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Canada (161,798)
POLS 3470 (14)
Tim Mau (14)
Chapter 4

Uneasy Partnership, Chapter 4: Business, Government, and the Politics of Development: 1760-1970

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Political Science
POLS 3470
Tim Mau

Hale, Chapter 4: Business, Government, and the Politics of Development: 1760-1970 Study of economic history useful in three ways: 1. places the problems and opportunities of the present in the context of past decisions that have emerged from political conflicts and compromises 2. helps people in the present identify recurring issues and problems, learn from past successes or failures in resolving those problems, and recognize changes in the social or economic environment that may require the adaptation of past policies to new circumstances 3. provides reasons for fighting the ideological battles of the present through a selective scrutiny of the past Four recurrent issues and problems in Canada’s economic history  central role of government policies in promoting economic development and diversification  challenges of responding to changing international economic conditions  role of economic policies in promoting social harmony or cohesion  economic policies as tools of nation-building Economic development and Diversification  For most of its history, Canada has been a land of underdeveloped economic potential  Regionally, dependence on one or two dominant staple industries has encouraged the pursuit of economic diversification as a major priority of economic policy  Resource dependence often made Canada vulnerable to unilateral policy shifts by Britain and U.S.-its major trading partners Responding to Changing International Conditions  Major shifts in commercial, trade, and investment policies of Canada’s central trading partners require the government to adapt  Four turning points in political and economic history: o Economic panic of 1837  Armed rebellions against colonial government  Britain’s unilateral free trade in 1840  Canada emerged as separate transcontinental political/economic unit o Post-Civil War protectionism in US  Canada’s National policy imitated US economic nationalism  Fostered domestic industries and markets through high tariffs and large-scale investments in infrastructure (railways)  Fastest growing economy in industrial world (1896-1913) due to high net immigration and rapid industrialization o Great Depression Hale, Chapter 4: Business, Government, and the Politics of Development: 1760-1970  Discredited mercantilism and laissez-faire biz ideology  Emergence of Keynesian economic policies legitimated idea of gov as gurantor of citizens’ economic opportunities and greater economic equality  Increasing international trade and investment  Provoked Canadian nationalism between late 1950’s and 1970’s (growing difference between biz and gov elites) o Collapse of postwar economic order  Also global energy price shocks in 70’s and 80’s  Destabilization of Keynesian consensus  Reexamination of role and scope of gov in economy and society Promoting Social Cohesion  Social cohesion- basic condition both for the security of property and economic relationships and for increased social and economic opportunity  Central role for governments in balancing the two, by distributing economic patronage and opportune ities in the pursuit of electoral success or by balancing pressures for economic growth and social or regional distribution in more recent times  Social cohesion closely linked to the balancing of social and economic interests Nation-Building  Canada’s response to these forces described as “defensive economic nationalism”  Gov has often pursued strategic alliances with biz elites as instruments of national or provincial economic development (neo-mercantilist)  New national economic startegies followed periods of social and economic turmoil- federal gov sought to increase their control over this by pursuing greater Canadian economic sovereignty, by negotiating reciprocal agreements with other countries to develop consistent rules  Economic development mostly driven by logic of private economic interests, governments consistently provide strategic political direction for development and locational decisions of key industries Colonial Canada and the Staples Economy  Political basis of gov shifted from rule of British governors, assisted and supported by colonial oligarchies dominated by local commercial elites, to an increasingly professional governmental apparatus supported by parliamentary and legislative majorities  Economic structures of the colonies (Upper and Lower Canada, nova Scotia, Newfoundland, etc.) were separate and distinct, sharing little except the dominant influence of British imperial and colonial policies  Political world of Upper and Lower Canada (1790’s-1840’s): o Dependence of scattered economies on colonial relationship with Britain, notably the trading system and financial system Hale, Chapter 4: Business, Government, and the Politics of Development: 1760-1970 o Dependence on staple exports of natural resources to finance economic growth and borrowing o Development of statist/clientelist approach to relations between governing elites and local communities of small merchants and producers o Government provision of strategic guidance in economic development o Effect of economic shocks in destabilizing the political system leading to changes in environment for biz-gov relations Canada’s Economies as Colonial Dependencies  After US War of Independence influx of settlers resulted in emergence of separate political settlements on Upper and Lower Canada and Maritimes  Settlement was scattered, based primarily on subsistence agriculture or fishing  After War of 1812, imperial gov encouraged settlement of British veterans in mostly Upper Canada  Introduced high preferential tariffs encouraging the growth of timber, and later, wheat and flour exports  Land companies, financed by British investors, were intended to facilitate settlement, construct roads, and provide other services (decentralized development)  These projects resulted in frequent overextension of colonial government finances  Growing political conflict between 1820’s-1840’s  Shift of power to elected colonial govs during 1840’s coincided with British adoption of free trade and phasing out of preferential tariffs that benefited Canadian exports  Aggressive railroad-building policies introduced as stimulus to economic expansion (relied on local entrepreneurs to borrow in British markets)  These policies revealed excessive dependence of Canadian economy on a handful of agricultural or resource staples to finance expansion Staples Theory and Economic Dependence  Most regions initially depended upon the export of a staple resource to pay for economic development or to recoup the costs of settlement, defence, and transportation infrastructure th  Initial development of Canadian resource industries during early 19 century fostered by Britain’s need for secure source of supply during the Napoleonic Wars (tariff policies gave colonial industries preferred access to British markets until 1840’s)  By 1850’s, only New Brunswick was primarily dependent on Britain for its exports, all others traded with other colonies as well as US  While staples alone impeded capital accumulation, over time, economic activity based on processing and adding value to resources generated sufficient savings to promote development and diversification Hale, Chapter 4: Business, Government, and the Politics of Development: 1760-1970  Political implications: o the financing, building, and politics of railways played a central role in Canadian political life well into the twentieth century  gov provided subsidies for the private construction of canals and railways that blurred the distinction between public and private enterprise  most economic interests sought to build alliances with gov, after the onset of responsible government in the 1840’s, to create coalitions capable of delivering economic benefits to local communities, regions, and industries (meanwhile, legislators traded votes for railway projects Statism and Clientelism  patronage and influence were used by colonial governors to manipulate the power of the state to serve their interests and create networks of political and economic clients to help them maintain their power  developmental clientelism o series of regional and local patronage networks characterized by mutual obligation between clients and patrons, who often combined control over land and other economic resources with administrative and political office-holding o elected members closely linked to the social and economic interests of client networks  public came to expect that the exercise of political power would be linked to the enjoyment of economic benefits  Aitken: “gov’s mobilized private capital to serve political ends when it suited their priorities, but also substituted strategic political considerations for economic or commercial ones when they chose to do so”  Political conflicts before 1837: o Competition for power and economic opportunities between French and English-speaking communities in Quebec; o Resistance of rural communities to domination by the commercial and financial interests of Montreal, Toronto, and Halifax; o The pursuit of responsible government (control over executive power by elected majorities in colonial assemblies) Responding to Economic Shocks  Rapid population growth stretched the colonies’ resources to their limits on several occasions  *Box 4.3 pg. 110  Reciprocity Treaty signed in 1854- provided tariff-free access to more than 90% of existing trade between Canada and US, as well as providing reciprocal access to each other’s coastal fisheries (resented by Nova Scotia)  exports to US increased four-fold in decade after 1854  Depression of 1857-1858: Hale, Chapter 4: Business, Government, and the Politics of Development: 1760-1970 o Canadian gov increased tariff rates, triggering resentment from Britain and US  As a result, British were receptive to interest of Canadian political leaders in greater self-government The National policy, Canada’s Industrial Revolution, and the Political Economy of Regionalism  Canada from a scattered series of british colonies into a continental nation o Absorption of Hudson Bay Company’s territories and treaty settlements with mainly Aboriginal population o Building of three transcontinental railroads o Opening of Western Canada to European settlement  Balancing of farmers’ interests and interests of growing urban populations was central to post-confederation Canada  Until WWI, growth of urban centres prompted growing gov attention to development of manufacturing industries, creating conflicts between manufacturing (centred in Ontario and Quebec) and agrarian interests  Three distinct eras of economic development and evolving biz-gov relations between 1867 and the Great Depression: o Macdonald era (1867-91) o Laurier era (1896-1919) o Economic and social disruptions of 1920’s Macdonald era (1867-91)  Idea of nation-building championed, resulting in first trans-continental railway in early 1880’s  Federal-provincial relations o Mix of partisan competition and the efforts of regional economic interests to develop effective political counterweights to federal policies that often worked to their disadvantage  Policies of defensive economic nationalism o Strategy of national economic survival sufficiently feasible to offset alternative of absorption by the larger and more powerful US economy  Major economic development left in federal hands, while provinces took control over a number of divisive regional issues  National banking system developed in 1871  Government-led expansion into West prompted by the lure of cheap land in US causing southward emigration, combined with fear that US settlers and commercial interests would flood into and annex (take over) Canada’s new North-West Territories Railroads and Nation-Building  Reflected several major aspects of biz-gov relations during this era: Hale, Chapter 4: Business, Government, and the Politics of Development: 1760-1970 o Political
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