CLICK HERE for the PowerPoint/RealAudio presentation of this lecture. 

This lecture deals with a topic which has generated a lot of controversy among Canadian economic historians. 

There are several  reasons for this: 
(a) prairie wheat is probably  the best example of a staple export industry  
(b) the period from 1896 to 1914 during which the prairie wheat economy was established was (coincidentally?) one of unprecedented economic growth. 
(c) the conflict between prairie farmers and the railway, banking, and grain marketing oligopolies involved classic issues of market failure and regulatory intervention 
(d) the emergence of an agrarian protest movement and radical social reform pressures in western Canada following the turn of the century made the history of the region unusually interesting. 

In this lecture we will highlight some of main elements of the debate over the significance of the western Canadian prairie wheat economy…but we'll begin by looking at some American antecedents. 
 

The American Frontier

The Turner Thesis 
- the frontier experience as the defining factor in America life 
- a continuously advancing interface between civilization and raw nature 
the key to explaining how America differed from Europe  

A key feature distinguishing the American and Canadian experiences in the 19th Century was the fact that the American frontier was uninterrupted.  

Weward expansion in Canada was blocked by almost a thousand miles of terrain unsuitable for any kind of agricultural settlement to the north of Lakes Huron and Superior. 

So what? It meant that Canadians could not share in the experience which was claimed to have "defined" American life by the American historian, Frederick Jackson Turner. 

According to Turner, the frontier influenced  the political, economic, social and cultural aspects which came to distinguish America from all other countries. 

For Canadian historians it seemed clear that the absence of a continuous frontier in Canada must have been significant.  

Can we see the "national policy" as a policy response to the absence of the 19th Century American frontier? 
  
 

The American West

• uncontrolled exploitation of the resources of the region
• violent suppression of Indian opposition
• freedom over authority
• the closing of the frontier in 1893

The American westward movement in the 19th century mainly market driven and only loosely controlled political intervention 

The Canadian expansion into the west (when it did come) was driven by policy and it was tightly  controlled and regulated 

Consider:  
- how was the movement of population into the west motivated in Canada and the US?  
- where did the initiatives to build railways into the west come from in the two cases?  
- how were issues relating to the native people handled?  
- was political authority established in the region before or after the influx of population?  
  

The American frontier eventually ran out of country...(but recall the reference in the last lecture to the possibility of further expansion northward!) 
  
 

The United States in 1870 

The range-cattle industry which developed ahead of the railroads had only a short life and was soon replaced in areas where soils permitted by grain and other forms of mixed farming.  

Despite opposition by native people, settlers were moving steadily westward from the mid-west into the unorganized territories of Montana, Wyoming, the Dakotas.  

Mining attracted newcomers to the desert lands of Utah and Nevada further south 

On the arid Pacific coast some early experiments to grow  fruit and vegetable crops under irrigation showed some promise.  

As grain farming spread westward into the Dakotas and Montana, farmers in already developed parts of the mid-west (Michigan, Wisconsin)  began to specialize in livestock and dairy production 

In deep south, cotton growers were expanding westward  from the eastern coastal regions into Texas and Arkansas.  

SLOW BEGINNINGS IN THE CANADIAN WEST

• little settlement until late 1890s
• US frontier still open
• CPR not completed until 1885
• lack of suitable wheat varieties for short growing season
• rapid settlement 1896-1914
  
Why did the settlement of the Canadian west take so long? 
- preference of immigrants for the US while its frontier was still open? 
- delayed construction of the CPR 
- a more difficult environment  

But, by the late 1890s the long-awaited settlement process took off  
- the rate of homestead entries settlemen accelerated (see chart above) 
- land prices rose 
- private and public investment spending boomed 
- Canadian wheat exports expanded 
 

Premature Settlement?

• efficiency aspects of resource development
• maximizing rents
• losses due to "premature" settlement
• social
• individual
• the optimum rate of resource utilization
• non-economic aspects of the western settlement process

Could resource rents from the prairie land have been greater if settlement had been timed to avoid waste of human and other resources committed to development there? 

Economic analysis demonstrates that the  total rents generated from a stock of resources is greatly influenced by the rate at which the resource is brought into use.  

But such considerations may have been irrelevant given the political and other reasons for getting the region "settled" as quickly as possible. 
 

Population of the Canadian West 

• Slow growth to 1890s
• Rapid growth due to immigration from eastern Canada and Europe 1896-1914
• Continued growth due to natural increase and net immigration to 1930s.

In 1871 there were some 75,000 people living in the interior plains region of British North America.  

By 1891 the population had grown to 250,000 

In 1911 the census reported 1.3 million 

The number of farms increased from about 55,000 in 1900 to 250,000 in 1911. 

To some undetermined extent this expansion of settlement in the region was a consequence of an aggressive immigration policy pursued under the direction of Clifford Sifton as Minister in charge of the Department of the Interior.  

There was an improvement in the terms of trade for many Canadian exports, including wheat which made wheat growing more profitable.  

The railway-building frenzy of the period from the 1880s to 1914 may have played a part by quickly provided improved access to grain shipping facilities throughout the entire region. 

Important  improvements were made in the farming technologies: 
- summer fallowing to conserve moisture
- new plant species more suitable to the climate of the region.  
 

Technology 

• public funding of research to develop fast-ripening wheat varieties
• Red Fyfe 1900-1910
• Marquis
• 107 vs. 134 days
• 45 bu/acre vs. 31

Red Fyfe was the first widely-used variety but was susceptible to disease and was often not fully ripe before frosts set in.  

Research at the federal government experimental farm in Ottawa led to development of a new variety by crossing Red Fyfe with Hard Red Calcutta from India.  

Canadian government research led to a new variety, named Marquis,  which ripened faster and gave higher yields  

Marquis wheat remained the wheat variety of choice used on the Canadian prairies from about 1910 until World War II when it was replaced by more modern varieties. 

By 1911 western Canada was producing more than 90% of all the wheat produced in Canada. 

Oats, barley and flaxseed were also produced on prairie farms.  

  
The "Wheat (?) Boom" 

• rapid increase in volume of Canadian wheat exports 1891-1914
• dramatic rise in per capita income 1900-1914 ("intensive" growth)
• Chambers and Gordon

Wheat production generated strong linkages to other forms of economic activity making it a classic "staple" industry 

"Backward" linkages to huge capital investments in railways, telegraph lines, grain elevators and terminals, shipping, residential and commercial construction and central Canadian manufacturing industries supplying farm supplies and equipment,  

"Forward" linkages to flour milling, baking, brewing, distilling 

"Final demand" linkages to real estate, clothing, household appliances and everything else which those making a living from farming and related activities could buy with the income they earned. 

But... it is uncertain how much of the improvement in Canadian real per capita income during this period can be attributable to the increase in wheat production and wheat exports during the 1896-1911 boom.  

The best-known Canadian application of the "New Economic History" approach by Chambers and Gordon suggests that the answer is "not much", -- perhaps only 8% of the total.  

  
The Political Economy of Wheat 

• Perfectly competitive organization of production
• Monopolistic or oligopolistic suppliers

railway monopolies 
elevator company cartel 
banking oligopoly 
equipment and supplies

Those supplying the inputs prairie farmers needed were typically organized as monopolies or oligopolies 

Farmers suspected that they were paying higher than competitive market  prices for their inputs 

- and that the prices they received for their output were lower than competitive market prices should be. 

Collective action by producers: 

- legal action against monopolists such as the elevator companies (largely unsuccessful) 
- cooperative organization to supply their own inputs 
- political action to win government support in the form of regulatory intervention in input markets and in markets for their products 
 

  
The Elevator Companies 

• The Northwest Grain Dealers' Association
• links to railway companies
• fixed buying price agreements
• an organized cartel
• court challenge under new federal "Anti-Combines" legislation
• "not guilty"…providing a public service through orderly marketing.

Line elevators such as shown in the picture were owned by large private firms based in eastern Canada and the US which bought grain, stored and shipped it to markets 

In 1903 these firms formed the Northwest Grain Dealers' Association to fix prices at which they would buy grain from producers. 

A court action launched by grain growers against the cartel was lost when the courts ruled that the cartel was not guilty of conspiring to fix grain prices. 

Producers then proceeded to organize their own co-operative elevator companies to compete with the private firms.  

They also began looking at other alternatives to the commercial grain market system.  
 

The Winnipeg Grain Exchange 

• private grain market
• futures trading and speculation in grain
• World War I suspension of free market
• resumption of free market trading following the war
• farmer demands for public marketing system 
Much of the dissatisfaction of prairie wheat growers with the commercial grain marketing system focused on the operation of the Winnipeg Grain Exchange where the elevator companies and others involved in the commercial grain trade negotiated the sale of the prairie wheat crop into world grain marketing channels. 

Producers were convinced that the dealing done at the Exchange resulted in them receiving less than the "true" market value for their output and were suspicious of such practices as futures trading. 

During World War I the Canadian government suspended commercial operations on the Winnipeg Exchange...and (coincidentally, grain prices rose) 

When the Exchange resumed operations in 1919 the price of wheat plummeted, confirming the farmers' worst suspicions.  

Western farmers began lobbying for creation of a permanent government marketing agency to replace the private marketing system.  
 

• US precedents in citrus fruit marketing
• the co-operative movement
• Saskatchewan and Alberta Pools 1923
• Manitoba Pool 1924
• Central Selling Agency
• worldwide offices
• the issue of compulsory membership
• the crisis of the 1930s

This involved establishing a voluntary associations or "pool" which would buy the members' crops for a fixed price, market it, and make a final payment based on the proceeds.  

With the help of a flamboyant California lawyer/publicist, Aaron Sapiro, pool organizers drummed up membership across the prairies in the early 1920s.  

Wheat pools were formed in all three prairie provinces and operated successfully through the remaining years of the decade -- until the entire movement was brought to the brink of disaster by the onset of the Great Depression in the early 1930s.  

  
Meanwhile Back in the East 

• Shift from wheat to mixed farming
• falling world wheat prices
• growing domestic and export markets for
• beef and pork
• cheese
• milk, butter
• Mechanization
• increasing farm size
• reduced demand for on-farm labour
• off-farm employment for women
 
 

Bacon and cheese became important products in Ontario and Quebec in the years leading up to World War I.  
 

 Next

• What else was going on during the "wheat boom"?
• the "new staples" of the Canadian Shield
• mining of metallic minerals
• pulp and paper
• hydro-electric power
• the growth of manufacturing

What could it have been?  

Two main possibilities: 

1. New resource industries based (mainly) in the Canadian Shield regions of Canada:  
- mining 
- pulp and paper 
- electric power generation 
(alsthough most of these industries did not become major contributors to output until after World War I) 

2. The growth of manufacturing in central Canada. 

RETURN to topics list