A sketch of Maritime economic history
by Fred McMahon
——————————————————————————–
06/1999
The Halifax Chronicle Herald
A century ago, the Maritime Provinces – not Ontario and Quebec – were the industrial heartland of Canada, the young nation’s economic dynamo.
Many historians claim Confederation’s trade barriers devastated the Maritime economy, and there’s some truth in that. Yet, the Maritimes’ great prosperity and worldwide trading links were almost certainly destined for ruin anyway, as was Halifax’s status as a world-class trading centre.
The Maritime economy late in the last century was not a one dimensional affair, built on cheap lumber and a crude means of shipbuilding, as many still think. Nor was it hobbled by a conservative business clique unable to adjust to changes in shipbuilding materials and techniques.
Instead, Maritime business leaders had created broad-based economic dynamo. The region was home to little more than a sixth of Canada’s population, but it boasted a quarter of the nation’s manufacturing enterprises, including both of Canada’s steel mills, six of 12 rolling mills, eight of 23 cotton mills, three of five sugar refineries, two of seven rope factors, and one of three glass works.
Halifax, a little more than a century after its founding, had been transformed from an isolated military garrison into one of the most dynamic trading centres in North America. Where ever traders gather, they need a sophisticated financial infrastructure – letters of credit, money changing, financing, deposit taking and so on.
All this could be done with ease in Halifax’s busy downtown. By the turn of the century Halifax was home to more than a dozen banks, including the forerunners of two of Canada’s “big-five” financial institutions, the Bank of Nova Scotia and the Royal Bank.
Yet, within a generation or two, the Maritimes Provinces would be on their way to economic ruin.
The region’s economy had a hairline fracture running through it. Everything depended on trade. The relative scarcity of agricultural land deprived the Maritimes of the hinterland needed for a strong domestic market. Maritime industrial activity vastly exceeded the size of its population, and could only be maintained through trade. That was a fatal flaw.
John A. Macdonald’s national policy threw up trade barriers around Canada. The idea was to liberate the new nation from U.S. economic dominance and create a domestic industrial base. The Maritimes already had an industrial base. All the national policy did was cut the region off from rich foreign markets, particularly New England. That was probably inevitable anyway.
U. S. protectionism would almost certainly have done the same thing in the end, not that it mattered. Transportation costs were such that domestic suppliers in New England and other large external markets would have eventually replaced most Maritime goods.
That’s more or less what happened with Maritime-Central Canadian trade. For the Maritimes, the National Policy turned short-term gain into long-term pain. In the beginning, Canada’s new trade barriers created a Maritime economic boom. Maritime manufacturers suddenly had the Central Canadian market to themselves. Competition from U.S. manufacturers withered behind trade barriers. The Maritimes, as Canada’s industrial heartland, flourished.
That was short-lived. Industry may have been located in the Maritimes, but the population base was a thousand miles away in Central Canada. That made no sense in an age when goods were heavier than today and transportation costs considerably higher.
Central Canadian interests began to buy out Maritime businesses. The businesses weren’t immediately shut down, but investment was stifled. New plants were built where the market was concentrated – Central Canada.
U.S. businesses also wanted in on the Canadian market. Because of tariff barriers, they needed to build branch plants, and it made no sense to build them in the isolated Maritimes.
If all this wasn’t bad enough, disaster hit in the 1920s. In four years, rail rates between the Maritimes and Central Canada more than doubled, and the Maritimes lost its one remaining large market.
The distinguished Maritime historian Ernest Forbes captured the impact best. “It was almost as though Maritime manufacturers had suddenly been pushed another 1,000 miles out to sea.” With this, the Great Depression arrived a decade early in the Maritime Provinces.
The federal government was no help at all. The Maritimes did not have the financial resources to build the infrastructure required for the emerging economy, roads for automobiles and trucks. Ottawa’s offer to cost-share infrastructure programs helped the rich provinces which could afford their share of the bill, but not the poorer provinces.
Sadly Maritime policy-makers have seldom realized the importance of infrastructure. When federal transfers to the region increased dramatically in the early 1970s and rich regional development programs were in their heyday, spending on infrastructure actually declined though economic research shows infrastructure spending to be more effective than anything else in creating economic growth.
Other problems, which still bedevil Maritime policy making, emerged in the early part of this century. Most damaging was the view of the economy as a negative sum game. Every existing job had to be protected because a job lost was a job lost forever. No new economic activity would ever create other jobs – a view that made sense in the 1920s after decades of regional decline.
Maritime policy-makers fought to keep every existing job. In 1924, subsidies began for the Cape Breton coal mines. Earlier, in 1908, legislation was passed to limit new technology in the Nova Scotia fisheries. The limits became progressively more restrictive. By 1939, only three mechanized trawlers operated in Nova Scotia, down from 10 a dozen years earlier.
Local interests built walls of their own. In the late 1920s, U.S. businesses had the exciting idea of turning Nova Scotia into the “Fish Pier of America,” using new freezer technology and steam trawlers. A coalition of inshore fishermen, schooner owners and fish merchants stymied the plan.
Now, 250 years after Halifax was founded, the Maritimes confront a world in many ways similar to the pre-Confederation era. Trade barriers have fallen. Old markets are open again, and new markets are everywhere. Transportation costs have never been lower.
This old garrison town, and all of Nova Scotia and Atlantic Canada, face historic opportunities, provided we can leave behind the failed, patronage-ridden, projectionist policies of the past decades and develop a competitive, outward-looking economic base and attitude – as the region had in the 19th century – capable of capitalizing on this new world of economic potential.