The three frontiers experienced peak activity at perceptibly different times. During the last three decades of the nineteenth century it was continued expansion of late Railway Epoch manufacturing that constituted the basis of growth. Between 1880 and 1913, investment in railways and settlement in western Canada accelerated, and peaked during the Wheat Boom of 1900--1910. Acceleration of wheat exports, lagged somewhat, occurring in the two decades from 1900 to 1920. In the 1920s, mining and forest frontier activities peaked, and manufacturing expanded on the basis of developments in electricity and internal combustion.
There were three distinct frontiers in Canada between 1870 and 1930. All contributed to the growth of the Canadian economy. Together they constituted Canadian economic development. One of these frontiers, however, was politically more important.
Development of the Prairie Provinces, being crucial to the transcontinental political integration of Canada, received massive government support. Homesteads were `free', and additional land, having been granted to the railways, was made available at `reasonable' prices. Between 1900 and 1910, a second and a third transcontinental railway were projected and construction was begun with government support. Between 1910 and 1920, completed railway mileage doubled from 19,000 to 38,000. The fastest rates of growth in almost every aspect of economic life were recorded on the central plain, where everything started, in 1869, from the statistically miniscule fur trading activities of the Hudson Bay Company. Gross Value Added in the three Prairie Provinces, as a portion of national Gross Value Added rose from 5%, in 1890, to 20%, in 1929. Advance on the Prairies was both the focus and measure of transcontinental nation building.
The question is, was Prairie development a source of wealth on which the rest of Canada grew, or did the rest of Canada pay a price for that development? In short, what was the substance of the economic development in Canada between 1870 and 1930? Which frontier was the economically important frontier?
There is real truth in the Staple Theory. It is not surprising that its elaboration in the 1930s generated excitement in the community of social scientists and historians working in Canada during those years of economic depression. They asked a particular somewhat narrow question, `What were the economic forces leading to the difficulties experienced in the Depression?' The Staple Theory was very much part of the correct answer to that question.
It would have been just as legitimate to ask, `What have been the economic forces generating the disintegration and continentalization of Canada? Perhaps better, `What has been the substance of Canadian economic development, generating forces of integration and disintegration, of independence and dependence; and how important have these forces been in the formation and reformation of the Canadian nation.
The manufacturing sector kept abreast of technological change in North America. The composition of its output reflected this. It also reflected the massive effort under the Second National Policy to bring the West into the economy through the extension of railways and settlement. Between 1870 and 1890, activities associated with wood and leather lost ground to activities associated with food processing and iron and steel. New entries in the list of Forty Leading Industries in the decennial industrial census included chemicals, hydro electricity, electrical equipment and consumer goods in rubber and textiles. After 1900, reflecting developments in the West, there was a disproportionate increase in transportation equipment, and in iron and steel manufactures related to railways. There was also a disproportionate increase in the manufacture of agricultural implements at this time, but this may have been only indirectly related to developments in the West. The Massey-Harris Company, for example, penetrated overseas markets, particularly in Europe. It is possible that developments in Europe were influenced, in part, by increased grain exports from the Canadian West. The Canadian West tended to purchase its implements in the United States West. Manufacture of automobiles began in Canada before the turn of the century.
Generalizing for the whole period, 1890--1920, one half of Gross Value Added in manufacturing appeared in Ontario, one third in Quebec. Almost all of it appeared in the Montreal and Toronto-Hamilton urban areas.
Nothing in the structural change in industrial sectors suggests that agricultural exports were the substance of development in the 1890--1930 period.
The first great railway expansion in Canada, 1850--1860, was followed by a period of economic consolidation. Output and income per capita grew, and manufacturing grew; despite the general decline in prices associated with the `Great Depression' of 1873--1893. Improvement in transportation increased the size of markets, generated economies of scale, and facilitated relocation of industrial activity to larger urban centers. The second great railway expansion, 1896--1910, was not followed by a period of consolidation. Between 1910 and 1920, the rate of growth of real GNP fell, consumption per capita fell, and the rate of growth of manufacturing fell. In short, the substantial growth that followed railway expansion in the 1850s was not repeated after railway expansion in the first decade of the twentieth century.
This can be interpreted in the light of two principal considerations. (1) Government intervention, an important propellant in both expansions, had a different motivation in the second expansion. In the first expansion, it was motivated by a desire for economic development as such. In the second, expansion was motivated by politicized economic development, that is, international imperial competition, and inter regional competition within Canada. (2) Both railway building booms entailed immediately related industrial expansion, but in the second instance the entailed development soon become technologically obsolescent as the Railway Epoch gave way to the Internal Combustion and Electric Dynamo Period. In short, the long-run sterility of early twentieth century railway expansion was a consequence of its very late arrival in the Railway Epoch, and its politically generated excessive scale.
Every region in the federation attempted to get more than its economically justified share of immediate benefits from western expansion. Rail-producing steel mills at Sydney, in Nova Scotia, thrived on political influence, tariff protection, and manipulated freight rates on the government-owned Intercolonial Railway. Quebec, miffed that all the expenditures on the Canadian Pacific had occurred in Ontario and the West, joined the Maritimes in demanding a politically determined share of expansion. With this motivation, Prime Minister Laurier successfully promoted a second transcontinental, the Grand Trunk Pacific, running from Moncton through Quebec City and across the uninhabited wastes of northern Quebec and Ontario. Even before this, however, Manitoba, fearful of the privileged position of the Canadian Pacific, and supported by those financial interests in Toronto who had lost to Montreal in the bidding to build the Canadian Pacific, aided and abetted Mackenzie and Mann as they promoted yet a third transcontinental, the Canadian Northern. The waste involved in this multiple expansion is evident in the reluctance of private enterprise to build even one transcontinental. To get the Canadian Pacific built the federal government had to offer a cash subsidy of $25,000,000, a grant of 25,000,000 acres of Prairie land, a monopoly of all traffic south of the company's main line, and a guarantee of 10% interest to be paid on its bonds.
It was not just the needless, unprofitable duplication of services that fed into economic sterility, because the whole expansion was carried out in a spirit of extravagance and corruption.
The proposed [Grand Trunk Pacific] railway was to run through a greater proportion of unsettled and presumably unproductive territory than either the Canadian Pacific or the Canadian Northern, both of which cut down into southern Ontario as soon as possible. Therefore it was designed for through traffic to the sea, either at Quebec or at Saint John and Halifax. What goods could be carried? The chief export of the west was grain, but grain, as had been demonstrated over and over again, would take the cheaper transport by lake carriers. ... As far as grain was concerned, the real pull away from Canadian ports was not to Portland [,Maine, by way of Montreal] but to [a number of] American ports by way of Buffalo. It seems a reasonable conclusion, therefore, that the ports of the Maritime Provinces would benefit no more from the National Transcontinental than from the Intercolonial; for the small saving in mileage would not materially affect the movement of grain. ... .
The work of construction on both the eastern and western divisions began in 1905. ... At Quebec the St. Lawrence had to be bridged. The Dominion government undertook to provide a bridge independently, without charge to the railway, and engaged a firm of engineers to erect it. The plan was ambitious, calling for the longest cantilever bridge in the world, and providing for electric railways, a road and pedestrians as well as for the trains. Construction began and about half the bridge was in place, when in August 1907, with only slight signs of weakness showing, the completed portion collapsed so suddenly that the men on it were carried into the river. This catastrophe, bringing with it a terrible toll in lives and money, led to a modified and less ambitious plan, which was carried out at a cost of $22,616,898, and the bridge was opened for traffic in 1917.
From the city of Quebec the railway followed its lonely path through northern Quebec and Ontario, unconnected by branches with Montreal or Toronto, except with the latter by the Temiskaming and Northern Ontario [Railway]. Shunning Lake Superior, the main line ran to the north of Lake Nipigon, with a branch to Fort William. No railway surveys had previously been made and no accurate maps existed, so that the engineers were also explorers. Much of the country through which the line ran caused difficulties in construction. The first contract was let in 1905 and the battle began with the rock and muskeg (swamp) of the north. The last spike in the eastern division was driven late in 1913, but at that time the Grand Trunk Pacific refused to carry out the agreement by which they were to lease the road, being not unnaturally staggered by the fact that the cost exceeded the estimate by approximately one hundred million dollars, or two hundred per cent.
No friend of public enterprise can fail to be embarrassed by some aspects of the story of the National Transcontinental [that is, the Grand Trunk Pacific]. Charges of widespread corruption in the letting of contracts were never proved, but the public continued to believe that fire existed as well as smoke. The Opposition in the House of Commons was vigilantly looking for irregularities in contracts. In 1909 a minor sensation was caused when the chief engineer of the National Transcontinental, H.D. Lumsden, resigned on the grounds that the assistant engineers were not following his instructions. He charged them with showing more rock-cutting than existed. In the debate that followed in the House, Houghton Lennox pointed out a number of contracts in which common excavation had been turned into rock-cutting -- to the profit of the contractors -- and hinted at collusion with the commissioners. The cost of the road was so enormous -- about $88,600 a mile -- that a royal commission was appointed to investigate (Glazebrook, vol.~2, pp.~138--140.).
Both the Grand Trunk Pacific and the Canadian Northern suffered bankruptcy early in the War. On the multiple grounds that the war effort required expeditious transportation, that railways might best be operated as public utilities, and, it is alleged, because certain Toronto financial interests needed to be bailed out, the Conservative Government of the time purchased the portions of the failed lines that the Dominion did not already own. This was the basis of a new company, the government-owned Canadian National Railway.
There is nothing in the history of railway expansion in the first decades of the twentieth century to suggest that opening the West was an economic success.
Settlers came from Ontario, from the United States, and from eastern Europe, mainly; and from Quebec, Iceland, and other political jurisdictions, in much smaller numbers.
Wheat was the cash crop on the Prairies, as it was in the northern United States. Other grains, feed for stock and horses, were not marketed in the beginning. Great distances to markets were overcome by the storability and transportability of wheat, and by technical improvements in the steam engine, marine navigation, and in machinery for culling defective rails. At first there were problems with wheat rust (mold) and early frosts. By 1908, Canadian government experimental farms developed the Marquis strain of hard wheat, rust free and capable of taking advantage of the longer days of the West's shorter growing season. This put in place the final piece necessary to generate a `wheat boom'.
The Wheat Boom occurred in the first fifteen years of the twentieth century. Of all homesteads still being worked in 1930, approximately 70% were taken up between 1900 and 1915. The corresponding quickening in wheat exports did not come until 1910. After 1900, Canada joined Russia and the United States in exporting sizable quantities of wheat to Europe. In 1900, Canadian exports constituted 4% of world trade in wheat. In 1914, 16%.
Opening of the West had profound political and economic effects on the rest of Canada. The whole country became more populous, while each of the older provinces became a smaller portion of the whole. In 1905, Saskatchewan and Alberta became the eighth and ninth provinces, and Manitoba had its boundaries extended. Together, the Prairie Provinces formed a block favouring lower tariffs, termination of the C.P.R. monopoly, public control of a fiat currency, `the return' of western resources to the western provinces, and, in general, a set of national policies favourable to their particular circumstances, and unfavourable to central Canada.
The Maritimes benefited from the demand for steel rails for railway construction, but large quantities of wheat did not pass through the ports of St. John and Halifax. United States ports, from Portland, Maine south, were economically more accessible. Within Canada, rail transport generally terminated at Fort William and Port Arthur, at the head of the Great Lakes, but there was some transport by rail in central Canada, especially in winter, with transfer to ocean-going transport taking place at Montreal or Quebec City. Very little grain was exported from the Port of British Columbia until the Panama Canal opened during the First World War. The West Coast benefited from the great demand for lumber on the Prairies during the initial building boom. Central Canada benefited from the great expansion of demand for iron, steel, and railway rolling stock and equipment.
The effect of the upsurge in wheat production in the West on agriculture in central Canada was minimal. Quebec had largely abandoned its attempt at `wheating' during the crise d'agriculture of the early part of the nineteenth century. Except for a temporary return between 1875 and 1882, Ontario shifted out of heavy dependence on wheat in the 1860s. In part, this was a consequence of the closing of its agricultural frontier, because wheat growing in Ontario was associated with the clearing of new land. In part, it was a consequence of the North American frontier continuing its advance across the continent. Ontario was not isolated from the United States Midwest. New wheat coming from the United States front would have affected prices in Ontario. In any case, Ontario agriculture had adjusted out of frontier operations long before the Canadian west became active. Beef, pork and cheese were more important in its export business than was wheat.
The question is `What was the contribution of westward transcontinental expansion to the growth and development of the Canadian Economy?' Excepting contributions coming from the the West Coast economy, answering this question entails some measure of the contribution of the `wheat economy', as such, to the growth of Canadian GDP.
The `Wheat Boom' period is estimated to have begun sometime between 1896 and 1908. In general, it may be dated 1896--1910. The contribution of wheat exports to the growth rate of GNP, in this period, has been estimated at between 8% and 30%. This implies that 70% to 92% of the growth rate was generated in activities related to the other two frontiers. There are forward and backward linkages to the rest of the economy to be taken into account in the cases of all three frontiers.
The contribution of the `Wheat Boom' to the development of the Canadian economy may be reflected in the growth rate of GNP before and after the actual `Wheat Boom' period. In the last third of the nineteenth century GNP grew in real terms at about 3% per annum. From 1900 to 1910 it grew at about 6%. Except for a spurt at 4% in the last half of the 1920s, the rate remained below 3% between 1910 and 1940; being about 2% in the second decade of the century, and 1% in the decade of the 1930s.
Until sometime in the 1890s, Canada grew on the basis of both agricultural and manufacturing activities, particularly in the Montreal--Southern Ontario region. From 1900 to 1910, there was a spurt of investment in iron and steel, and in transportation equipment related to transcontinental expansion. This was followed by a period, associated with the First World War, in which the politically motivated excesses of western development were recognized, and to some extent dealt with. Thereafter, investment in activities related to internal combustion and the electric dynamo generated a secondary spurt of growth, during which railway expansion continued. In the 1930s, over expansion in the activities of all three frontiers, including pulp and paper operations, accounted for the depth and extended length of the depression in Canada.
Had there not been the secondary spurt of growth in the 1920s, related to production of automobiles and pulp and paper in particular, the growth rate of GNP would have risen from 3%, in the late nineteenth century, to 6% in the transitional boom, and then it would have fallen, it would seem, to 2% for the following twenty or thirty years. That is to say, over the first decade of the twentieth century Canada passed through an investment boom, `the Wheat Boom' that switched its economy to a slower growth path. If the transcontinental economic nexus based on railways and settlement in the West was necessary for building and populating the Canadian state, and it would seem that it was, then the economic cost of that political necessity was a slower rate of growth in per capita income.
Economic expansion on the Canadian Prairie was not robust. It was paid for by external capital and government subsidization. The yield on those expenditures was insufficient to eliminate the need for further subsidization well into the second half of the century, at least. The Prairie economy ran into difficulties almost immediately.
With the outbreak of war, the provincial legislatures of Ontario, Manitoba, Saskatchewan and British Columbia passed moratorium legislation. This protection of borrowers against foreclosure was disturbing enough to lenders, but there were other equally disturbing measures to come. In 1915, when conditions of widespread drought led the federal government to vote $ 8 million for the purchase of seed grain, provision was made to enable the banks to make temporary loans for the purchase of seed grain supplies; these advances were given precedence over other claims in spite of the protests of mortgage lenders against this infringement of contracts already made. In 1917, government intervention entered a new stage when the Manitoba Farm Loans Corporation began operations (Easterbrook and Aitken, p.~510.).Two of the three transcontinental railways failed, and the third had a satisfactory return only with government subsidization. But if capital suffered a less than satisfactory return, labour faired even worse.
... more than 41 per cent of original homestead entries from 1870 to 1921 were cancelled: more than 41 out of every 100 Canadian homesteaders fell by the wayside before acquiring patent to their original homesteads. How many after acquiring patents turned their homesteads over to speculators and land companies it would be impossible to estimate. It will be conceded that in some respects `free' homesteads have been costly beyond computation (Martin, p.~172.).
What can be said of the `Wheat Boom', and of the wheat economy as a very long run factor in the integration and disintegration of the Canadian economy? Economic development associated with transcontinentalization was not the substance of Canadian economic growth, except during the short lived investment boom itself. Prairie settlement, no doubt, was important for the unification of the country, and it succeeded in this regard, in its own time. Still, the West required continued economic help, and continued to blame aspects of the National Policy for its dependent position. Ignoring the costs of western expansion carried by the rest of the economy, it repeatedly complained about `eastern exploitation'. At the same time, not receiving the benefits of expansion under the Second National Policy, the Maritimes and Quebec resented expansion in Ontario and the West. In the long run, disaffection related to the burdens and benefits of western expansion have been as important to national disunity as the economic nexus was to unity.
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