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Chapter 4

POLS 3470 Chapter Notes - Chapter 4: Western Alienation In Canada, Political Machine, Planned Economy

Political Science
Course Code
POLS 3470
Tim Mau

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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
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
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

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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
Social cohesion closely linked to the balancing of social and economic interests
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

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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
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
These projects resulted in frequent overextension of colonial government
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
Initial development of Canadian resource industries during early 19th 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
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