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Economic History of Canada: How Did the Settlers Facilitate Economic Growth? Essay


Canadian economy was typical of water transport until mid 19th century. Major industries involving fur, lumber and fish depended on the expansive waterways in the country for transport. It was only after this period that agriculture and mining became dominant. These industries depended on rail and road as their major transport channels.

Undoubtedly, fishing industry attracted foreigners such as Portuguese and French traders who identified the economic wealth of Canada. Many of these colonialists developed the fishing industry and brought in new technologies of fish preservation and storage. The study of economic history of Canada involves the analysis of the prevalent economic institutions and industries.

According to Easterbrook and Aitken, Canadian economic history revolved around the export of ‘staple products’ whose market existed outside the boundaries of Canada (213). This analytical paper seeks to highlight the evolutions of various industries in the Canada.

The paper will attempt to explain how and why various economic institutions and industries were relevant and remain important in economic history of the country. The major analytical part of the paper will concentrate on the role of settlers in developing the economy.

Background of Early Industries and Trade

Many communities living in the central parts of Canada were hunters and gatherers since the ancient era. They hunted animals with fur-bearing traits to make clothes.

Besides, small mines of copper and silver were important in creating ornaments for these communities. Although there were some aspects of trade among the native communities, the level of business was not profound and specialized. External trade that emerged involved French and British traders.

They came to the land in search of fur and fisheries. In exchange, they brought iron-made tools, weapons and other items that the native communities valued (Greasley and Les 296). This in turn led to an unprecedented trade among the natives and the foreign traders. As such, fur trade became one of the aspects of Canadian economy that led to the penetration of inland Canada.

Fur was of important use by the European settlers and traders who found their way to Canada. The products of fur such as beaver hats fetched high value owing to their escalating demand in Europe. Although there were many traders, French traders dominated the fur trade.

Easterbrook and Aitken say that they had controlled the commercial activity through New France and other towns located in the interior parts of Canada (237). Nonetheless, the English traders began their trade in Hudson Bay to put up with the increasing competition from the French traders. This in turn resulted to fierce rivalry due to the perceived dominance in fur trade.

It is worth mentioning that fur-trade did not support settlement since the traders had a handful of workers to aid the shipment process of fur to Europe. The trade also insinuated that the traders were unlikely to direct their voyages to the west part of Canada since there existed no elaborate routes (Marr and Donald 217).

This way, only few settlers were willing to occupy the Canadian territory. Thus, the native population remained relatively low. Owing to the political nature of medieval Canada, the French lost their share of the fur trade when their main town (New France) came under control of the British Crown.

Fishing was a major aspect of Canadian economy in the 19th century. It was the prime activity in such areas as Nova Scotia. Due to the increased demand for fish, other areas also started concentrating on the fishing industry. Greasley and Les articulate that the entrance of the United States into the West Indies trade prompted a surge in the demand for fish (301).

Major traders designed expansive storage facilities and fishing equipment to allow for expansive fishery business. Like fur industry, fishing did not allow for settlement in the country and majority of fish products constituted the exports. Much of the fish was exported to the US. The fishing industry did not last long in the country.

Timber industry became pivotal in the country owing to the increase in construction activities across the world. By the early 19th century, timber had become a staple product of the Canadian economy. Although the demand for timber remained negligible in the country, external forces led to an increase in its demand outside Canada. Norrie says that Europe had diminishing supply of the commodity from its countries (417).

Many high quality sources of timber had been exhausted in Europe. Such species as the great oak in England suffered depletion and there was an apparent need to look for other sources of the same commodity in other countries. In the US, major forests began to disappear while at the same time, the population was increasing exponentially.

All these factors led to the heightened demand of Canadian timber. In addition, Canada had high quality and long lasting timber products from such species as white pine. The extensive Canadian forests had remained largely unexploited. This prompted the external traders to come to the country in search of the valued commodity, which was disappearing fast in major European and American markets.

While the demand for timber was rising, traders were contending with narrow routes and dangerous transport system of timber. Canada had no elaborate ways of transporting timber after cutting it. The loggers would subsequently float timber in meanders and rivers that were headed towards the coastal regions.

Some of the timber products such as the oak were hard to transport to the harbors due to their inability to float on water (Norrie 423). With increasing need for work force to make timber trade an effective and efficient venture, many passengers who accompanied the ship vessels became settlers in Canada.

Indeed, timber trade was among the major factors that encouraged settlements. As the timber industry matured, there was an increase of competition. Besides, tariffs and preferences led to improved industries where the quality of ships that transported timber improved remarkably.

As such, many immigrants began to enter the country prompting massive settlements within the country. The settlers took their roles as loggers. Indeed, by 1850, there were over fifteen thousand Irish loggers within the country. As the population of the immigrants increased, other ventures became feasible. In particular, many loggers who stayed within the country began to cultivate plants and keep livestock.

The timber industry also encouraged increased competition for land. Land distribution became a major debate with the British crown formulating ways through which land could be distributed fairly. Many of the immigrants who went to Canada were paupers. The authorities therefore had to contend with alleviation of poverty although majority of the issues encountered by the immigrants remained hugely unresolved.

The arrival of many starving Irish soldiers in early 19th century acted as precursor for imposition of restrictions to migration (Emery and Kenneth 260). Although the lower parts of the country were unfriendly to the immigrants, it became apparent that many of them sought refuge in upper parts of Canada. Consequently, the authorities imposed a reduction in the land grants accruing the immigrants and instituted a new land system.

For the immigrants who had some form of capital, land was available for them to lease. This is in lieu of the fact that majority of the land controlled by The British American Land Company was mainly meant for agriculture. As such, agriculture became another aspect of Canadian economy.

Although agriculture had been a small aspect of the Canadian economy, it flourished by the end of 19th century. In Ontario, agriculture was profitable for many settlers who had begun cultivating their lands. Increase in mechanization and adoption of technology insinuated that farmers specialized in marketable agricultural commodities.

They included eggs, milk, potatoes and other vegetables that were in great demand in the urban and urbanizing regions. According to Norrie, majority of the farmers started to appreciate the need for elaborate agricultural ventures, which had surpassed numerous aspects of the economy (426). In other areas especially the prairies, wheat was a major crop that had become profitable. Majority of the wheat from Manitoba and Alberta was exported to Europe while the rest was shipped to America.

It became clear that wheat farming was a profitable venture not only for the settlers and the natives but also for the foreign investors. Due to perceived low risk, huge foreign direct investments especially from Europe started to flow into the country. Driven by external forces such as dwindling crop yield in Europe, many European nations directed capital investments to Canadian prairies (Marr and Donald 233).

This implied that wheat farming had reached its peak by the beginning of the First World War. Nonetheless, many investors overlooked the risks associated with wheat farming and it was only in 1916 that it dawned to them that the sector carried with it numerous risks. The drought that engulfed the country in 1916 led to unprecedented losses.

The industry had not witnessed such losses since its emergence. Many foreign investors incurred losses and shifted their investments to other countries.

Rapid withdrawal of investments in the wheat sector insinuated that Canada was unable to produce half the amount of wheat it was producing prior to the drought. However, agriculture in other areas of Canada was thriving despite the pessimism that foreign investors had shown in the industry.

Further, Canada had an indigenous financial system by the end of 18th century. Driven by colonial policies and capitalism, the country’s banking system began in 1972. This trend continued in numerous of other states where similar financial institutions became operational. By the end of the 19th century, Canada had over thirty-three chartered banks (Marr and Donald 223).

In addition, financial policies by the Government of Canada had made the sector to be lucrative for majority of investors. Emery and Kenneth say that insurance firms also opened their operations and it became apparent that the country was ready for an established financial services sector (256).

Indeed, by 1832, the country’s first stock exchange was opened. Montreal Stock Exchange was the pioneer in the sector leading to accelerated need for other similar financial institutions.

Later, Toronto Stock Exchange was established. With the increasing need for a financial system that would deal with commodities, Winnipeg Commodity Exchange became operational in the early 20th century. This ushered an era of elaborate financial system in the country. This eon was hugely driven by capitalism, which had overtaken parts of Western Europe and America.

Moreover, it is worth mentioning that the economic history of the country was motivated by the need to industrialize. Ideally, the country’s native population was relatively small to support any form of aggressive economic growth. To this end, various factors led to the industrialization and growth of the economy.

Subsistence production and natural resources were major drivers of the economy. Mining remained a natural venture for tradable commodities such as gold. In Quebec and Ottawa, there were large resources of gold and other minerals like silver and copper (Pomfret 143).

Although a commodity market was not well established, trade in mineral commodities was rampant in West Indies and propelled the economic welfare of the natives. Massive resources of other minerals such as iron, oil and natural gas complemented the initial resources making the mining industry among the significant industries in the country.

Mechanization of technology and other aspects of mining increased the profitability of the mines leading to an accelerated growth. The foreign traders were not solely interested in timber and fish. Some of them came to engage in the trade of minerals and saw it as lucrative and profitable.

What was the Role of Settlers in Economic Growth of Canada?

With the above industries and sectors, the country experienced economic growth until the Great Depression of early 1930s. Why were the settlers important in economic growth of Canada? While many economists argue that Canada could have developed economically with little facilitation of the settlers, it is apparent that the settlers were vital in the country’s business history (Pomfret 148).

At the outset, settlers provided labor force that was apparently lacking in the country. Due to the thriving timber industry that led to the influx of foreigners, the local population could barely satisfy the international demand for the commodities. Emery and Kenneth postulate that the settlers who came to Canada as mere loggers had an impact in the development of the economy (258).

Indeed, economists argue that the settlers facilitated the production of more volumes of timber leading to increase in revenues for the government. Besides, many traders who later settled in Canada had a profound knowledge of routes and waterways where transport of commodities was easy. In particular, French traders understood the terrain of Canada and provided routes through which commodities could go be exported back to Europe.

Further, it is important to mention that various aspects of the Canadian industries changed dramatically owing to the external trade. For instance, the concept of shipbuilding in order to export cargo from the country to other nations became rampant after the arrival of the settlers.

Economic historians point out that there were 46 ship vessels transporting timber from the country by 1826 (Pomfret 154). However, Pomfret points out that this number grew tremendously to reach about 1500 vessels by 1845 (154). This implied that more timber could be transported than earlier on.

Another aspect of settlers and foreign trade that changed the Canadian economic history was the ability to create massive storage facilities for fish. It is through these preservation technologies that the country was able to exploit its rich fish industry and increase its exports.

Fishing technology also improved greatly with many technologies of deep sea fishing emerging. The technologies that came with the settlers and the foreign traders increased the trading potential of the country leading to an increase in the demand for the commodities that Canada was producing.

In addition, Marr and Donald assert that the arrival of settlers in many parts of Canada precipitated the expansion of underdeveloped industries (234). Particularly, many settlers helped in clearing land for cultivation making Canada to start reaping benefits and revenues from agriculture.

Initially, agriculture was not profitable due to difficulties of clearing fertile lands especially in lower parts of the country. The presence of settlers ensured that the country had substantial labor force through which land clearing was possible. Besides, the settlers who had significant amount of capital were able to lease land and engage in agricultural activities that were profitable.

In Ontario, settlers began planting such plants as corn, vegetables and reared dairy cattle. This increased the demand of the products in areas where such products were needed. In the Prairies, the settlers also invested in grain growing with wheat being the most profitable crop.

The success of settlers who ventured in agriculture culminated into increased urge by people and the government to invest in agriculture. In fact, by the early 20th century, the major investments in wheat fields were from external governments and corporate organizations. This implies that the settlers had profound impact on the Canadian economy.

It is important to highlight that Canadian settlers also led to changes in social and economic policies of the land. Of particular interests is the institutionalization of major government properties. Due to increased immigration, land became a debatable issue where many people did not access land in a fair manner.

The Canadian authorities came up with a subtle land policy where the land acquisition had to follow certain processes (Emery and Kenneth 260). Under Canada Company that operated in many parts of Ontario, land acquisition reduced from hundred acres to forty acres. This was an attempt to curb the increasing speculation about land. Settlers could buy huge tracts of land cheaply. They could later resell the lands at a profit prompting the intervention of the authorities.

The case was also similar in Eastern parts of the country where The British American Land Company restricted the sale of huge tracts of land within the country. It is important to note that the settlers precipitated land reorganization. This increased the ability of the country to increase its agricultural yields by having a superior land system.

Other policies that Canadian authorities raised included the minimum wage of labor. The Minimum wage Act was initiated in 1870s to cushion the laborers in the expansive lands held by the settlers from exploitation (Pomfret 399). Although the act was not applicable to all townships at the beginning, by the early 20th century, majority of the country was under the act.

This made the conditions of work in all sectors to be in favor of employees. It led to an increase in productivity and consequently, it improved revenues for the government and the settlers who were now the majority of famers in the country. Moreover, such trade agreements as Ottawa Agreement and Equalization of Payment Act became major aspects of the economic policies of the country. The settlers in the country precipitated enactment of such landmark policies.

The settlers also led to changes in social policies. For instance, the cholera outbreak of 1932 led to increase in healthcare access for majority of the population including the settlers. Legislations were put in place to alleviate poverty levels among the immigrants while at the same time reducing the costs associated with health care.

The challenges that many paupers from Europe experienced became the focal points of new policies on social and economic progress not only for the native Canadians but also for the settlers. The government came up with new policies that would enhance the ability of the citizens to live in dignity and out of poverty. Some of these policies gave hope to majority of the settlers although they were not implemented immediately.

Finally, the settlers were instrumental in enhancing the processes of urbanization and globalization. Among the initial township that the settlers inhabited, there was an increase in migration making the demand for local products and commerce to increase. In Quebec, Ontario and Montreal, many native populations migrated to the areas in the hope that they would get employment opportunities. This in turn spurred unprecedented economic growth leading to increase in revenues for the government (Pomfret 399).

As the migration increased, there was creation of expansive tracts of land that could sustain agriculture. Besides, new agricultural products gained markets in highly urbanized localities and regions. It is important to recognize that the country became fully urbanized by 1980s making it among the countries in the world whose majority population resided in cities. This is not only advantageous for the country’s economic growth but also for the entire industry sector where labor is easily accessible.


Essentially, economic history of Canada dates back to the French revolution in the mid 18th century. From a small and disintegrated economy, the country came under consolidation during the rule of the British crown. As early as 1810, the country was engaging in foreign trade with the French, Portuguese, and English traders.

At the time, fur was the most traded commodity owing to its value in making beaver hats back in Europe. Since the main system of commerce was barter trade, Europeans could exchange iron tools, weapons, alcohol and cloth for fur. Timber industry also became an iconic sector that propelled the economy at the time.

It is during this time that American forests were disappearing fast due to an increase in population and European timber industries had exhausted much of their timber. As such, Canadian timber attracted numerous buyers from all over the world. The impact of timber trade in the country was the unprecedented influx of immigrants and settlers. Other industries that supported early trade included fishing and agriculture.

Although the latter was not expansive, the settlers developed it leading to its profitability. The economic history of Canada is attributable to the settlers who came into the land by mid 19th century. The rationale is that they led to increase in mechanization of technology and provided labor force for different industries.

Besides, they led to urbanization of various regions leading to centralized market for goods and commodities. Due to their increase, Canadian authorities proposed numerous amendments to the preexisting policies to enhance social and economic wellbeing of the populace. As such, the settlers played a critical role of growing the Canadian economy.

Works Cited

Easterbrook, William and Aitken, Hugh. Canadian economic history. Toronto: University of Toronto Press, 1988. Print.

Emery, Herbert and Kenneth, McKenzie. “Damned if you do, damned if you don’t: An option value approach to evaluating the subsidy of the CPR mainline” Canadian Journal of Economics, 29.2 (Feb. 1996): 255-70. Print.

Greasley, David and Les, Oxley. “A tale of two dominions: comparing the macroeconomic records of Australia and Canada since 1870” Economic History Review, 5.2 (Mar. 1998): 294-318. Print.

Marr, William and Donald, Paterson. Canada: An Economic History. Toronto, 1980. Print.

Norrie, Kenneth. “The Rate of Settlement of the Canadian Prairies 1870-1911” Journal of Economic History, 35.2 (Jan. 1975): 410-27. Print.

Pomfret, Richard. “The Mechanization of Reaping in Nineteenth-Century Ontario: A Case Study of the Pace and Causes of the Diffusion of Embodied Technological Change” Journal of Economic History, 36.2 (Sep. 1976): 399-415. Print.

Pomfret, Richard. The Economic Development of Canada. Ontario: Pearson Press, 1993. Print.

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