ECONOMIC HISTORY, 1840-1867 I GENERAL VIEW OF ECONOMIC CONDITIONS N spite of the strenuous efforts of the anti-British element of Lower Canada and of the ultra-British IN element of Upper Canada to frustrate the designs of Durham and Sydenham for the reunion of the provinces, the progressive policy of a united Canada, with a still larger union in view, was realized in 1841 under Lord Sydenham. Rallying the progressive forces of the country under the new system of responsible government, hope supplanted despair, and the colony once more resumed its industrial and commercial expansion. For many years after the Union of 1841 economic conditions in Canada, even in their domestic aspects, were entirely dominated by forces which lay beyond her own borders, and therefore largely beyond her own control. While this was true of both the Canadian and Maritime Provinces in the period before 1841, it was still more significant for the period between 1841 and 1867. In the earlier period the economic life of the British provinces had consisted on its domestic side chiefly in living frugally upon the ample natural products of the country with little dependence upon the luxuries and refinements of European civilization. On its commercial side it involved simply the exchange of surplus natural products for those of other climates, and for a few staple lines of manufacture drawn almost entirely from Great Britain. But in the period between 1841 and Confederation, colonial trade was becoming ever more complex, especially in Canada. An increasing volume of capital was being invested in those manufacturing industries which transformed the natural products of the country several stages beyond the condition of raw materials, though seldom as yet into finished articles of consumption. Much capital also was being sunk in the rapidly expanding transportation systems of the country, combining both land and water routes. Larger and more varied supplies were acquired in lines of imported manufactures, and, in consequence, the commercial interests and capital involved in wholesale and retail trade, and in the banking and exchange facilities, were on a rapidly increasing and ever more permanent scale. But, while the economic interests of the British American provinces were thus expanding, and at the same time becoming more inflexible, they were still as completely dependent upon foreign conditions as the smaller and more adjustable interests of the earlier period. The greater part of the capital invested relied upon a foreign rather than upon a domestic trade. Industries were not sufficiently developed to support a population so well balanced in the production, exchange and consumption of its own products as to be essentially independent of foreign countries or strong enough to hold its own in regulating the trade with them. For capital the provinces were still absolutely dependent upon the mother country. They were forced to find markets abroad for the greater part of their own natural products, and to foreign markets they were compelled to look for the purchase of the greater part of the manufactured goods which the people were demanding in increasing volume and variety. We may appreciate, therefore, the growing interest and anxiety with which the leading citizens of the provinces watched the economic conditions and commercial policies of Britain and the United States, the countries upon which British American interests mainly depended. Under these conditions Canadian economic history during the Union period will be found to centre around certain outstanding movements and changes of economic policy on the part of Great Britain and the United States. The first and most important of these influences was the development of the free trade movement in Britain, which, alike in its intermediate and final stages, had most important consequences for the leading Canadian industries, such as the production of wheat and other articles of food, the manufacture of flour for the British market, and the timber and ship-building industries. The grain and milling trades, on the other hand, largely determined the economic relations of Canada to the United States. In the first place, we find much the most important phase of the attempt to make Canada, by artificial means, at once the commercial medium and the geographical highway by which the middle and western states tributary to the Great Lakes should send their natural products to the British and other European markets, and by which they should receive the corresponding imports. This transport of Western American grain through Canada supported extensive milling and financial interests, which were heard from with no uncertain voice on the termination of the incidental situation from which they temporarily profited. When complete free trade was achieved in Britain, and the British American preference abolished, readjustment on the part of the colonial interests was naturally required to meet the new conditions. Deprived of their advantages in the markets of the mother country, the British American provinces claimed a corresponding emancipation from the special privileges enjoyed by British shipping in colonial ports and in the carrying of colonial exports and imports. The British government soon recognized the logic of the situation, with the result that the historic Navigation Acts, long considered vital to British commercial supremacy, were absolutely abolished in 1849. The Canadians, having now lost all special advantages in the British markets, clamoured for access to the protected American markets, and solicited the assistance of the British government in procuring that boon. This led to the interesting negotiations and general campaign for reciprocity, a movement which began with Canada but was extended to take in all the British American provinces. After the Reciprocity Treaty went into effect in 1854, some very interesting and instructive economic experiences resulted which led to much discussion on both sides of the international boundary, and the ultimate determination on the part of the Americans to |