LECTURE #8

INDUSTRIALIZATION

This lecture builds on Topic IV, Part A in the printed Guide.  Please read that material first.  

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



Industrialization is a complex phenomenon which defies simple definition, but most basically refers to a particular structural change in an economy: 

- a relative expansion of manufacturing production 
- reallocation of labour from rural, agricultural employments to urban industrial jobs. 

Once thought to be a "sudden" occurrence, hence, the widespread use of the term "industrial revolution".  

Now believed to have been a more gradual process involving much more than the growth of factories and the redeployment of the labour force: 

- typically associated with important social and cultural changes, the nature of which may vary from one country's experience to another. 

(Be sure to read the review of British and US industrialization in the Guide as background for our treatment here of the "Canadian case".  In addition to the print references given there, you might like to look at a new basic reference on American industrialization on this topic, W. Licht, Industrializing America: The Nineteenth Century, (Johns Hopkins Press, 1995).  For more on the role of technology in American industrialization a handsomely illustrated reference is B. Hindle and S. Lubar, Engines of Change: the American Industrial Revolution 1790-1860 (Smithsonian Institution Press, 1986). 

In the Canadian case: 

- industrial development began well before Confederation 
- proceeded at an uneven pace in different parts of BNA 
- accelerated dramatically in the period from around 1900 into the 1920s 

 

Requirements for Industrialization 
  • markets for manufactured commodities
  • labour force
  • raw material inputs
  • technology
  • enterprise
  • finance
Such an acceleration in the rate of industrial expansion requires: 
- markets for industrial output 
- suitable supplies of labour 
- food to feed an expanding the industrial work force 
- appropriate skills and knowledge  
- organizational abilities 
- effective financial institutions 
- stable government 

Meeting even these requirements (and there may be more) has been possible in only some countries...which may help explain why there are not more "industrialized" countries in the world today. 
 
 

Markets
  • Domestic
  • location of population centres
  • Growth of the population
  • Per capita income
  • Mass consumption
  • automobiles
  • appliances
  • Policy
  • External
  • transport costs
  • competition from alternative sources of supply
  • productivity
  • policy
    • domestic
    • foreign
Early manufacturing in BNA was small-scale and inefficient because it served mainly amall local markets 
- by the late in the 19th century these local markets were becoming larger due to population increase and rising incomes 
- but these growing markets could be supplied by imports 
- unless tariffs were imposed to make imports more expensive 
- but imposing tariffs raised the likelihood of retaliation by trading partners and might also provoke political oppositon from domestic consumers. 
 
 
Canadian Exports
 
  • the investment boom 1896-1911 established new export capacity
  • wheat
  • pulp and paper
  • minerals
  • improved terms of trade for raw material exports after 1890
Conditions were favourable for an expansion of Canadian exports at the turn of the last century: 

The rapid growth of the prairie wheat economy helped attract a large inflow of foreign capital which supported large-scale infrastructure investment, especially in railways. 

Railway construction contributed to the development of new resources in the Canadian Shield 

- new discoveries of  metallic mineral deposits such as those at Sudbury  
- by opening up previously inaccessible regions of the Canadian Shield to forestry operations, especially the pulp and paper industry  

New technology made possible the development of hydro-electric power resources which in turn permitted development of 

- electro-chemical manufacturing 
- pulp and paper mills 
- light manufacturing  

In addition to all this, the terms of trade (the ratio of Canadian export prices to import prices) shifted in favour of food and other commodity exports. 
 
 

Commercial ("Trade") Policy
"NO TRUCK OR TRADE WITH THE YANKEES!" 
Slogan used to good effect by the Conservatives to defeat Laurier's Liberals in the 1911 federal election.
  • 1911 attempt by Laurier government to renegotiate reciprocity with US
  • electoral defeat by Conservatives
  • but -- reduction of US protectionism
  • the case of pulp and paper
During the wheat boom period the Liberal government under Laurier tried to re-establish a reciprocal trade deal with the US 

This failed when the Liberals lost the 1911 election to the Conservatives -- who remained committed to the old protective regime introduced by Macdonald in the 1870s.  

But some US companies were anxious to obtain access to cheap Canadian raw materials 

Example: big American newspaper companies succeeded in getting Congressional approval to reduce duties on imports of pulp and newsprint from Canada...and invested heavily to develop the Canadian pulp and paper industry. 
 
 

The Industrial Labour Force
  • Size of the source population
  • Participation rates
  • Skills and training
  • Labour organization
  • Public policy
 

Rapid growth of the non-agricultural labour force at the turn of the century. 
- heavy immigration 
- rise in female participation rates 
- movement of labour out of agriculture as farm productivity rose 

As the industrial labour force increased so did union activity, creating new "industrial relations" issues. 
 
 

Population and Labour Force
  • rapid population growth 1901-11
  • natural increase + heavy net immigration
  • labour force grew faster than population except during WWI period
 

The census decade 1901 to 1911 
- was one of unusually rapid population growth in Canada 
- even more rapid growth of the labour force (because a high proportion of immigrants were labour force age) 

Despite official policy, many immigrants in this period found their way into non-farm employment. 

Even on the prairies, urban population grew twice as fast as rural population. 
 
 

Training and Education
  • apprenticeship in most trades to late 19th Century
  • specialized schools for specific skills
  • sailors
  • surveyers
  • early 1900s provincial government training schools
  • federal funding under Technical Education act 1919
  • agricultural "extension" services
Much early public education was aimed at improving the productivity of labour although the apprenticeship system was still prevalent in some trades. 

Provincial governments were responsible for education under the BNA Act. 

But the federal supported technical and some specialized educational programs for farmers ("agricultural extension" work, in which provincial governments also participated). 

Higher forms of professional education were well established prior to 1900 
- University of King's College  established in Nova Scotia in 1789 
- McGill founded in Montreal in 1821 
- University of Toronto chartered in 1850. 
 
 

Labour Organization

 

the mainstream labour movement
  • craft-based to 1850s
  • railway brotherhoods 1860s
  • Knights of Labor 1870s-80s
  • Trades & Labour Congress of Canada 1886

 

splinter organizations
  • Canadian Federation of Labour 1908
  • western radicalism
The Canadian labour movement began in the early years of the 19th century with craft-based organizations of stonemasons, bricklayers, carpenters, printers and other skilled trades 
- self-help "fraternal organizations" organized on a local basis. 

In the mid 1800s a new form of labour organization appeared, the Railway Brotherhoods 
- a unique North American type of labour organization having "locals" in the US and Canada (= "international unionism"). 

Another influence from  the US, an idealistic labour movement known as  the  Knights of Labor

Formation of the Trades and Labour Congress of Canada in 1886 
- a labour "central" 
- modelled on the American Federation of Labour 
- member unions of the TLC were  typically craft-based, non-ideological, and pragmatic. 

Outside the TLC, several splinter movements developed 
- radical, ideologically motivated unions, especially in western Canada 
- other "nationalistic" unions opposed to American affiliation.  
 
 

Raw Materials Inputs
  • Imports
  • coal supplies for Central Canada
    • Maritime sources
    • US sources
  • Domestic
  • food
  • metallic minerals
  • pulpwood
  • hydro-electric power
Plentiful food supplies were available in Canada to support the industrial labour force. 

Fuel supplies were limited in central Canada (wood and coal were the main fuels used in 19th Century industrial production) 
- coal from Cape Breton was relatively expensive, especially in central Canada due to shipping costs 
- Ontario producers preferred to import coal from adjacent regions in the US 

Water power was widely available, but required plants ("mills") to be located on waterways. 

Late in the 19th century electrical energy created new opportunities for industrial development in central Canada where excellent hydro-power sites were plentiful (especially in Quebec). 
 
 
 

The Mining Industry 
Click for Map
  • Fraser River gold 1858
  • Sudbury nickel 1883
  • Klondike gold 1898
  • Trail, BC, base metals 1886-
  • Cobalt silver 1903
  • Kirkland Lake gold 1906
  • Porcupine gold 1908
The search for precious metal (gold and silver) in the 19th Century attracted attention to Canadian mineral resources 

First in the Cordillera  
- placer gold in central and northern interior of BC 
- silver in south-eastern BC 
- gold  and later silver in the Yukon 
 

Later in the Canadian Shield region of central Canada 
- Cobalt (silver) 
- Kirkland Lake (gold) 
- Porcupine (gold) 

Base metals became of interest toward the turn of the century 
- Sudbury, Ontario 
- Trail, BC 

By the 1920s Ontario and Quebec were becoming major sources of metallic mineral production and Toronto was emerging as a financial centre where capital was raised for mining and other resource-frontier ventures. 

 
 
Technology
  • Imported
  • foreign investment
  • policy
    • patent laws
  • Domestic
  • research and development
  • funding
Importance of technological change in the development of industry is well recognized, but the sources of such change are not well understood. 

We know that technologies have traditionally been "embodied" in capital, so that there is a link between the discovery of new techniques and the process of real capital formation. 

In Canadian history we find examples of technologies being imported through the processes of investment and immigration 

There are also examples of technologies produced locally. 

Both imported and locally developed technical change in industry appear to have been prevalent in the first decades of the 20th Century in Canada ... but the specific causes of this remain obscure. 

 
Effects of World War I
  • internal combustion engines
  • aviation
  • tracked vehicles
  • communications
  • news
One possibility is that developments associated with World War I accelerated either the invention or deployment of new industrial technologies: 
- mining and  metallurgical processes (example: nickel) 
- transportation equipment (example: diesel powered track-type heavy vehicles) 
- chemicals (example: explosives) 
- pulp-and-paper (example: mass communication) 
- aviation (example: reliable light aircraft) 
- .... 

(But also note the negative impact of the war on the Canadian economy...loss of manpower, social unrest, waste of natural resources...) 
 
 

Canadian Business Enterprise
  • The Naylor thesis
  • commerce
  • industry
  • Profitability and survival in a cold climate
  • Staples influence
  • Regional biases
  • Exposure to external forces
Criticism of Canadian business as a dynamic force in Canadian development has focused on its alleged reluctance to innovate and take risks, especially the risk of investing in activities yielding profit only in the long term. 

This issue remains controversial, but the evidence seems to suggest that the record of Canadian "enterprise" has not been as bad as suggested. 

Like business everywhere, Canadian firms have had to be profitable in order to survive and this has meant: 

-  exploiting the country's initial comparative advantage in producing raw material exports for more development economies 
-  achieving scale through producing for large external markets rather than the small (and regionally fragmented) domestic market 
 

Government and Business
  • Public support to offset a high-uncertainty environment
  • acceptance of business concentration
  • protective commercial policy
  • education, research and development
  • social policy
  • Constraints
  • economic nationalism
  • national unity
Has Canadian business enterprise been unusually  dependent on government support? 

Perhaps, as Easterbrook suggested, because of the high level of  "uncertainty" (as distinguished from measurable "risk" ) in the Canadian business environment which public policy tried to offset by: 

- tolerating  monopolistic forms of business organization? 
- providing protection from import competition? 
- public support for education, training, research, health care, and other policies which enabled business to avoid bearing the cost of such productivity-enhancing measures? (Is this what US firms are complaining about when they talk about wanting a "level playing field"?) 

And was business in Canada expected, in return, to accept certain constraints on its operations to help promote economic and political sovereignty and national unity? 

(We will return to this topic in a later lecture in the second term. See if you can accumulate some evidence to support or refute these possibilities as we move through the rest of the course.) 
 
 


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