDN bond market @ 5% (ceiling of 6%, short-term loans seems plausible)  US would never again enjoy a national banking system with branches of banks across all states  Earliest Banks in Canada: merchants in MTL, HFX, and SJ careful note of 1 Bank; by then, immigration from NY and NE: 30K from US in 1789 as UEL; 2K settled in MTL, 7.5K occupied SLR (from Cornwall-Kingston), Lake ONT. and Niagara Area, York founded 1793  1793-1815, requirements of commerce, little impression on British Treasury →English/Scottish banking systems were unstable  1797, Bank of England suspended cash payments and did not resume until 1821  example in 1824, National Bank of Scotland, transition steadily made to present, 1870, system of few large banks w/ many branches  1870, BMO already existed (started operating 1818; sent officer to train at 2 Bank) but did not receive provincial charter/royal assent  articles of association adopted in 1817 very similar to the 1 Bank and earlier aborted cases (also adopted from the 1 Bank) st  1792, earlier attempt to incorporate the Bank of Lower Canada; 1808 (Bank of Quebec)  authorized capital was $1M Canadian = £250K; no market in shares (bank was not yet chartered as a joint-stock)  serious restrictions on share ownership and voting rights → no1 could vote >20 shares (aimed at wealthy NY & BOS)  BankofNB, limit 10 shares (1 bnk receive provincial charter 1820); BankofNS, 1 joint-stock bnk incorporated 1832  critical regulation in the BMO articles, liabilities of the bank could not exceed 3X its paid capital (capital has to be specie)  for many years, bank deposits were uncommon; chief liability of bank was its own bank notes (non-interest-bearing deposits)  but if notes were accepted by the public for general circulation → no pressure on bank to redeem them for specie  paid-in capital → reserves underlying the money supply → forced BMO to prudent in its note issue  constant pressure on BMO → French Canadians distrusted paper, converted the bank‟s notes into specie and hoarded it  in Upper Can. excessive issue of notes helped to the demise in 1866 of Bank of UC  BMO charter sbject for decennial review → enabled legislature of LC to monitor consequences of its chartering activities  charter forbade bank from engaging in any other business and prevented the extension of credit for real property purchases  preserved Can.‟s small economy from acquisition by banks of manufactures, railways, & land speculation excesses  absent from the charter was double liability clause (originated with the BNB copied from Massachusetts banks)  encourage prudent behaviour by directors and shareholders in issuing bank notes.  event of failure, shareholders of the bank were required to take up an amount of stock equal to that they already owned  clause was not enforced before the Confederation and caused grave consternation among shareholders of BUC  privilege of; sole depository for gov`t monies, fiscal agent for the colony with the Treasury in LDN, overseer of the note issue  charter was silent on the power to establish branches; BMO opposed branching by others  Bank of Upper Canada  1818, BMO lost no time opening branches in Kingston and York → alarmed merchants in UC; BMO subject to the archaic French Civil Code of LC; and ↑dependence of the merchant community on MTL (seaport & financial centre for all trade along with NY)  1822, York (900 pop.) 1/2 Kingston, 1/10 of Mst obtained first UC bank charter (9/15 bank directors members of the UC Exec Council → governing body of the colony; 1 pres. William Allan → BMO agent in York since 1818)  authorized capital, £200K close to BMO, £20K paid-in capital → Yorkies coud not raise that directors and execs turned a blind eye  (3X the capital pain in specie) bank‟s note issue not contrained → note circulation > legal requirement  BMO gathered BUC notes, dumped w/out warning to BUC requiring payment in specie; responsing prolonging a specie war  BUC in beginning made notes redeemable at its MTL branch → made it easy for BMO to redeem its rival‟s notes on the spot  BUC resorted to making its notes redeemable only at York → forced others the expense and risk of transporting specie  gov‟t @ York passed an act preventing out-of-province banks from operating in UC unless notes were redeemable @ York  effectively banned BMO from operating in UC from 1824 until 1840 when UC and LC united  virtual monopoly of BUC (profitable) → sole bank of deposit for the gov‟t and immigrants (both of which it paid no interest)  gradually other banks appeared → legislatureovercame the Exec Council‟s resistance to competition; 1832 CBK and GBH in 1835  BUC overextended its loans tocanals and railways → 1850s heavily comitted in financing GTR  BUC failing, BMO recaptured the role of depository to the gov‟t of the PC and took over GTR → BUC failed in 1866  now subject to the double liability clause introduced when LC&UC united  serious political embarassment; nothing has yet been done enforce payment by the shareholders (PM indebted to BUC of 17K)  Mr Galt, 1 minister of fiannce and director of the CBK also failed soon after BUC → imprudent loans to the GWR (suceeded by Mr. Rose after 4 months in office as a minister of finance)  GBH also failed brought down by the bankruptcy of its large competitors and its cascading effects on the whole mercantile community  all these failures provided new venture in UC → Bankf of Commerce and the Toronto Bank  must keep in mind the serious commercial situation in Toronto due to the 3 bank failues  also must consult newcomers esp. McMaster → pres. of the BoC and chairman of the Sen. Committee on Banking&Finance  Struggle among Banks for Market Share  @ Confederation, 38 banks and BMO accounted for 25% of all the assets  Mr. Rose& King propose Can. banking adopt American ‘free banking system’& agree to transfer the note-issuing power to Dominion  licensing of banks (states controlled). NY and other state decided not necessary to examine individual applicants for bank charters  FB → anyone w/ capital could open local bank with no branches → many bank failures; flood of fake paper money appeared  FBA 1850, allowed the founding of local banks w/out branches → allowed to lapse and British Treasury offended by this  stabilize market in gov‟t bonds → disastrous economic depression & transatlantic financial collapse 1848, uniform currency  re-establish confidence in financial system by requiring banks to hold gov‟t bonds to secure their paper money issues  resistance to proposal from all chartered banks but not BMO (own large amt of gov‟t bonds; became monopoly issuer of bank notes)  since Confederation, Rose continued the case for BMO and met strong opposition from other banks  same time, little support for removing power to issue notes from all the chartered banks& transferring that power to Dominion gov‟t  British Treasury, pushing Can. to follow the British system → Bank of England is the sole issuer of paper money in small denominations  but monopoly gov‟t bank solely for issuing paper money → subject to political interference and corruption  may wish to consider prohibiting banks from issuing bank notes in denominations > $4 (general circulation of money is for sums > $4)  for smaller denominations ($1/$2) → might wish to propose issuance of Dominion notes  ensure public confidence in Dom. notes → define them as legal tender and place and overall ceiling og $10M on their issuance  banks‟ note issue → required to hold a reserve of legal tender (gold/Dom gov‟t bonds or combination) ↔ replace present system  limiting issue to some multiple of their paid-in capital in specie & introduce a reserve of legal tender controlling supply of money  these will restore public confidence in Banking system, serioujslt shaken by the failure of so many ONT bank failures  Rise of the Canadian Dollar: establishment of a self-governing Dominion → no longer require royal assent from LDN  1851-1854, battles to keep provincial accounts in dollars instead of sterling (Treasury officials insist circulating currency of colonies must be sterling; but Can. trading relationships w/ US became so strong and Can. accustomed to the decimal currency of US)  1858, PC adopted a dollar currency as the money of account and British Treasury gave way  1854, succstded in defining the value of $Dom. = 23.22 grains of gold = $US; £British = 133 grains of gold = $4.8666  1 time there was fixed relationship between 3 currencies → benificial in transatlantic trade and in conduct of daily affairs  but Spanish and French coins still in ciculation so worn that they cannot be recognized  paper money issued by banks = no uniform value for 5P → must determine legal tender & uniform paper currency for all 5P  in summary Abbott recommends; establish a uniform fed act, replacing all provincial charters including;  min capital of $500K; 10% to be paid up  power to issue notes in denominations of $4 or more; not to exceed paid-up capital and secured by gold or Dom. notes  double liability on shareholders, to be paid before realizing on the assets of a failed bank  total bank liabilities not to exceed 3X the capital  mandatory decennial revision by Parliament  1 vote per share  prohibition against extending credit on real property; and  maintain 6% interest ceiling Conclusion:  recommendation of the Abbott report were all part of the 1 Bank Act of 1871 along with 20 other clauses defining constraints on;  raising the capital, duties of directors, and issuance of paper currency  act remained silent on the power to have branches → Hincks encourage the banks to have multiple branches rather than pursue the US model  multiple single banks with no branches CASE 3: CANADA’S FIRST GREAT MANUFACTURING ENTERPRISE: THE STORY OF MASSEY-HARRIS Introduction:  completed in 18180, Massey-Harris headquarters at 915 King Street West → measure of the ∆ transforming the way people worked in TOR  gas used to light the many buildings linked to headoffice; likely the 1 sprinkler system in Can. (protect from fire); steam eavators carriying materials of 4 floors building where tradesmen divided into specialties made all parts of the farm equipment assembled  1st factory of its kind in Can. → small compare to US but still an important step forward for Can. business Massey’s Entrepreneurial Roots (1802-67)  1802, Daniel Massey Sr emigrated from NY with wife and children → settled near Cobourg (port town on Lake ONT) in UC  Massey like 95% of the settles in UC bet their futures on faming → paid off for their son, Daniel Jr  Daniel Jr Spots Opportunity → Sr less lucky: cleared the land for his farm → no market for his trees and burned them  @ 19, most men in UC lived on their family‟s farm learning how to work land hoping by 21 might be able to find land of their own  1817, Jr age 19 recognized → pop. growing quickly → demand for wood in forests around Cobourg made clrearing land profitable  made possible by the arrival of men from Ireland and Scotland looking for immediate work  seized the chance this market offered @ 19 and left the family farm, rented nearby land, cleared it, selling the trees at enough profit to buy the land which he farmed until he found a buyer → proccess he repeated often to his own good fortune  1820, enough money to marry Lucinda; 1821 first daughter and followed by a son (Hart) in 1823 → 9 children all together  Hart closest to Jr; by age 7 had trust of Jr and already skilled in handling a team of horses  1820s, Jr continued business in creating ready-made farms for new immigrant families → realized change was coming  market for his trees declining also # of land buyers → after 12 yrs and 1200 acres of cleared land Jr became full time farmer  took interest in labour-saving tools, budding industrial rev. was beginning to generate → he knew would bring vast change  American thresher, Jr learned machine in 1830 in NY → step forward in reducing amount of labour during harvest  1840s, his ideas improved the lot of farmers in his small machine shop on his farm → fabricated field implements  economic conditions worsen for farmers but his sideline of making labour-saving farm tool paid off  Launch of the Newcastle Foundry and Machine Manufactory Company  1840s, influx of impoverished immigrants → crop failure, economic hardship, and famine in Europe especially Ireland  Britain lawmakers in a debate about Corn Laws → tariffs on wheat primarily protecting British empire growers from US&Ger.  Can. wheat growers benefitted against US until 1831 (British gov‟t removed tariffs on US wheat shipped using St.Law)  1845, crop failues hit Britain; Briton‟s living standards could not bear protect Brit. Empire farmers (against Corn Laws grew)  1846, Brit gov‟t repeled Corn laws leaving farmers in the PC to compete with th US and whole-wheat producing world  1847, growing competition for Brit‟s wheat market → hard times for Can. farmers and poor harvest  economic malaise not deter Jr from selling his farm to 24 yr old Hart & buying nearby foundry that had gone bankrupt  allowed launching of new farm-implements-making firm w/ some help from tariff regime imposed by UC gov‟t  1849, foundry finally moved to Newcaste named the Newcastle Foundry and Machine Manufactory Company  supplied modest but expanding market for farm implements by buying manufacturing licenses for equipment designed in US  Jr limited capital expense in R&D to increase efficiencies in production but made small improv. so equipments would suit Can.  strategy proved enough for the company to secure its footing in a market that was to become very competitive  New Generation  close to 1850 pop. nearing 500K → faring enterprise changed drastically → company expanded as orders for his implements grew  purchased another foundry nearby but still struggled to keep up w/orders by 1850, strain took hold of Jr and called Hart to take over  1851, Hart abandoned farming and moved to Newcastle with his wife&kids → 1852, name changed to HA Massey&Company  Hart assumed effect mngmnt. 1854 full ownership 1855 Jr died 1856 (hard-working, hands-on manager, pious and disliked all liquor)  Hart displayed many of Jr‟s characteristic: commitment to hard-work; news salesmanship and self-confidence (Jr lacked)  Hart, risk-taker constantly seeking latest machinery to import → pre-empted rivals; hart also improv. to suit Can. need  worked to ensure firm developed reputation not only for innovation but also for excellence and quality  firm was advance in innovation by importation of Ketchum mover 1851, Burnell reaper 1855 and cobination of two (1 bring in Can.)  1856, Cobourg linked via GTR (MTL-TOR) → reliable means to transports wares to dealers and supplies to Newcastle factory  advantage needed to keep Harris Company of Branford, ONT rival that entered the field in 1857  1842, Red Fife strong variety of wheat suit Can‟s climate; wide use 1850s farming more profitabloe & expand market for Hart‟s wares  Hart and others in BNA sought ways to expand markets in wake of Britain‟s repel of Corn Laws and ↑ importance of exports to US  1849, NB 1 launch meetings negotiating a trade pact with US; 1850 limited reciprocity was in effect between US and NB, NS, PEI  1854, broader reciprocity deal included the PC  Scarcity of Labour; influx of immigrants 1840s by 1850s lack of manpower due in part needs in rail construction; and vastness of the land  with agriculture more attractive → farmers incentive to purchase productivity-enhancing wares  EU, lad was scarce labour abundant make most of land; US/Can land abundant labour scarce make most of labour  this development + opening up of attractive markets for produce helped prompt flurry of activity in production of farming wares  innovation originating in US → rapid development of new machines and patents ↔ patent wars ensued within country  US readily licensed their inventions to Can. implement makers preoccupied with patent wars w/ one another than w/ foreigners  Localized Market: in 1850s advantage Can. implement producers enjoyed ↔ transportation across BNA played against foreign competition  competition in farm-implement market emerged after CPR completed 1885 ↔ advantages enjoyed by locals diminished  Massey grew largely unimpeded by competition from US before late 19C + benefit by a 15% duty imposed by PC on manu. imports  Reciprocity Treaty 1854  US less interested w/ trade UC; interested w/ reciprocity trade w/ BNA to access fishing rights in waters of Brit‟s Maritime colonies  fresttrade in non-manufactured items but 15% duties remained on manufactured goods into BNA raised to 20% Galt Tariff 1858  1 yr of treaty brought 96% ↑ in duty free trade items between US & BNA → growth was not sustainable but when treaty killed 1866  US trade ↑ 40-69% exports due to treaty, US econ growth & impact on DMD for goods; DMD for food & meterial from BNA  farming did well → Massey prospects improved; deal allowed firm import natural products (timber)
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