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Department
Administrative Studies
Course
ADMS 1010
Professor
Alison Kemper
Semester
Winter

Description
Midterm Review Case 60-67  Massey Headquarters built in 1880  Massey works was the first factory of its kind in Canada, (small by the standards of the large manufacturing plants that thrived in larger U.S. cities such as Chicago, but still an important step forward for Canadian business)  Daniel Massey, Sr Emigrated from New York State with his wife Rebecca and their children to settle in upper Canada in 1802  Lived in Cobourg, a small port town on Lake Ontario and began the arduous process of building a new life in Upper Canada  They brought their furniture, two oxen, farm tools and brute strength to cut down hardwood trees, uproot stumps, and remove rocks and boulders  The Masseys, like 95 per cent of the settlers in Upper Canada, bet their futures on farming.  Their son Daniel Jr. spots opportunity in 1817, as Daniel sr. cleared the land for his farm and burned his trees because their was no market for them  Daniel Jr. leaves his dads farm and rented nearby land land, hired labourers and cleared it, selling the trees at enough profit to buy the land which he then fared until he found a buyer (Daniel Jr. repeated this to his own good fortune)  By 1820 Daniel Jr. married his wife Lucinda Bradley and they had many children, but of those Hart Almerrin (born 1823) appears to have closest relationship with his father  Hart by the age of 7, he had the trust of his father and was already skilled in the handling of a team of horses.  During the 1820’s Daniel Jr. continued in the business of creating ready-made farms for new immigrant families.  The market was declining for trees as well for land buyers  Daniel Jr. became a full-time farmer and starting taking a keen interest in labour-saving tools that the budding industrial revolution was beginning to generate (implements that he knew could bring vast change to a world that still relied on farming tools which were used in the days of Egypt)  One such device that promised a new age in agriculture was the American Thresher  A machine operated by twelve men and used to separate grain from husks to help with the wheat harvest  Daniel Jr. a frequent visitor to family and friends in New York State across Lake Ontario, learned of this machine 1830 and decided to import it to upper Canada  While it was a step forward by reducing the amount of labour required at harvest, this first thresher did not produce the results Daniel Jr. had hoped for.  A decade later his ideas to improve the lot of farmers took shape in his small machine shop on his farm where he fabricated field implements for tilling the soil, seeding it, and harvesting crops.  Daniel Jr. was perfecting his skills as a machinist, fixing equipment and outfitting his neighbors with tools he made or imported  Although economic conditions deteriorated for farmers n the 1840s, Daniel jr.’s sideline of making labour-saving farm tools paid off  Crop failure, economic hardship and famine in Europe, especially Ireland  Brought many immigrants to the new world in the 1840’s seeking relief and a better life  In Britain lawmakers were embroiled in a fundamental debate about that country’s Corn Laws, tariffs on wheat that were designed primarily to give protection to British growers and members of the British empire over foreign countries such as the United States and Germany  Canadian wheat producers generally benefited from British protection against American growers until 1831, when the British government removed all tariffs on U.S. wheat shipped using the St. Lawrence  Crop failures hit Britain in 1845 and the price exacted on Britons living standards proved more than most were willing to bear to protect British and colonial farmers  The fight against Corn Laws grew  In 1846 the British government repealed them, leaving farmers in the province of Canada to compete on the merits of their wheat and its price against Americans and the whole-wheat producing world  Growing competition brought hard times to Canadian farmers and poor harvests in 1847  The economic problem facing the province of Canada did not deter Daniel Jr.’s from making the most important decision of his life (abandoning the farm and buying a nearby foundry that had gone bankrupt)  This purchase allowed for the launching of a new farm-implements-making firm  Daniel Jr. would use his experience and tariffs from any imported farming equipment into Canada  In 1847 Daniel Jr. bought the foundry at Bond Head, near Newcastle, Ontario and sold his farm to his 24 year old son Hart  Two years later firm was moved to Newcastle and named Newastle Foundry and Machine Manufactory company  The company supplied modest but expanding market for farm implements by buying manufacturing licenses for equipment designed in the United States that, if made south of the border and imported, would have face a tariff.  Daniel Jr. limited capital expense to process innovation to increase efficiencies in production rather than spending precious money on research.  He did make modest improvements to the American-designed machinery, so it will better suit Canadian conditions.  This strategy proved enough for the company to secure its footing in a market that was sure to become more competitive in time as farmers looked for ever more efficient ways to grow, harvest, and transport crops.  Daniel Jr. changed upper Canada and it was not what it was before when he came to Canada at the age of four  The orders for farming equipment was increasing and in order to meet the demand Daniel Jr. opened another foundry nearby  Even with the extra help Daniel struggled with keeping up with the orders  By 1850 Daniel called on his son most trusted son, Hart to come on board and be groomed to take over the family business  Hart abandoned farming, just as his father had  Hart moved out to Newcastle in 1851 with his family  1852 the company name was changed to H.A. Massey and company, in recognition of the new leader  Hart assumed effective management in 1854, and in 1855 taking full ownership  Hart had many of his dads characteristics, such as commitment to hard work, but he would put his own stamp on the firm’s management, bringing to bear the formal education his father lacked and a new salesmanship born of his own self-confidence  Hart was a risk taker, constantly seeking the latest machinery to import and in so doing, pre-empted his competitors  Like his father he also did improvements on to tailor to Canadian farmers to ensure that his firm developed a reputation not only for innovation but also for excellence and quality.  In 1855 Hart combined the revolutionary Ketchum mower in 1851 and the Burrell reaper and called it the Manny Combined Hand Rake Reaper Mower  Hart was the first to bring an invention to Canada (this reaper can cut 8-10 acres a day and became extremely popular with farmers in Canada)  Several significant events took place around the time of Hart Massey’s takeover of his fathers company  By 1856, Cobourg was linked by rail to Montreal and Toronto via the Grand Trunk Railway, which made it easy to ship out and import from the Newcastle factory (an advantage it would need as it tried to keep at bay a new rival, the Harris Company of Brantford, Ontario, that entered the field in 1857  The development in 1842 of Red Fife, a hardy variety of heat suited Canada’s climate –by Scottish immigrant David Fife and its wide use by the 1850s made farming more profitable and helped expand the market for Hart’s wares  Like Hart Massey, fisherman, farmers, timber firms, and others across British North America sought ways to expand markets for their goods in the wake of Britain’s repeal of the Corn Laws and the growing importance of exports to the United States.  New Brunswick was the first of the colonies to launch meetings in 1849 about negotiating a trade pact with the Americans  By 1850 limited trade was in effect between the United State and New Brunswick, Nova Scotia, and Prince Edward.  Four years later, a much broader trade deal included the Province of Canada  These events were unexpected for Massey, since with agriculture now more attractive, farmers had more incentive to use capital to purchase productivity-enhancing equipment.  The next decade they experienced the development of labour shortages. The lack of manpower created a need for labour-saving equipment.  The labour shortages were due in part to the manpower needs of rail construction, but they were also a reflection of the vastness of the land its small population  In Europe land was scarce and labour abundant, such that farmers attempted to make the most of their land. In Canada and the United States, where land was abundant and labour scarce, farmers attempted to make the most of their labour.  This development in addition to the opening up of attractive markets for produce, helped spur a flurry of activity in the production of farming implements, with most of the innovation originating in the United States.  Innovation taking place in the U.S led to the rapid development of new machines and patents.  Rivalry was fierce between manufacturers/implement makers was intense and paten wars ensued, with rivals taking each other to court repeatedly  Fortunately for Canadian implement makers, the American firms readily licensed their inventions to them since they were more preoccupied with one another than with foreigners.  Canadian implement producers also had an advantage on account of the localized nature of industry in the mid-nineteenth century.  Transportation between regions was difficult in British North America and played against the forces of concentration and foreign competition in the farm-implement market, which emerged after the Canadian Pacific Railway, was completed in 1885.  With the expansion of rail linkages, the advantages enjoyed by local producer diminished as competition became both national and international  Massey firm grew largely unimpeded by competition from the United States prior to the late nineteenth century and would likely have thrived without the added benefit generated by a 15 per cent duty imposed by the Province of Canada on manufactured foreign imports.  The US wasn’t deeply interested in trade with Upper Canada  It was drawn to a reciprocity trade deal one where parties would agree on a mutual list of goods that they would trade between themselves tariff free- with British North America primarily serving as a means of winning access to new fishing rights in the waters off the short of Britain’s Maritime colonies.  The deal that was eventually signed allowed for the free trade of largely primary, non-manufactured items such as fish, grain, meat, breadstuffs, timber and minerals.  Duties remained on manufactured goods, while special provisions for fishing rights and joint use of the Welland Canal were agreed to. The 15 per cent duty remained on US manufactured goods imported into British North America – the Galt Tariff of 1858 was later raised to a duty of 20 per cent  The first year of reciprocity brought a 96 per cent increase in duty-free trade items between the US and British North America.  This kind of growth was not sustainable, but , by the time the trade deal was terminated in 1866. Trade to the US had increased from 40.7 per cent of exports to 69.2 per cent.  Whether this increase in trade was due largely to the reciprocity deal or to more fundamental causes, such as growth in the US economy and its impact on demand for goods, as well as the demand for food and materials from British North America during the US civil War, is a matter that scholars debate.  For Hart Massey, the reason did not matter as much as the effect. For whenever farming did well, his firm’s prospects improved.  Reciprocity Treaty allowed the Massey firm to import natural products, such as timber from the United States, free of duty. Timber was an important component of Hart’s farm-implement business.  His freedom to choose between Canadian and American sources weakened local suppliers’ power and reduced his input costs  Further coal was included in the treaty and this benefited Massey in the sale of steam-powered implements that relied on coal.  If farmers could access coal, more cheaply, they would be better able to afford Massey machinery  Despite Britain’s and the province of Canada’s move towards a less protectionist stance, the colonies still received significant advantages from this protectionism  British North America enjoyed lower prices for iron and steel imported from Britain, compared to prices faced by US buyers  At the time Britain had considerably better quality iron and steel as well as more efficient manufacturing processes compared to US producers, placing “British steel’ in high demand.  Both reciprocity and protectionist impulses proved to be advantageous to Hart as he moved his family firm forward in rapidly changed era  The civil war resulted in sustained high prices for wheat, driving more farmers into wheat growing  For Hart-Massey’s firm, which built implements designed for harvesting wheat, this enhanced demand presented an opportunity to grow market share and Hart seized upon it, developing innovative promotional campaigns and building sophisticated distribution channels for his equipment  The more demand for wheat Hart expanded  The efficiency of the Massey mower and reaper was heavily advertised along with other items in a Massey sales catalogue that Hart launched in 1862.  Massey had a publication that contained numerous illustrations highlighting the savings and convenience generated by Massey machines.  It created a direct link from between manufacturer and consumer, a move that defied the usual commercial practice in which retailers acted as brokers between producers and consumers.  Harts ability to supply and service Massey products was of equal importance.  In 1860, Hart deemed it essential to establish distribution channels, using railways to move equipment quickly to local shops run by agents of the Massey firm who offered sales and service.  He expanded Massey’s market by extending credit to his customers so they could buy an ever-increasing assortment of Massey Goods using three-year installment plans to pay for them  Harts expansion were geared to the surging number of farms in Ontario, which climbed from 113,984 in 1861 to 172,258 in 1871  By 1867 Hart Massey transformed the company from a small foundry to a large, mature, and sophisticated operation  Similarly Alanson Harris had also been very successful in Brantford  Both were ahead of their Canadian rivals, and they are about to become part of a larger political and economic experiment- the Dominion of Canada  Canada’s first great manufacturing enterprise (1867-1910)  The province of Canada was no more. It was now split into two provinces, Ontario and Quebec, and joined with two Maritime provinces, Nova Scotia and New Brunswick (they comprised of 3.5 million people)  Hart Massey pondered what this new dominion of Canada would mean for the company’s future, one that was made uncertain after the United States had repealed the 1854 reciprocity deal in 1866  Hart had many options to consider:  Should he enter the US market to bypass rising tariffs on the part of the Americans,  Should he export to Europe, Should he focus on domestic rivalry and, in particular, keep his chief rival, the Harris Company, at bay  Hart began thinking seriously about markets beyond Canada’s borders when his harvesting equipment was chosen by the Toronto Industrial Exhibition to represent Canada at the 1867 International Exposition in France  Massey won two gold medals: one for salesmanship, and the second was a measure of his ability as a manufacturer  Massey filled his first European order, selling more than twenty mowers and reapers to German customers, making Hart Massey the First Canadian manufacturer to export Canadian-made machinery abroad  That move would not have been possible without the rise of steam-powered ships with screw propellers that cut down the time and cost involved in traversing the ocean  Massey would find that exporting to Europe was cheaper than supplying the farms of Canadian prairies (due to weather conditions of Canada especially in the remote part of the Canadian West)  Europe had developed a need for farm machinery in order to feed its growing urban centres more efficiently  European farm-implement makers were less experienced then Massey and had lower quality products  All of these factors provided export opportunities for the Massey Firm  Nineteen years after Exposition in France, Hart and his son Charles attended the Indian and Colonial Exhibition in London England, where they put the products Massey had to offer on show  The reception from the English was cold, except for the response of one Scottish farmer, William Ford, the whole venture may have proved a failure  Ford liked Massey’s binders and ordered six of them for the year’s harvest. (Scotland trial was a great success)  Ford soon ordered forty more binders and became Massey’s agent in Britain.  By 1888, Hart’s son Walter had set up a Massey agency in Austalia and sales on the European continent were going very well. In fact were being shipped to Asia minor, Africa, Germany, Russia, South America, Jamaica, and most British colonies.  Harris soon followed Massey to Europe, and even though Massey gained advantage because he was first, Harris was never too far behind  In 1870 Hart reorganized the company and renamed it the Massey Manufacturing Company, and capitalized it with $50,000 of his own money, keeping the firm private  Hart named himself president and brought Charles Albert Massey his son on board as vice-president and superintendent. A year later Hart’s began to fail. He decided it was time to retire and leave the daily challenges to Charles.  Hart moved to Cleveland, Ohio with his wife and kids. Charles took over the reins of Massey Manufacturing  Charles found the old factory could not keep up with high demand, so he wanted to make a new factory. Toronto was deemed a perfect fit because larger pool of labour, bank head offices, and myriad railway connections  Hart returned to help Charles with the building of the new Toronto plant on six acres of land. Construction began in 1879 and was completed in 1880. The result was the most modern farm-implements manufacturing plant in thie British Empire, located at 915 King Street west  One of the companies concern was the growing number of Canadian farm- implement makers who operated on minimal profit margins  By 1870’s a total of 252 farm implement makers were operating in Canada. They employed 2546 people and together generated 2.66 million in annual sales  Hart met this challenge by pushing as far into the Canadian market as possible using an aggressive advertising campaign that started in 1862  Hart wanted a larger share of the market that existed, he began expanding westward from Cobourg and selling his equipment in the large and growing market around Hamilton and to the west of that city  Harts advertisements were not unique, however he made up for by making a big event out of the annual train delivery of new farm equipment before the harvest.  Trains were decorated, a band was hired to play, and, in some instances, parades were organized to showcase the new equipment that farmers could purchase and use for the harvest  Rival firm Harris was also aggressive in it pricing and distribution tactics.  Intensified rivalry in the industry drove out many of the marginal implement makers, beginning a process of merging  One of the companies that could not keep up was Toronto Reaper and Mower, it opened its doors in 1877 using American capital and produced machines of excellent quality that were designed and proven in the United States before launched in Canada  This firm had particular success with its mower, which by 1879 accounted for two-thirds of all mower sales in Canada. Massey could not afford to ignore this company  Charles was constantly barraged with glowing reports about Toronto Reaper and Mower, which gave him even more reason to watch the company closely.  In 1881 the Toronto Reaper and Mower Company could not keep up with its financial obligations because it expanded to fast. Massey manufacturing bought the upstart competitor and could boast that the purchase had doubled its manufacturing capacity and tied it to Van Allen and Augur, a Winnipeg implement-distribution firm that would now manage their future orders on the Canadian prairies- an area that showed promise as a potential market for farm implements  This acquisition bought by Massey firm the rights to make the light binders. Once Charles and Hart had developed a simplified manufacturing process, these binders gave Massey Manufacturing the technological lead again in the field of farm implements. The advantage was short lived.  Harris was also developing a light binder and by 1882 had perfected its manufacture.  A year later Harris’s light binders were in full production, competing vigorously against the Massey alternative. Thus began the binder wars, which divided Canadian farmers between those who attested to the quality of Massey and those who favored Harris. While the binder wars raged, political developments of import were happening  While the binder war raged on Sir John A. Mcdonald was experience good fortune, not just politically, but economically  The global depression that had slowed economic growth came to an end in 1879 the year Macdonald implemented his new tariff policy on a wide range of items.  Macdonald’s National Policy promised much higher tariffs, including 35 per cent on some imports, and an expanded list of products to which the tariff would apply  Roughly 10 per cent of the Massey’s firm’s sales were generated from exports to Europe (this would later increase to 40 per cent of production exported)  Tariff walls designed to protect Canadian steel and iron makers would increase the input costs for Massey, make the company less competitive in the international arena, and cut into profits  Public promises and private conversations that Charles Massey had with conservatives during the 1878 election bought assurances that the tariff Massey paid on imported materials that he needed in order to make machines for export would be repaid by the federal government  However the company was obliged to supply a proper accounting of its export sales and use of materials. This report would be assessed, approved, or rejected by the cabinet, thus opening the door to arbitrary political decisions.  Charles Massey had a problem, if he opposed the National Policy he risked making enemies of Macdonald’s government  Charles and his father decided they had to support Macdonald’s party  Charles succumbed to typhoid in 1884. The grieving hart Massey invited his son Walter to join the firm as secretary-treasurer. Walter and Hart would now guide the firm going forward.  The National Policy with its high tariffs continued to pose a challenge for the Massey firm.  Massey pressed the government ministers and the prime minister, making it clear that if tariff walls increased his input costs, Massey would be less likely to effectively compete in the export market, costing the firm both profits and jobs.  In 1888 Massey let loose in a Toronto Daily Mail interview, making it clear he opposed the National Policy as it pertained to his industry and more generally that he favored commercial union with the US, believing it would benefit farmers as a whole  Hart’s list of complaints covered two newspaper columns.  He said National Policy act against the interests of manufacturers in our line of business. Specifically he pointed to steel and metal parts and the inability of Canada’s four rolling mills- there were two in Hamilton, one in Montreal, and another in Nova Scotia- to supply large amounts of competitively priced items for Canadian manufacturers.  As a result Hart turned to US steel producers to fill the gap  National Policy would wipe out his firm’s profits force it into a loss position of $30,000, and push Massey Manufacturing out of the international market where it could not compete against American producers while paying high tariffs on input materials.  Hart wants the Reciprocity Treaty of 1854 to come back as he had best of both worlds that time.  After Macdonald’s death in 1891, the governing party started rethinking the National Policy. Western complaints on high tariffs on farm implements were penetrating the walls of Parliament.  In the first time in years they received favorable consideration, including from Sir George Foster, the finance minister in 1893.  They dropped the tariff was reduced from 35 per cent to 20 per cent, and reduction apparently had the support of Hart Massey.  As the National Policy was revised, a major merger was in the works that would transform the Massey firm.  Both Massey and Harris had established many separate distribution networks across the country  The duplication by the two competing firms was seen as counterproductive  Massey talked to Harris about merger after he accepted technological defeat in the binder wars  They became Massey-Harris company  This consolidation gave the newly merged firm many advantages, such as economies of scale in distribution by eliminating wasteful duplication.  The merger of Massey and Harris caused other mergers in Canada, most notably the consolidation of the Patterson and Wisner companies, which occurred three months after the Massey-Harris merger  This was threat to Massey-Harris even though it was a smaller firm, Patterson-Wisner, was a full line implement maker.  Massey Harris did not make everything, so they could not make this claim  Massey-Harris merged with Patterson-Wisner, although it maintained the Massey Harris name. The merger of the four firms resulted in a Canadian powerhouse that controlled almost 60 per cent of the domestic market.  Consolidation and the weeding out of marginal players continued over a ten year period, reducing the number of domestic implement makers from 221 in 1890 to 114 in 1900  The decision to focus on exports abroad as opposed to serving the western market had significant consequence’s for the future  The west became important not only because of its rapid growth but also because the farms there were on average two to three times larger than farms in Ontario or Quebec.  The larger size was made possible by the new farm machinery that had become available as the Canadian west was being settled- it allowed for cultivation of larger areas and the larger areas made the machinery more efficient; hence, better business case could be made to purchase the expensive machinery  Massey-Harris focusing on exports to Europe and maintain manufacturing operations solely in Ontario, left the door open for American firms, such as McCormic, Milwaukee Deering, and Minneapolis Harvester that were interested in penetrating the increasingly attractive market in Canada’s west and locating their operations mid-west, closer to prairie farmers.  Their closeness was one factor that helped them erode Massey-Harris market share  If Hart-Massey had entered the US market before American farm-implement firms had consolidated, by building a branch plant or by acquisition of an American firm, the competitive landscape of the farm-implement industry in North America could have been altered dramatically  In 1894 Hart Massey was 71 years old, and his interest in the business was fading, he did have some unfinished work to do  His first wish was to secure a rebate on the tariffs his firm had been paying under the National Policy for steel and parts imported from the United States that were used to make Massey equipment for export  The second was launching a US Massey-Harris branch plant.  This would allow the company to bypass US tariff walls and enter the American market on an even playing field with US competitors who were still small compared to Massey-Harris, the US farm-implement industry still not having entered the consolidation phase  The Canadian government’s decision in 1894 to reduce tariffs on farm implements occurred at the same time Hart Massey achieved his first desire  He made a deal with Ottawa that saw his firm receive a 99 percent rebate on the tariff paid on US materials used to make machines for export  Buying a US plant was approved by the board in 1895, but then in 1896 Hart Massey died.  Harts death delayed the US expansion until 1910, but by then consolidation in the American farm-0implment industry was already well under way  Hart created the first Canadian company to build an international brand name for itself based on manufacturing and design expertise Case1-14  Mid-nineteenth-century British North America was made up the United Province of Canada (Canada East and Canada West, modern-day Quebec and Ontario), Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland, and Vancouver Island  The interior of the northern part of British North America contained three territories, the largest of which, Rupert’s Land, was owned by the Hudson’s Bay Company (HBC)  The North-West territory and New Caledonia, the southern half of present- day mainland British Columbia, made up the other two  In 1867 the British imperial Parliament passed the British North America Act creating the Dominion of Canada, with the Canadas, Nova Scotia, and New Brunswick becoming provinces of the new Dominion.  The Dominion of Canada expanding quickly, particularly in 1869 when it acquired Rupert’s land from the HBC  Early twentieth century, Canada had become a great colony of the British Empire  As Canada got bigger it was also growing economically as well  Canada’s GDP/capita more than doubled between the mid-nineteenth and the early twentieth century  Which made it the 10 richest nation in the world  It was achieved by public policy, a sound financial system, energetic entrepreneurship, and the emergence of large non-financial corporations  Government has played a role in business from the earlier days of settlement  Two major public policy statements were particularly significant  The first was the BNA act of 1867  The second was the National Policy first enunciated by Sir John A. Macdonald in 1878  BNA act was the product of conferences held in Charlottetown and Quebec City in 1864  It did not only create the Dominion of Canada, but also allocated responsibility between the federal and provincial authorities, giving the federal government jurisdiction over areas such as regulation, of commerce, currency, and banking  Also specific provisions relating to an intercolonial railway and to Rupert’s Land would have far-reaching implications for business in Canada  National Policy which began as a slogan to gain re-election of the conservative party in 1878 consisted of three interrelated parts  The settlement of the west  The building of a transcontinental railway  The adoption of a protective tariff  Because Canada is a trading nation, trade has always played an important role – more so than in most economies  Introducing a protective trade tariff, Macdonald was influenced both by the history of trade and by American policy  Lord Elgin the British Governor general of Canada went to Washington in 1854 to negotiate a reciprocity treaty in natural, unprocessed goods between the US and the British North American Colonies.  It was short lived after US voters put protectionist northern Republicans into power in 1860  The first step to reduced tariffs within Canada came seven years later when the Dominion was created and the former Province of Canada agreed to reduce its tariffs to bring them closer into line with those in the Maritime provinces.  In 1878 a speech to the House of Commons calling for free trade, Macdonald made it clear that he saw a protective tariff as a tool to get the American back to the bargaining table  Macdonald said if we continue to keep protective tariff we will procure for this country, eventually a reciprocity of trade  The issue of reciprocal trade continued to be an important topic of debate throughout the rest of the nineteenth century.  The liberal party would often campaign on eliminating the protective tariff, as in the 1891 election, when it called unrestricted reciprocity with the US  Macdonald responded “British subject I was born, a British subject I will die”  Macdonald addresses the US saying we want to have free trade with you guys, but we will not open our markets to you while yours remain closed to us  The Liberals gained power in 1896, they too supported the tariff and in 1897 went the Conservatives one better by entering into a preferential trading relationship (a reduced tariff commonly known as an imperial preference) with the mother country  Even though the role of government business had become more active by the early 20 century than it had been half a century earlier, it was still passive by modern standards  It was summed up as “The encouragement of industry, not its discouragement, is the office and duty of government”  BNA act provide the federal government with powers over currency and banking as well as life insurance  This was an important provision and one that contributed significantly to Canada’s development of an effective financial system  By granting the federal authority these responsibilities, Canada avoided the quarrels between centralists and decentralists that occurred in the US from the time Alexander Hamilton introduced the First Bank of the United States in 1791 until Andrew Jackson vetoed the Second Bank of the United States in 1836  The fathers of Confederation learned lessons from the US experience by osmosis, or wheather they were concerned by the failure of two major banks in Canada West – the Bank of upper Canada in 1866 and the commercial Bank in 1867  BNA act in 1871 ensured a sound currency, a necessity for any successful economy and a nationally regulated banking system  One of the key provisions of the Bank Act was decennial revisions  Which provided regular re-examination of the legislation to determine whether it was still suitable and applicable to changing times.  Other things that fell into place were in 1875 a superintendent of insurance was appointed, 1870’s stock exchanges were incorporated in both Montreal and Toronto, and in the 1890s mining exchanges were formed in Toronto that merged into a single exchange, known as the Standard Stock and Mining Exchange  Early years of Confederation, most major financial institutions were banks  Important life insurance companies as well as mortgage and loan and trust companies had also emerged (they were growing more quickly than the banking sector)  The period from 1899 to 1905 saw the formation of Canada’s first three investment banks  At Confederation, twenty-two banks were operating in Canada, the largest of them was Bank of Montreal  By 1905 the number increased to 37  The second largest bank – the Canadian Bank of Commerce in Toronto- had been incorporated in 1867, its growth helped by its financing of the Canadian Northern Railway (CNor)  Meanwhile the process of consolidation was just beginning, number of banks with head offices in the Maritimes was reduced and the concentration of financial power in Montreal and Toronto became particularly pronounced  Toronto replaced Montreal as the financial centre of Canada  While banks were the dominant financial intermediaries, their percentage share of all financial intermediary assets decreased between 1867 and 1905  The asset share of mortgage loan companies and life insurance companies increased dramatically  The role of other financial institutions had also begun to grow  Chartered banks were not allowed to lend money for real property purchases, because the government believed the risks were too great, so mortgage loan companies stepped into the void  They quickly became the second largest financial intermediary class as their share of such assets nearly doubled during this period  The oldest and largest mortgage loan companies was the Canada Permanent Building and Savings Society  The growth of life insurance companies was even more remarkable  The early companies found The Canadian market small and by 1890’s Canadian life insurance salesmen traveled the world, opening new markets for their policies, importing capital to Canada where their companies could invest it profitably  By 1875 The Canadian life insurance business was deemed sufficiently important that the government appointed a superintendent of insurance to oversee the industry  In 1899 regulations were changed to permit life insurance companies to invest in the expanding Canadian utility industry, a change that liberated hundreds of millions of dollars for investing in this emerging sector with its huge needs for capital  Three life insurance companies owned all the bonded indebtedness of the Toronto Electric Light Company, which had a distribution monopoly in that city  Legislation requiring companies to keep sufficient assets in Canada to cover their liabilities prompted some British and American firms to leave Canada, thereby creating a vacuum that both Montreal-based Sun Life and Toronto based Confederation Life moved in to fill  Trust companies also started to appear in the 1880s’ th  Canada was fortunate that by the early 20 century it had both legislative frame work for a sound financial system and healthy number of financial corporations in operation  Both are necessary in meeting the demands for capital that entrepreneurs and growing corporations required to carry on their activities  Earliest entrepreneurs were the French fur traders Pierre-Esprit Radisson and Medard Chouart des Groseilliers, who, rejecting the policies of the government of New France, went over to the English and helped establish the Hudson’s Bay Company  A century later, a handful of feisty Montreal-based Scottish entrepreneurs would rebel against the HBC’s monopoly and create a number of fur-trading partnerships (North West Company)  Which became HBC’s major rival prior to the 1821 merger of the two companies  Scots such as Simon Mctavish and William Mcgilivary were among the company’s early leaders.  The first English, as distinct from Scottish, entrepreneur was John Molson, whose beer is still sold today two and a quarter centuries after the business founded  The financial system in place made it simpler to obtain capital  The main entrepreneurial drive came from Canadians, either Canadians or British Born  Best known are Samuel Cunard and Hugh Allan in shipping; cousins George Stephen and Donald Smith, who were involved in the Bank of Montreal, the Canadian Pacific Railway (CPR) and the HBC’ Hart Massey and Alanson Harris in farm machinery; Goerge Gooderham and Hiram Walker in distilling; Timothy Eaton and Robert Simpson in retail; William Mackenzie, Henry Pellatt, Frederic Nicholls, and James Ross in railways and public utilities; and William Neilson of ice-cream fame th  In mid 19 century Canada, agriculture played the dominant role in the economy and was by far the largest employer  Few large publicly trade companies existed other than two-century-old Hudson’s Bay Company, British-owned with a Canadian head office near Montreal. Also Montreal telegraph Company, The consumers Gas Company of Toronto, The Richegraph Navigation Company, and a few fledgling railway and mining companies  Smaller than American corporations, but left a bigger footprint on the Canadian economy that did their American counterparts in the US on the American economy  Most are Canadian owned and located either Montreal or Toronto, although British investors did own such a major companies as the Grand Trunk Railway (GTR) and the HBC. American investors (who preferred equity investment, particularly in the mining sector also played a role  The Largest corporation, by far was the CPR (Canadian Pacific Railway) and Canada’s big business sector also included two other large railroads, major mining corporations, and a whole host of investor-owned electrical public utilities plus a few large manufacturing corporations.  Railways were the largest and first corporations and a o
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