Riendeau A Roger E. Brief History of Canada

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A BRIEF HISTORY OF CANADA

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acquire or access. Large tracts were set aside as Crown and clergy

reserves or held for speculation by members of the government or their

cronies. The lack of suitable roads into the interior also made it difﬁ cult

for immigrants to open up new stretches of land far removed from the

established settlements. Much of the impetus for opening up the Upper

Canadian settlement frontier came from enterprising individuals and

private land companies, which secured large tracts of land from the

provincial government at bargain prices in exchange for their promise

to bring out settlers and to provide roads, schools, and other local ser-

vices. When the new settlers could earn enough money from the sale of

surplus crops, they could then purchase their holdings from the land

company. Peter Robinson brought some 3,000 southern Irish to the

Peterborough area halfway between Toronto and Kingston in 1823 and

1825. Colonel Thomas Talbot settled over 30,000 immigrants on the

500,000 acres that he secured along the north shore of Lake Erie. He

ruled over his domain like a feudal lord and honored himself by nam-

ing the main center of the Talbot settlement St. Thomas. But the most

ambitious of all the settlement agents was the Canada Land Company.

In 1826, under the direction of John Galt, it began to settle the 2.5 mil-

lion acres of the Huron Tract extending from Lake Huron to near the

western end of Lake Ontario. Not only did the Canada Land Company

settle and service its holdings, it also spread information about the

Canadas in Europe and the British Isles and ensured that immigrants

arriving at Quebec were transported directly to Upper Canada, rather

than drifting to the United States. As a result of these settlement

schemes, the population of Upper Canada soared from about 100,000

in 1815 to 952,000 by 1851.

The great migration to British North America had run its course by

the mid-1850s. With the prime agricultural land of Upper and Lower

Canada completely settled, transatlantic immigrants were attracted by

opportunities in the American Far West in the second half of the 19th

century. Not until the end of the century would immigration again be

a major factor in Canadian population and economic growth. Never-

theless, the great transatlantic migration of British subjects following

upon the northward continental movement of American people enabled

the British North American colonies to move out of their pioneer stage

of development.

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THE EXPANDING

COLONIAL ECONOMY

(1815–1850)

n addition to the growth of population, the inﬂ ux of American and

British immigrants dramatically altered the nature and scope of eco-

nomic development in the British North American colonies during the

ﬁ rst half of the 19th century. The British North American economy at

the turn of the century was still dominated by the cod ﬁ sheries in the

Atlantic Provinces and the beaver fur trade, which the St. Lawrence

commercial interests based in Montreal conducted principally north-

west of the Great Lakes. In their relentless competition with the

Hudson’s Bay Company, the St. Lawrence traders extended the fur trade

frontier to its transcontinental limits before the decline in fur resources

and the beginnings of western settlement forced them to relinquish

the trade to their archrivals in 1821. Thereafter, the St. Lawrence com-

mercial empire focused on the expanding agrarian frontiers of Upper

Canada and the American midwest. The Maritime Provinces beneﬁ ted

from the increased imperial demand for timber that spawned colonial

shipbuilding and shipping activity, but their limited agricultural poten-

tial and the passing of the golden age of the wooden sailing ship were

already sowing the seeds of regional economic disparity.

The Clash of the Great Companies

While Upper and Lower Canada were developing their settlement fron-

tiers based on agriculture and struggling with the War of 1812, the

dynamic St. Lawrence commercial interests operating out of Montreal

were extending their fur-trading empire across the continent. Although

the capture of Michilimackinac during the War of 1812 enabled the St.

Lawrence merchants to regain temporary control of their old fur-trading

A BRIEF HISTORY OF CANADA

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realm south of the Great Lakes, their hopes were ultimately dashed

when the Treaty of Ghent returned the western frontier to the United

States in 1814. Indeed, the treaty merely conﬁ rmed the inevitable, as

the Canadian southwest trade was doomed by the steady advance of

American settlement. But even as the southwest trade was winding

down, various St. Lawrence “pedlars” were pursuing opportunities to

expand the fur trade northwest of the Great Lakes beyond the limits

reached by their French predecessors.

By setting up posts on the Saskatchewan and Assiniboine Rivers in

order to bargain directly with the Native trappers, the St. Lawrence

traders incited the Hudson’s Bay Company to reciprocate. To keep pace

with its rivals, the English-based company dispatched Samuel Hearne

into the western interior, whereupon he discovered the Coppermine

River and Great Slave Lake during his journey of 1771–72. Two years

later, the Hudson’s Bay Company ofﬁ cially deviated from its long-

standing policy of conﬁ ning its trading posts to the shores of Hudson

Bay. The establishment of the company’s ﬁ rst inland post, Cumberland

House on the Saskatchewan River northwest of Lake Winnipeg, in turn,

prompted the St. Lawrence traders to push even farther inland. Nota-

bly, Peter Pond, a Connecticut-born veteran of the southwest fur trade

who joined forces with St. Lawrence interests, journeyed to the Atha-

baska River (in northern Alberta) in 1778. Competition meant continu-

ous expansion as the rivals endeavored to outﬂ ank each other in their

quest to reach new Native suppliers and new areas to exploit.

The increasingly long and costly trek from Montreal to the fur-rich

Athabaska regions and beyond demanded more extensive and perma-

nent organization backed by substantial amounts of capital. Moreover,

the St. Lawrence traders soon realized that continued competition

amongst themselves would undermine their prospects for success

against the Hudson’s Bay Company, which enjoyed the geographic

advantage of a more direct and less costly water route to the heart of

the continent. Consequently, by the early 1780s, Montreal-based entre-

preneurs were consolidating their capital and resources to participate

in cooperative ventures out of which emerged an ongoing partnership

known as the North West Company. While the new company contin-

ued to rely on French traders and voyageurs, its management was

dominated by an exclusive group of English-speaking (notably Scot-

tish) merchants because their Canadien counterparts lacked the capital

to join the corporate ranks.

The formation of the North West Company did not completely

eliminate independent competition within the St. Lawrence fur trade.

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Indeed, the most serious threat to the North West Company came in

1800, when a group of discontented partners joined forces with south-

west traders who were forced to turn their attention to the northwest

after the British surrendered the western posts to the Americans. The

ruinous competition of the New North West Company or XY Company

forced yet another reorganization of the St. Lawrence fur trade in 1804

as the two Montreal-based rivals merged under the renewed auspices of

the North West Company to pursue the rivalry with the Hudson’s Bay

Company.

The North West Company sought to overcome the geographical

advantage of the Hudson’s Bay Company by building up a great water

and portage transport system across the continent. Large freight-canoes

ﬁ lled with trade goods and supplies traveled regularly from Montreal to

Fort William (now Thunder Bay) at the head of the Great Lakes. Here

the “wintering” partners, who resided permanently at the interior

posts, arrived in their smaller canoes to meet the Montreal partners and

to exchange the furs collected from the western tribes for a seasonal

cargo of eastern goods and supplies. Furthermore, in the contest

between the trading systems of the St. Lawrence River and Hudson Bay,

the North West Company beneﬁ ted from organizational ﬂ exibility,

stressing the individuality, self-reliance, and bargaining skills of the

traders. North West Company traders were inclined to be more enter-

prising because they were proﬁ t-sharing partners with greater decision-

making powers than the salaried Hudson’s Bay Company servants who

rivaled them. Consequently, the North West Company’s volume of

trade was approximately six times greater than that of the Hudson’s Bay

Company by the turn of the 19th century (Stanley 1960; Innis 1999).

The North West Company also proved to be the more proliﬁ c agent of

exploration and discovery. The quest to expand the fur-trading frontier

beyond the northern and western reaches of the Hudson’s Bay Company

led Alexander Mackenzie to the shores of the Arctic Ocean (via the river

that bears his name) in 1789 and of the Paciﬁ c Ocean (via the Peace

River) in 1793. Mackenzie’s journeys reﬂ ected the hope that a navigable

water route to the Paciﬁ c Ocean would give the North West Company

the same geographic advantage that the Hudson’s Bay Company enjoyed.

The Paciﬁ c route as an exit for furs and an entrance for trade goods

would thus replace the long and costly canoe and portage trek across the

continent. With similar visions, Simon Fraser—who explored the river

that bears his name in 1808—and David Thompson—who surveyed the

entire Columbia River system from 1807 to 1811—were other notable

North West Company employees who opened up the far western

THE EXPANDING COLONIAL ECONOMY

A BRIEF HISTORY OF CANADA

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reaches of the continent. The exploits of Fraser and Thompson helped

to stave off the competition of the American Fur Trade Company,

owned by John Jacob Astor, who established Fort Astoria at the mouth

of the Columbia River in 1811 but was forced to sell the post to the

North West Company three years later. In laying claim to what is now

British Columbia, the North West Company completed the transconti-

nental expansion of the fur trade and foreshadowed the developmental

course of the future Canadian nation.

However, as the fur trade extended to the northern and western lim-

its of the continent, the dynamism of the North West Company could

no longer be sustained. Without new resource frontiers to exploit, the

company’s organization was unable to adapt to static or declining trade.

The practice of dividing the proﬁ ts annually among the partners pre-

vented the building up of ﬁ nancial reserves for bad times, while decen-

tralized authority could not impose the necessary control and discipline

to adapt to changing market conditions. By contrast, the more conser-

vative Hudson’s Bay Company responded more effectively to economic

duress. As a joint-stock company with limited liability and registered

on the London Stock Exchange, the Hudson’s Bay Company main-

tained the conﬁ dence of the Bank of England, and thus could mobilize

ﬁ nancial resources that enabled it to sustain losses over an extended

period. Moreover, a highly centralized structure enabled the company

to modify its administrative methods and employment policies to place

greater reliance on the initiative, judgment, and bargaining ability of

the individual trader, ironically drawing heavily on the practices of its

chief adversary. But above all, the company beneﬁ ted from its strategic

position on Hudson Bay and its reluctance to incur the burdensome

cost of building and maintaining inland posts to compete with its more

expansionist rival (Rich 1967).

The ﬁ nal collapse of the St. Lawrence fur trade empire in the north-

west was precipitated by a familiar enemy—the encroaching settlement

frontier. The seeds of western settlement were sown by Thomas Doug-

las, earl of Selkirk, who endeavored to provide a haven for Irish and

Highland Scottish peasants dispossessed from their land by the enclo-

sure movement by settling them in British North America. After enjoy-

ing modest success with settlements on Prince Edward Island and in

Upper Canada, Lord Selkirk turned his attention to the fertile Red River

Valley, situated within the bounds of Rupert’s Land as stipulated in the

Hudson’s Bay Company charter of 1670. Selkirk’s motives extended

beyond philanthropy when he purchased controlling interest in the

ﬁ nancially struggling Hudson’s Bay Company and secured 116,000

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square miles of land in what is now southern Manitoba and the north-

ern reaches of Minnesota and North Dakota. In 1812 the ﬁ rst settlers

arrived in the small colony centered at the forks of the Red and Assini-

boine Rivers, where the city of Winnipeg now stands. Lying across the

main North West Company transport and supply lines between Fort

William and the far west, the Red River colony was viewed as nothing

more than a Hudson’s Bay Company plot to destroy the St. Lawrence

fur trade. Antagonism between fur traders and settlers culminated in a

North West Company attack at Seven Oaks in 1816 during which Gov-

ernor Robert Semple and 20 Red River colonists were killed. In retalia-

tion, Selkirk hired former Swiss soldiers to capture Fort William. For

the next few years, the warring companies remained mired in expensive

litigation in the Canadian and British courts as each charged the other

with unlawful activities. These legal struggles, in addition to his deter-

mination to maintain the Red River colony, cost Lord Selkirk his for-

tune and his health before he died in 1820.

On the brink of ﬁ nancial ruin, both companies decided to end their

trade war and to join forces in 1821. The merger of the North West

Company with the Hudson’s Bay Company was not so much a victory

for the latter as it was a consolidation of the fur trade whose economic

realities dictated operating from Hudson Bay rather than from the St.

Lawrence River. Nevertheless, the clash between the great fur-trading

companies not only dominated life northwest of the Great Lakes in the

late 18th and early 19th centuries but also had the effect of keeping the

vast region within the British and Canadian sphere of inﬂ uence. In

exploring the entire northwest to the Paciﬁ c and Arctic shores, the

traders of the North West Company were, in effect, the ﬁ rst agents of

transcontinental expansion, and the subsequent development of the

Canadian nation followed their course. In establishing the Red River

colony as the ﬁ rst permanent settlement northwest of the Great Lakes,

and by preserving the region for continued exploitation of fur resources

in the face of American encroachment after 1821, the Hudson’s Bay

Company served as an agent of the British Empire until, nearly half a

century later, the new Canadian nation was willing and able to take

control.

The Revival of the St. Lawrence Commercial Empire

With the end of the St. Lawrence route as the main artery of the fur trade

in 1821, the economically powerful Montreal merchant community

sought new commercial horizons. Many of the St. Lawrence merchants

THE EXPANDING COLONIAL ECONOMY

A BRIEF HISTORY OF CANADA

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were already turning their attention to new staples, timber, and grain,

which reinforced commercial ties with Great Britain. At ﬁ rst the timber

trade was a by-product of farming, since settlers had to clear the forest

before cultivating the land. But when the Napoleonic Wars jeopardized

Britain’s supply of timber from the Baltic countries in the late 18th and

early 19th centuries, the rich pine and oak forests of the Ottawa and St.

Lawrence valleys became so vital to sustain the Royal Navy that British

North American timber was granted preferential treatment in the impe-

rial market. After the war, the growing cities of industrial Britain con-

tinued to have an insatiable appetite for colonial lumber to build homes

and factories.

As the forest receded before the advance of settlement, wheat was

produced from the land that had been cleared. While the French Cana-

dian farms of Lower Canada grew grain crops principally for domestic

consumption, the newly cleared land of Upper Canada produced a sur-

plus of wheat for sale in the British market. During the Napoleonic

Wars, the occasional interruption of supplies from the Baltic countries

and a series of bad harvests in Britain increased the imperial demand

for Upper Canadian wheat. By the 1820s, increased demand for food to

feed an expanding urban population led the imperial government to

modify the Corn Laws, which placed duties on grain imports into Brit-

ain in order to protect domestic agriculture. As a result, grain from

British North America was given preference in the form of lower duties

in the imperial market, thereby making colonial imports cheaper than

foreign supplies (McCalla 1993).

These British timber and grain preferences, in addition to the fact

that the St. Lawrence–Great Lakes system of waterways was still the

shortest and most natural route between Europe and the interior of the

North American continent, offered enterprising Montreal merchants an

opportunity to restore the commercial empire that had been lost with

the end of the fur trade. They sought to become the brokers supplying

British manufactured goods to the growing settlements in Upper Can-

ada and the American midwest and shipping their agricultural products

to Europe. If the St. Lawrence could remain the main water highway of

trade between two continents, Montreal could emerge as the commer-

cial metropolis of North America ahead of New York, Philadelphia,

Boston, and other aspiring American Atlantic ports (Creighton 2002).

This goal appeared realistic in the early 1820s as Montreal, with a

population exceeding 20,000, had surpassed Quebec as the leading city

in British North America. First incorporated as a city along with Que-

bec in 1832, Montreal became the center of a major wholesale forward-

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ing business that developed readily out of the earlier operations of the

big fur trade supply houses. The establishment of the Bank of Montreal

as Canada’s ﬁ rst bank in 1817 began the city’s long reign as the ﬁ nan-

cial center of British North America and eventually of the future Cana-

dian nation. Montreal’s chief urban rival, Quebec City, with a population

of 15,000 by the early 1820s, had grown somewhat more slowly as a

provincial capital, an imperial military base, a shipbuilding center, the

main St. Lawrence port of entry, and the main entrepôt for the timber

trade of the St. Lawrence and Ottawa valleys.

The Montreal merchants and their associates were convinced that the

achievement of their commercial aspirations depended on the improve-

ment of navigation along the St. Lawrence–Great Lakes route. The

advent of the steamship certainly made transportation more comfortable

and efﬁ cient. As early as 1809 the steamer Accommodation had been

launched at Montreal to cruise the St. Lawrence River, and by 1816 the

ﬁ rst Canadian steamship, the Frontenac, appeared on the Great Lakes.

However, the steady ﬂ ow of trafﬁ c along the St. Lawrence–Great Lakes

route was broken by the thunderous Niagara Falls between Lakes Erie

and Ontario, long stretches of rapids west of Montreal, and the shallows

between Montreal and Quebec. The need to tranship cargoes at these

points could only be overcome through the construction of canals.

But for canal construction to proceed effectively, two political obsta-

cles had to be overcome. First, jurisdiction over the St. Lawrence route

was divided between Upper and Lower Canada. Neither province sepa-

rately could command the credit rating in the international capital

market that a single provincial legislative body controlling the entire

revenues of the St. Lawrence economy could reasonably have expected

to attain. Moreover, such a massive public works project required

agreement upon a uniform policy and an administrative framework

that was virtually impossible to achieve within the context of divided

provincial jurisdiction. Second, political opposition to the construction

of canals pitted the commercial interests of both provinces against the

agrarian interests, which saw a greater need for public expenditures on

the construction of roads to open up the backcountry. Ethnic conﬂ ict

further complicated matters in Lower Canada as the agrarian interests

were overwhelmingly French while the commercial interests were pre-

dominantly English. In the hopes of overcoming this impasse, the

imperial government, inﬂ uenced by the Montreal merchant commu-

nity, proposed a legislative union of Upper and Lower Canada in 1822

but dropped the idea in the face of widespread agrarian opposition

within both provinces.

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The improvement of the St. Lawrence route became even more

urgent after the completion of the Erie Canal in 1825. By linking the

Hudson River with Buffalo on Lake Erie, the Erie Canal gave New York

merchants a route for western trade that was cheaper to access than the

unimproved St. Lawrence. Even the wheat farmers in the western part

of Upper Canada could take advantage of the building of the Erie Canal

to ship their produce by way of New York when market conditions

were favorable. The Montreal merchants did manage to secure provin-

cial funding to complete the ﬁ rst canal around the Lachine rapids in

1825, while William Hamilton Merritt persuaded the Upper Canadian

legislature to support the building of the ﬁ rst Welland Canal to bypass

Niagara Falls in 1829. In 1832 the Rideau Canal was opened, linking

Lake Ontario at Kingston with the Ottawa River, thereby allowing sail-

ing vessels to avoid the rapids of the upper St. Lawrence. The British

government ﬁ nanced this alternate water route in the event of an

American seizure of the St. Lawrence. Further improvements to the St.

Lawrence route were still required if it was to remain competitive with

the Hudson route for the trade of both the American Midwest and

Upper Canada. The Hudson route had the advantage of leading to New

York, which was an ice-free port open all year round, whereas the St.

Lawrence route leading to Montreal and Quebec was closed for nearly

half the year.

The political debate over public funding for the improvement of the

St. Lawrence system raged throughout the 1830s and was not resolved

until after the imperial government reunited Upper and Lower Canada

into a single provincial jurisdiction in 1841. By 1848 a chain of ﬁ rst-

class canals had been constructed around the rapids above Montreal,

and the shallows west of Quebec City had been deepened, thereby

allowing ships to sail by the St. Lawrence from the Atlantic Ocean to

the upper Great Lakes. Although the St. Lawrence–Great Lakes system

was still not deep enough to accommodate ocean-going vessels, it was

efﬁ cient enough to rival the Hudson-Erie route and to enable Montreal

to compete with New York as the major exporting and importing center

for the North American continent. A new commercial empire based on

agriculture and settlement enabled Montreal to extend its lead as Brit-

ish North America’s richest and largest city, with a population of

57,000 in 1851. Its rival Quebec had in the process become an even

bigger lumber port with a population of 42,000 by 1851.

Contributing to Montreal’s rise as the commercial metropolis of Brit-

ish North America in the ﬁ rst half of the 19th century was the develop-

ment of urban communities within the Upper Canadian hinterland

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(Careless 1978, 1989). Established as a military outpost to guard the

eastern end of Lake Ontario upon the arrival of the Loyalists in 1784,

Kingston thrived as a transhipment point between lake and river trans-

port on the St. Lawrence route. During the War of 1812, Kingston was

the defensive stronghold of the province and the largest town in Upper

Canada with a population of about 2,000. The construction of the

Rideau Canal reinforced commercial links with Montreal and made

Kingston a strategic choice to serve as the ﬁ rst capital of the united

Province of Canada in the early 1840s. However, the lack of a sizable

hinterland along with the improvement of the St. Lawrence to allow

more through trafﬁ c reduced Kingston to a local market and service

center of 11,000 inhabitants by mid-century. At the other end of the

Rideau Canal along the Ottawa River emerged Bytown in 1826. A thriv-

ing inland lumber center of 8,000 people, Bytown became the city of

Ottawa in 1854.

Spurred on by the inﬂ ux of British immigrants and the rise of com-

mercial agriculture after the War of 1812, the population of the provin-

cial capital, the town of York, grew from scarcely 1,200 in 1820 to

slightly over 9,000 when it was incorporated as the city of Toronto in

1834. Toronto’s strategic location on the St. Lawrence–Great Lakes trans-

port route was complemented by its access to the improved Hudson-Erie

route and to the American railway system. Consequently, Toronto

became not only a wholesale and retail center for a rapidly expanding

agricultural hinterland but also a transhipment point for Upper Canadian

as well as American midwestern wheat and ﬂ our headed for Britain via

New York or Montreal. By 1850 Toronto, with a population of 30,000,

was beginning to rival Montreal for metropolitan dominance of British

North America, and later the Canadian nation. Links with Toronto

helped nearby Hamilton grow into a signiﬁ cant marketing center and

lake port with a population of 14,000 by mid-century.

Urban development in Upper Canada, however, was limited by inad-

equate inland transportation. Because early roads were often little more

than dirt trails or paths cut into the wilderness, settlement for most of

the ﬁ rst half of the 19th century remained conﬁ ned to areas fronting

the Great Lakes and the St. Lawrence River or along Yonge and Dundas

Streets. However, as more immigrants arrived from the 1820s onward,

the improvement of existing roads and the construction of new ones to

connect the interior with the coastal settlements became a constant

source of political controversy. Corduroy roads consisting of logs laid

side by side on a bed of dirt were an improvement when they were new.

But they would deteriorate quickly, particularly with inclement weather,

THE EXPANDING COLONIAL ECONOMY