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External Conditions Of Canada Essay, Research Paper

The External Conditions of the Canadian Situation

Summary Statement; an Historical Perspective

The Late Nineteenth Century [in contrast, not necessarily in substance]

Canada had strong economic and political ties with Britain. Trade flowed

more east and west in association with Britain, than it had during the

Reciprocity Treaty Period, 1854-1866. Primary product exports, decreasingly

forest products, increasingly wheat, were the policy basis of expansion.

Porfolio capital flowed into Canada from Britain to build transcontinental

railways. In short, the expansion of industrialism around the globe, and

the force of the British Empire, developed and integrated Canada, with

primary product exports the leading element in expansion. To Sir Wilfrid

Laurier it seemed like the twentieth century belonged to Canada.

The Late Twentieth Century [in contrast, not necessarily in substance]

By 1990, the British Empire was irrelevant. Canada had strong economic and

diplomatic ties with the United States. The frontier of global industrial

expansion had moved from America to Asia, and to developing countries in

South America. This is not to say that the United States had fallen into

permanenet relative decline. The stagflation of the 1970s and 1980s

evaporated in the 1990s. With innovations in information technology

leading the advance, by 2000, the United States was enjoying one of the

longest expansions and increases in productivity in its history.

Canada’s primary product export industries were no longer forceful engines

of expansion, though they experienced continuing development. Canada was

a settled frontier, a permanent northern frontier. Compared to frontiers

in Information Technology, its resource frontier was a dead frontier.

Its finished goods exports exceeded its primary product

exports by two to one in value. The standard

of living in Canada was was falling in relation to other, more rapidly

advancing countries. In the 1990s, it fell absolutely, though by the

last two years of the decade it rose with the growth of GDP, which

reached an annual rate of 4% in the first quarter of 2000. The

relative decline in the demand for Canada’s resources, and the associated

decline in foreign investment and in the value of the Canadian dollar,

together will a heavy burden of taxes associated with both cyclical and

systemic fiscal problems, accounted for the decline in average real income

in the 1990s. Attempts to keep the economy expanding by seeking a niche in

external market for manufactured goods, and by upgrading producitivity in

the new telematic information economy, were successful only at the end of

the decade. The nineteen nineties were a time of incomplete adjustment

for Canada.

The Main Lines of Historical Development

Late Nineteenth and Early Twentieth Century Capital Flows.

Throughout the nineteenth century, and into the twentieth Canada had an

unfavourable Balance of Trade with the United States. It had a favourable

balance with Britain, but mostly it paid for its excess of imports from the

United States with capital imports from Britain — toward the end, mostly

to pay for the building of transcontinental railways. The flow of goods

from the United States, to Canada, to Britain, to the United States, was

matched by a flow of money the other way. There was a small, but growing

flow of capital from the United States to Canada, but that was equity,

rather than portfolio capital. There was no question of the value of the

Canadian dollar. The Gold Standard was in effect internationally, and

Canada’s currency was, by 1913, virtually a gold certificate.

This perfect beginning for the century – Canada growing quickly, immigrants

pouring in, capital pouring in – was about to change, but not, at first,

for the worst.

The Great Shift 1910-1930

The First World War hastened the economic reduction of Britain,

the decline of the British Empire, and the rise of the United States to

the position of the most industrialized and richest nation in the world.

The automobile and the aircraft replaced the railway, which began its

long decline into obsolescence. A new primary product frontier came to

the fore in Canada; really two frontiers, as mineral and forest products

exported to the United States rose in value in relation to wheat exports

to Britain.

The exhaustion of British capital, in part because of the war, and in part

because of her relative decline, caused Canadian interests to turn to

United States sources. Canada became indebted to the United States, and

as United States electrical, automobile, and pulp and paper and mining

interests moved north, more of the capital inflow came in the form of

equity. American capital replaced British capital to offset Canada’s

trade deficit with the United States. The international corporation and

“foreign ownership”, mostly American, rose to prominence in Canadian concerns.

Expansion on the Prairies came to an end. Two transcontinental railways

bankrupted and were bought out to form the one, government owned, Canadian

National Railway. Still, the advance of the consumer capital industries,

that is, of the innovation of durable consumer goods like radios,

automobiles, and vacuum cleaners, and new resource

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