Part I – Introduction
Chapter 1 – Introduction – Michael Howlett (SFU) and Keith Brownsey (Mt. Royal College)
For generations provinces like British Columbia and Quebec were known for their forestry resources, while others like Prince Edward Island, Saskatchewan and Manitoba were known for their farms. Ontario mining was legendary, as were the oil and gas wells of Alberta and the fisheries of Newfoundland, New Brunswick and Nova Scotia. It was common wisdom that fifty cents of every dollar in British Columbia came from the forestry industry and that aawmills, pulp and paper, and shingle mills and other related industry employed hundreds of thousands of people in cutting, hauling, and producing various wood products. Those days are gone. The Douglas Fir no longer reigns in British Columbia’s economy but rather, eco-tourism, film and television production, aquaculture and other industries have taken a strong if not leading role in the province’s economy.1
While still important to British Columbia’s economy, as with most other provinces, the original ‘staples’ resource industries of farming, fishing, mining and forestry have given way to service and other types of business. The wheat economy of the prairies has diversified into various agricultural products from canola seed to cattle as well as undergone a process of consolidated into large agribusiness. On the east and west coasts, the Atlantic cod fisheries have vanished and the Pacific salmon stocks have dwindled. Even in the energy sector a hegemony of high valued goods has emerged. The staples of hydroelectricity and crude oil and natural gas have been transformed by environmental regulation, decreasing conventional reserves of liquid hydrocarbons, conflict over land use
, new technology, and scarcity of supply. As well, there is a security premium on oil and gas reserves that adds to the final production and consumption cost.
No longer tied to the original staples industries, Canada has become an advanced industrial economy but one which remains different from the typical model of advanced manufacturing and services found in Europe, the US and Japan. The new base of the Canadian economy retains its origins in early staples industries with many new activities grafted onto those traditional sector. This transformation of the old staples political economy has ushered in some elements of a new political and social order at the same time that it as exacerbated or worsened many elements of the old. Over the last several decades the transformation of significant components of Canada’s staples economy has led to demands for many institutional, legal and political reforms which would better represent the Canada’s new globalized and regionalized configuration of business and social life.
Changes in the staples economy are illustrated by the rise of social movements, urbanization and an increasingly disconnected regional politics. They are also a product of the globalization and regionalization of markets. All together, the transformation of the staples economy has been attributed to such factors as industrialization and urbanization, resources depletion, increasing competition from low cost producers, immigration from non-European countries, the regionalization of markets and industrial restructuring as well as the rising importance of social movements and knowledge elites. Simply put, the traditional staples industries within Canada have been affected by a variety of factors which together have transformed the Canadian political economy.
The contributors to this volume provide an overview of the changes in Canada’s political economy. Each tries to answer a series of questions. First, what was the traditional staples economy? Second, how were the various staples industries organized within the centre-periphery model? What was the political impact of the staples model of development? What factors led to change within a particular industry? How did a post-staples economy evolve? How does it differ from a staples economy? And what are the political consequences of the post-staples society? The different contributors examine industries as varied as diamond mining in the Northwest Territories and aquaculture off the coast of British Columbia. Yet, within the wide parameters of the post-staples paradigm there is a congruence of events and processes which can be identified as a new model of economic and political development which is dramatically different from its predecessor and which has altered domestic social relations.
Overview: Staples and Post-Staples Political Economy
A staple refers to a raw, or unfinished bulk commodity product which is sold in export markets. Timber, fish and minerals are staples, usually extracted and sold in external markets without significant amounts of processing.2
The significance of having an economy based on exporting unfinished bulk goods lies with how it affects policy-making in specific resource sectors by creating continuing issues with resource technologies, profits, rents, location and availability
how it affects policy-making in related areas such as the environment4
or transportation infrastructure,5
and also how it affects policy in less directly affect areas such as welfare, health and social policy.
As the Toronto School of staples theorists noted, many consequences for government and society flow from having an economy based on exports of such unfinished bulk goods. Their significance lies not only in how they affect resource policy-making by creating continuing issues with resource location and availability, provide only a limited need for education and technical skills in frontier resource communities, entrench a system of metropolitan-hinterland links in both economy and culture, but also in how populations, governments and industries in staples-dependent areas react to their continued vulnerability to international market conditions. As Naylor and others have shown, the development of a staple-based economy, for example, triggers government and private sector investments in large-scale infrastructure activities such as transportation and communications facilities required to co-ordinate the extraction and shipment of bulk commodities to markets in distant lands designed, as well as provisions of export subsidies and credits designed to facilitate trade and the distortion of the banking and financial system away from consumer and small business credit to a concentration on large industrial loans and profits. 6
The fact that staples reliant countries have tended to focus on markets in foreign lands is significant, in itself. As most staples-based countries have a monopoly or near-monopoly on the production of only a very few resources or agricultural goods, producers must sell at prices set by international conditions of supply and demand. While international demand for most resources—outside of wartime—has increased at a relatively steady but low rate, world supplies of particular primary products are highly variable. A good harvest, or the discovery of significant new reserves of minerals or oil, or the addition of new production capacity in the fishery or forest products sectors can quickly add to world supplies and drive down world prices until demand slowly catches up and surpasses supplies, resulting in sudden price increases triggering a new investment cycle and subsequent downturn.7 As Cameron has noted, these fluctuations in international supplies account for the “boom and bust” cycles prevalent in most resource industries and, by implication, most resource-based economies, and lead affected populations to press governments to provide a range of social, unemployment and other types of insurance schemes as well as make large-scale public expenditures in areas of job creation and employment.8
While most observers would agree that historically Canada can be characterized as a staples economy and that this has had a significant impact on the evolution of Canada's resource regimes and practices, as the discussion in other chapters of this book show, there is considerable disagreement over whether this depiction continues to characterize the overall Canadian economy and whether and to what extent it will continue to do so in future years.9
The Staples approach was developed primarily by Canadian economists and historians whose works are rooted firmly in the historical examination of the development of the Canadian economy. They describe the effects of this development on Canadian social and political life. The school derives its name from the emphasis on staples industries, which, following Gordon Bertram, are defined as those industries ‘based on agriculture and extractive resources, not requiring elaborate processing and finding a large portion of their market in international trade’ (1967, p. 75). Staples theorists view Canadian political economy as having been shaped by the export of successive staples over the course of Canadian history from the earliest colonial times to the modern era.
Following Gordon Laxer, we can identify four main ‘analytical assumptions of the staples school’ (Laxer, 1989b, pp. 180-181). First, staples theorists believe that the key to understanding Canadian history is to discover the export commodity that the economy depends on. They argue that the Canadian state and Canadian capital devote themselves singlemindedly to discovering and extracting bulk resource commodities or staples that have a ready export market. The money thus derived is used to pay wages to Canadian workers and finance imports of goods demanded by Canadian consumers. Canadian economic growth, then, is intimately linked to the demand for staples in the industrialized nations, and this demand has shaped economic development in Canada: any shift in demand for the staple in question, while inconsequential for the importing country, has a pervasive impact on the local economy, which is dependent on its export. An example is the fading away for the fashion in beaver-felt hats in Europe, which had a serious, debilitating effect on the early nineteenth-century Canadian economy, which was almost completely dependent on the export of furs (Innis, 1956).
Second, staples political economists argue that Canadian political life is heavily influenced by the country’s staple export-dependent economy because economic wealth and political power are concentrated in Canadian business and political elites--often the same people--who act as the instruments of interests in the industrialized countries importing the staples. According to the theory, the Canadian business community has been more interested in promoting continued and expanded staples-resource exports than in acting as entrepreneurs developing an industrialized Canadian manufacturing economy.
Third, the staples school emphasizes history as a key to understanding the Canadian political economy. A study of the actual history of Canadian economic development enables these scholars to overcome the limitations of other models developed to understand the industrialized economies of Europe. They clearly understand that Canada and many other ‘new world’ economies have unique features that the most traditional theories cannot account for.
Fourth, analysts in this school argue that the need to overcome geographical impediments to the expansion of staples exports helps explain the state’s role in a staples-dependent market economy. They argue that confronting the harshness of the Canadian terrain and the physical distances that had to be traversed to get staples from the hinterland to ocean loading ports required large capital expenditures on transportation and communications infrastructure, which Canadian business could not afford to make. Instead, projects such as canals and river improvements, railway construction, and the establishment of telephone, electrical, and airline systems were all undertaken by the Canadian state.
Not all staples theorists place equal weight on all of these aspects, and significant debates exist between different groups concerning questions such as the historical time periods that the analysis can cover or whether the construction of transportation infrastructure amounts to industrial development or not. The most contentious question--one that divides staples political economy into two schools--is whether the reliance on staples exports rather than industrial manufacturing is a positive or negative development.
The staples approach has its origins in research into Canadian social, political, and economic history carried out in Canadian universities, roughly between 1920 and 1940, by members of what were then known as departments of political economy. The two most prominent scholars following this approach were Harold Innis and W.A. Mackintosh. But numerous other scholars during the same era arrived at similar conclusions regarding the significance of the resource industries and their impact on Canadian settlement (Fay, 1934). These included, most notably, Arthur Lower, a Queen’s University historian; S.A. Saunders, a Dalhousie University historian; and Donald G. Creighton, a University of Toronto historian, as well as others scattered across the country. Lower (1938) explored the origins and impact of the lumber industry on Canadian development, while Creighton (1937) adopted several staples tenets in developing his ‘Laurentian thesis’ of Canadian history (Berger, 1976). Saunders examined the development of the Maritime provinces using a staples framework (Saunders, 1939).
Enough scholars were working in a similar vein by the mid-1930s to allow the publication between 1934 and 1938 of a nine-volume Frontiers of Settlement series on the history of Canadian economic, political, and social development. This series of books contains some of the finest writings in this tradition, including submissions from Lower (1938), Innis and Lower (1936), Mackintosh (1934), and Morton (1938). In 1939, major submissions by Saunders and Mackintosh to the Royal Commission on Dominion-Provincial Relations (the Rowell-Sirois Commission) presented the development of the Canadian economy in staple terms, and in 1941 V.W. Bladen (1943) relied on a staples framework to write the first textbook on Canadian political economy.
The two dominant thinkers in this tradition were clearly Innis and Mackintosh. While the two shared common theoretical premises in their emphasis on staples, they followed different lines of analysis and arrived at different conclusions in their works. Most later writings in the staples tradition can be classified according to whether they share Innis’s pessimistic outlook on Canada’s future or Mackintosh’s more optimistic analysis.
The Innisian Approach
Harold Innis, an economist at the University of Toronto and one-time head of the American Economics Association
, wrote a series of books from the 1920s to the 1940s discussing the significance of various early resource industries to the development of different parts of Canada. These included the classic works A History of the Canadian Pacific Railway
(1923), The Fur Trade in Canada
(1930), and The Cod Fisheries
(1940) as well as numerous essays and edited works on related topics.
Innis argues that the political economy of Canada was shaped by the successive concentration on exports of cod, fur, lumber (and pulp and paper), agricultural products (principally wheat), and minerals, which all went to the metropolitan economies of Europe and later the United States. As Innis summarized his staples thesis:
The economic history of Canada has been dominated by the discrepancy between the centre and the margin of western civilization. Energy has been directed toward the exploitation of staple products and the tendency has been cumulative. The raw material supplied to the mother country stimulated manufacturers of the finished product and also of the product which were in demand in the colony. Large-scale production of raw materials was encouraged by improvement of technique of production, of marketing, and of transport as well as by improvement in the manufacture of the finished product . . . . Agriculture, industry, transportation, trade, finance, and governmental activities tend to become subordinate to the production of the staple for a highly specialized manufacturing community. (1956, p. 385)
Innis argued that Canada’s export of staples products in unprocessed or semiprocessed forms was necessitated by the lack of technological capability to process them within the country and that exports were also essential to supporting the improved living conditions that had brought Europeans to Canada in the first place. The exportation of staples and the importation of consumer goods, while satisfying the needs of the immigrants, primarily benefited the interests of the industrialized nations, which secured a cheap and reliable supply of raw materials. The domestic commercial interests involved in the movement and financing of the export-import trade also benefited in the process.
With the passage of time, Innis argues, increasingly larger local resources had to be devoted to resource exports, which exacerbated the staples-orientation of the political economy. The railways built to transport wheat and lumber could not pay for themselves, which made it necessary to export pulp, paper, and minerals to take advantage of the railway’s unused capacity (Innis, 1956). The increasing dependence on staples correspondingly widened Canada’s technological backwardness, which only deepened the country’s dependence on unprocessed or semiprocessed raw materials. This was different from the situation in the United States, where a less harsh geography and a larger population enabled the economy to depend less on staples exports and to develop both a large and prosperous agriculture sector capable of supporting a large domestic population and an industrial sector to serve the growing domestic market.
Climatic and topographical difficulties prevented Canada from undergoing a similar process of development, and the resulting dependence on staples exports, according to Innis, doomed Canada’s chances of developing a domestic industrial base. Reliance on staples exports necessitated increasingly large investments in building a transportation infrastructure. The heavy debt-servicing charges that such investments involved diverted funds away from other areas of the economy, including manufacturing. The dependence on staples export also increasingly exposed the Canadian economy to the vagaries of international commodity markets, which tend to witness violent fluctuations as new capacity comes onstream in different countries, lowering world prices until world demand catches up with global supplies and prices rise accordingly. The ‘cumulative’ impact of all this, according to Innis, was that the Canadian economy became caught in what Mel Watkins (1963) would later call a ‘staples trap.’ This form of economic life could provide relatively high standards of living to citizens of exporting countries, but only as long as domestic resource supplies and world demand remained constant or increased. Any declines in demand or increases in supplies would have drastic consequences for the domestic political economy, which would be poorly placed to respond to the challenge of finding a new economic base. As a result, Innis and most staples political economists following his lead are pessimistic about Canada’s future as a reasonably wealthy ‘developed’ country.
The Mackintosh Approach
W.A. Mackintosh, a Queen’s University professor of economics and advisor to the federal Liberal government of William Lyon Mackenzie King, had more impact on practical political economy than most academics ever will. He served as a key researcher for the Rowell-Sirois Commission in the late 1930s, looking into problems caused in Canada by the Great Depression, and was one of the most powerful bureaucrats in the federal government during World War II--at a time when the federal government itself was powerful as a result of its war activities (Granatstein, 1982). Mackintosh was instrumental in introducing Keynesianism to Canada, and that approach formed the basis for Canada’s postwar strategy of economic growth, but with the twist that full employment was to be secured through increased staples exports and an inflow of investments in further resource extraction and branch-plant manufacturing.
In his theoretical writings Mackintosh argues that in a ‘new’ country dependence on the export of staples is an essential stage in economic growth. In his first article on the subject, in 1923, he states: ‘The prime requisite of colonial prosperity is the colonial staple. Other factors connected with the staple industry may turn it to advantage or disadvantage, but the staple in itself is the basis of prosperity’ (Easterbrook and Watkins, 1967, p. 3). In a report to the Rowell-Sirois Commission in 1939 he stands by this position: ‘Rapid progress in . . . new countries is dependent upon the discovery of cheap supplies of raw materials by the export of which to the markets of the world the new country may purchase the products which it cannot produce economically at that stage of its development’ (1939, p. 13).
Mackintosh presents economic development as a linear process in which each nation has to pass through a series of stages (Williams, 1983, pp. 131-132). For him, Canada’s dependence on staples reflects the nation’s early stage of development, when staples were the only area in which it enjoyed a comparative advantage. Unlike Innis, he argues that eventually the technology acquired and the profits accumulated from the extraction and export of staples will lead to investment in manufacturing industries. The expansion of the domestic population and the availability of foreign capital and technology in setting up manufacturing plants to supply the growing domestic market would further facilitate the process. He cites the Unites States as having followed this route. If Canada had not been as successful as the United States, it was because of its harsher climate and smaller population, which inhibited the establishment of efficient manufacturing industries. The implication of his analysis was clear: there was nothing wrong in depending on staples exports, for eventually industrialization would arrive in Canada.
After slowing down during World War II, more work in the staple tradition emerged following the war. These include works by Vernon Fowke (1946) and Kenneth Buckley (1958), which both follow Mackintosh’s line of reasoning. Both point out the tremendous economic spinoffs to the Canadian economy that had accrued as a result of booming wheat exports between the 1890s and 1920s. They argue that a large proportion of the benefits did not flow to the Western wheat producers but to Canadian manufacturers, most of them located in Central Canada. As John Richards concludes:
To Fowke and Buckley, the wheat boom was necessary to Canadian industrialization because it alone provided a sustained high level of demand necessary for the Canadian manufacturing sector to ‘take off.’ Without wheat Canada would have had a much smaller domestic market and, given serious barriers to any new manufacturing exporter, manufacturers could not easily have substituted export for domestic markets; their level of activity could have been seriously curtailed. (1985)
The discovery by Fowke and Buckley that wheat exports provided the impetus for industrialization lent credence to Mackintosh’s theory. Yet in Fowke’s work there is an Innisian strand: the wheat exports from the West (the periphery) primarily benefited the Central provinces (the centre), just as the industrialized nations benefited from Canada’s exports of staples (Richards, 1985, p. 53).
By the 1950s many different aspects of Canada’s resource-dependent economy were being investigated (Easterbrook, 1959), including the impact on provincial development (Dales, 1957) and the impact of U.S. investment in key industries (Aitkin et al., 1959; Aitkin, 1961). The high point in the staples analysis in a practical political sense was no doubt in the late 1950s when the Royal Commission on Canada’s Economic Prospects (the Gordon Commission) accepted Mackintosh’s version of the staples thesis and focused its efforts on planning for and controlling the various effects on Canadian society of resource-led economic growth (Canada, Royal Commission on Canada’s Economic Prospects, 1957).
By the 1960s the staples approach to Canadian political economy was being challenged on a number of fronts. The historical generalizations of the staple tradition were being subjected to detailed empirical scrutiny and to a demand for empirical verification on the part of quantitative economics and econometrics (Bertram, 1963). Secondly, the significance of the historical approach to understand contemporary economic and political phenomena was being undermined by alternative methodologies in contemporary political science, such as the systems and behavioural approaches, which promised greater insight into discovering solutions for contemporary political problems. Although the staples approach would receive its finest formulation at this point (Watkins, 1963), it would be increasingly relegated to the sidelines in academe as a conceptualization of the early developmental stages of a relatively new economy, an approach without much relevance to contemporary life.
Nevertheless, because most significant historical works on Canada’s development had been fashioned by staples theorists, the approach could never be completely eliminated. Any researcher delving into Canada’s past was bound to encounter the staple theorists and their powerful, inductively developed model of the Canadian political economy. This in fact occurred at the end of the 1960s as Canadian scholars rejected purposeless quantification and modelling for the broader insights offered by the staple perspective and as scholars of other nations searched for a superior approach to economic development than that provided by the orthodox liberal and socialist political-economic theories (Hirschman, 1958; North, 1961).
Debates in the 1970s and 1980s
The staples approach to Canadian political economy was revived at a time, towards the end of the 1960s, that was unusual in North American history, a time that had a pervasive impact on inquiries in social sciences. Civil rights activism in the United States and anti-Vietnam War protests across North America had rendered the intellectual milieu fertile for challenging established beliefs, while the anticolonialist nationalist struggles in the Third World in the years following the end of World War II had given a new impetus to nationalism. It was also the time when the emerging evidence of the increasing strength of multinational corporation was inculcating fears that these corporations would enable the former colonial powers to once again dominate the world.
In Canadian political economy, an enhanced nationalism and a scepticism about the validity of established liberal and socialist theories led to the search for alternative analyses, for an approach that would be more in tune with the realities of Canadian history and provide a more pertinent guide to political practice than the deductive application of a general liberal or socialist principles. Not surprisingly, this search led to a renaissance in staples theory.
However, the staples approach did not provide a clear guide for political action. Unlike the liberal and socialist theories, the staples analyses of both Innis and Mackintosh provided what were essentially descriptive evaluations of Canada’s economic growth. Moreover, the two differed in the prescriptions they proposed for influencing the course of Canada’s development, and in whether they felt the process had been harmful or beneficial to Canada. Before their analyses could be used to develop plans to improve Canada’s lot, it was necessary to synthesize their various writings, observations, and insights into a general model of economic growth.
When this was attempted, it became obvious to most observers that staples political economy existed simply as a specific case, a somewhat unique example of national development, or lack of it, within the more general theories. The neo-Innisian staples political economy combined, or attempted to combine, the work of Harold Innis with the theories of socialist political economy, especially the Leninist-dependency school. The resemblance of the Canadian economy to economies in the Third World--especially with respect to the high degree of foreign ownership--made such a line of analysis seem appropriate.
Two elements from Innis’s thinking hit a particularly harmonious cord with scholars attempting to develop a new political economy. One was his conclusion that dependence on staples exports inhibited independent industrial development. The second, expressed in his later writings, was the fear of U.S. dominance of Canada.
The first element allowed the neo-Innisians to adopt dependency theory in their later analysis of Canadian political economy (Levitt, 1970; Teeple, 1972; Laxer, 1973; Hutcheson, 1978). The second fostered the development of economic nationalism, which in the Canadian context necessarily involved a certain degree of anti-Americanism. The two together inevitably led to the conclusion that the Canadian economy was suffering because of U.S. investment, and that, more importantly, nationalist measures should be taken to reduce it. In other words, the ‘staples trap’ could only be overcome through resort to economic nationalism.
The neo-Innisian analyses had a number of common features. First, the scholars in this tradition attribute heavy emphasis to the need for an advanced manufacturing sector, a feature characteristic of economic nationalism. As Glen Williams points out, there is a ‘pervasive concern with the overdevelopment of the resource export sector of the economy at the expense of the industrial sector’ (1983, p. 138). As a corollary, they assert that the dominance of the resources sector has stifled the growth of indigenous manufacturing in Canada.
Second, the neo-Innisians believe ‘that foreign direct investment in Canadian manufacturing, among its other negative effects, inhibited our capacity to develop an export trade in industrial products’ (Williams, 1983, p. 138). The reference here is to U.S. investments, which have formed a majority of all foreign investment in Canadian manufacturing since the 1920s. This area of Canadian economic history has generated some of the finest work in the staples approach (Naylor, 1972, 1975b; Watkins, 1977; Levitt, 1970; Laxer, 1989a,b). The theorists argue that foreign subsidiaries have been more interested in making quick profits for their parent firms than in attempting to be innovative, export-oriented, or internationally competitive. What is ironic is that much of the U.S. investment arrived in Canada to evade tariff barriers against imports, a measure itself inspired at least partly by Canadian nationalism.
Third, these scholars warn that ‘a failure to address and correct these trade problems will result in decreasing living standards or even a descent toward “economic underdevelopment”’ (Williams, 1983, p. 138). They are concerned that unless coercive measures are taken, Canada might turn into an industrial wasteland. Pessimism about Canada’s social and economic prospects is indeed an enduring feature of neo-Innisian analyses, and it has received a fresh boost with the signing of the Free Trade Agreement with the United States (Cameron, 1988).
Finally, the neo-Innisians are acutely concerned about Canada’s cultural identity, and they feared its assimilation by U.S. culture (Christian, 1977). They take considerable pride in the fact that Canadians are not ‘Americans’ and do not practise the same kind of heartless capitalism. They proudly note Canada’s superior social welfare system and activist state tradition. They argue that closer economic integration with the United States will rapidly lead to cultural assimilation and recommend chalking out an independent course of economic development. In addition, they recommend financial assistance for the Canadian cultural industries and their protection from U.S. imports.
The publication of Kari Levitt’s Silent Surrender in 1970 marked the beginning of a series of works combining Innis’s staples approach with dependency theory. Building on Innis’s conception of Canada as a staples-producing nation on ‘the margin’ of Western capitalism, Levitt argued that the U.S. multinational corporations ‘organized the collection or extraction of the raw material staple required in the metropolis and suppled the hinterland with manufactured goods, whether produced at home or “on site” in the host country’ (Levitt, 1970, p. 25). As she put it, ‘The Canadian entrepreneurs of yesterday are the coupon clippers and hired vice-presidents of branch plants of today. They have quite literally sold out the country’ (Levitt, 1970, p. 40). She describes this as a ‘silent surrender’ on the part of Canada. The adverse effects of the branch-plant economy were cumulative, as Americans came increasingly to dominate the economy because of their superior technological and capital base.
Mackintosh’s staple political economy did not receive the same reception as that of his counterpart, Harold Innis. His optimism that staples exports would eventually enable Canada to industrialize drew little sympathy from socialists, who saw no evidence of this occurring (Drache, 1983); but it did influence liberal nationalists concerned about Canada’s apparent failure to develop into a diversified, industrialized economy following World War II. It was within a Mackintosh-inspired framework that the most systematic model of staples-led growth was developed, by Mel Watkins.
Watkins’s staple theory of economic growth rests very much within the assumptions of liberal political economy: it focuses on the role played by entrepreneurs in the marketplace as a key determinant of economic development (Watkins, 1963). Although Watkins later adopted a more neo-Innisian perspective on Canada’s economic development and endorsed many of the dependency arguments concerning both regional and national development in Canada (Watkins, 1977), this early work represents an excellent synthesis of the various conceptions of staples-led growth floating around in the Mackintosh-inspired staples literature at the time.
Watkins makes it clear that the staples approach applies only to ‘new’ countries, such as those in North and South America, Australia, and New Zealand. The distinguishing feature of these nations is their favourable ratio of natural resources (staples) to labour and capital. It is obvious from this that staples necessarily form the cornerstone of their economies.
The limited . . . domestic market, and the factor proportion--an abundance of land relative to labour and capital--create a comparative advantage in resource-intensive exports, or staples. Economic development will be process of diversification around an export base. The central concept of a staple theory, therefore, is the spread effects of the export sector, that is the impact of export activity on domestic economy and society. (Watkins, 1963, pp. 53-4)
The extent to which the spread effects are realized depends on three kinds of ‘linkages’ in the export of particular staples: ‘backward linkage, forward linkage, and final demand linkage’ (ibid., p. 55). The forward linkage involves investments in further processing of the staples, such as lumber into pulp and preferably paper. The backward linkage involves investments in production of the inputs required by the staples sector, such as railways to move wheat or machinery used in mining and logging. The final demand linkage is created by the expenditure of incomes generated in the production and export of staples; it exists to the extent that those incomes are used to invest in manufacturing of the goods consumed in the home country.
The establishment of these three linkages cannot be taken for granted. Much depends on the nature of the staple itself. Cod fishing afforded few linkages, because at the end of the season the fishermen tended to return to their homeland after they had caught and cured their fish; they didn’t invest in backward or forward industries. Wheat, in contrast, attracted permanent immigrants who established, for example, an agricultural machinery industry (backward linkage) as well as food milling, processing, and preserving industries (forward linkage). Wheat production also automatically led to some degree of final demand linkage as industries were established to supply basic needs such as clothes, shoes, and toiletries to farmers and other members of the agricultural community.
The importance of final demand linkage is clearly the greatest if the economy is to diversify. But the full realization of this linkage remains elusive if the staples exports are in the hands of foreign investors who siphon off their profits to their home countries, leaving little behind to invest in local manufacturing. Besides, it is easier and more profitable for foreigners to supply manufactured goods to the local economy from their home country, thus making profits in both the export of staples and the import of manufactured goods. The most significant problem, however, is that staples dependence fosters an ‘export mentality, resulting in an overconcentration of resources in the export sector and a reluctance to promote domestic development’ (Watkins, 1963, p. 62). If this happens the economy is caught in the ‘staples trap’; it becomes dependent on the economies that receive its imports and supply its manufactured goods. Towards the end of his article, however, Watkins indicates that he is optimistic that eliminating the ‘inhibiting export mentality’ is within the means of policy-makers.
This type of new staples political-economic analysis was taken up by the Science Council of Canada, which explicitly used the model in several of its publications (Britton and Gilmour, 1978, p. 20). They point out that foreign subsidiaries are here to maximize profits for their parent companies and not to serve the interests of Canada.
Simply (and obviously), the behaviour of multinational corporations does not support the long-term aspirations of Canadians for their economy and society . . . . The solution must, therefore, contain initial support for Canadian firms as compensation for their more limited resources and must modify the economic environment in such a way that policies are designed to be consistent with a developing Canadian industrial sector. (p. 22)
The Science Council was particularly emphatic about Canada regaining its technological sovereignty so the country does not have to rely on foreign technology in ‘core’ areas of the economy. To push for this objective the Council continued to recommend a host of interventionist measures. In its 1984 policy proposal, for example, it again called for subsidies and protection from imports for domestic manufacturing. After the mid-1980s, however, the Council watered down its proposals, perhaps because it realized that its interventionist proposals were not appreciated by a Conservative government committed to reducing the role of the government in the economy.
Contemporary Staples Theory
The main strength of staples political economy is its insistence on following an inductive methodology, which largely avoids the propensity of both liberal and socialist political economy to force the world into pre-established moulds. This inductive methodology provides several avenues for further refining Canadian political economy, primarily through the pursuit of comparative studies. But until now most staples analysis has used this same methodology to argue that Canada is in some manner ‘exceptional.’ If staples political economy is to contribute further to an understanding of how the Canadian political economy operates, it must abandon its emphasis on Canadian ‘exceptionality.’ Harold Innis, the founder of the staples approach, clearly understood this point. As William Christian notes: ‘Innis treated Canada not as a unique phenomenon but as a particular one . . . . He worked inductively and not deductively. He drew his theory from the facts that he studies; but there was always an interpretation of facts and theory
, each refining and modifying the other’ (1977a, p. 21).
Gordon Laxer was correct when he suggested: ‘To renew itself, the new political economy needs to modify several assumptions which have more to do with belief than with the reality of Canada’s international position. The idea of external control of Canadian life is too rigidly held. It is easy to blame others (1989a, p. 186).
Earlier debates within the staples school itself centered on whether Canada had emerged as an industrial power in the wake of the wheat boom and manufacturing activities associated with the First World War. However the failure of the manufacturing sector to grow outside of wartime led to the re-emergence of staples analysis in the 1960s and 1970s.10 Current debates focus less on the impact of a transition from primary to secondary activities then they do upon the undeniable growth in service sector employment and production in the post World War II era,11 and the transition of many staples industries towards more capital and technologically intensive forms of production – undermining the association of large parts of the population directly with staples extraction activities and exacerbating urban-rural divides. The idea that significant parts of the economy have entered a new "post-staples" mode has led to a variety of debates in Canada concerning the consequences for government policy-making.12
However, as Tom Hutton has observed, there are several possible permutations on the general staples ‘theme’. In addition to the ‘classic’ staples political economy based on easily accessible and ample resource supplies, labour-intensive means of production, social insurance and export enhancing infrastructural investment, there is also the "mature, advanced" staple political economy in which there is substantial depletion of original resource endowments and consequent increasing pressure on the part of industry to access more costly or protected stocks and supplies. This activity is resisted by "environmental" groups originating both in urban centres divorced from the resource economy and in hinterland communities desiring to replace ‘exploitation’ with ‘sustainability’ as the operating motif of the basis of their livelihood. Mature staples economies feature the increasing capital- and technology-intensiveness of resource extraction processes and consequent decrease in employment in the staples sector, the evolution of development from 'pure' extraction to increased refining and secondary processing of resource commodities, and the diversification of economic structures in cities and small towns with growth in non-staples related areas such as, tourism, and local administration and education, health and other social services.13
While a mature staples political economy may still be characterized as "resource dependent", the economy is more diffused and diversified than in the past. As Hutton suggests, if this diffusion, diversification, and resource depletion continues, then an economy may make a further transition towards a "post-staples" one in which severe pressures on the critical resource sector coupled with the prospect of even more substantial contractions in the near future lead to an internal reconfiguration of growth and development as unprocessed bulk commodities can no longer compete with low-cost suppliers in traditional export markets. Typically this would involve a significant increase in metropolitan shares of population and employment, the emergence of regional economic centres, the decline of smaller resource-dependent communities and the increased prominence of the internal market for remaining, smaller-scale, resource industries.14
Having had a staples economy in the past has raised several overlapping problems for Canadian policy-makers. For example, having a staples economy pits economic interests and activities involved in resource harvesting and exploitation against environmental activities such as wilderness, species and habitat preservation and these types of conflicts have been a hallmark of Canada's initial post-1960 experience with environmental regulation.15 Similarly, populations in staples-dependent areas have reacted to their continued vulnerability to international price fluctuations by demanding, and expecting, a higher degree of social insurance than is the case in many other countries with less volatile economies.16 This has led Canadian governments to provide a range of social, unemployment and other types of insurance schemes as well as make large-scale public expenditures in areas of job creation and employment in the effort to offset weaknesses in the staples base of Canadian wealth generation and distribution.
As Hutton has observed, "mature, advanced" staple economies have the following features:
(1) substantial depletion of resource endowments;
(2) well established export markets for principle staple commodities;
(3) increasingly capital- and technology-intensive resource extraction processes;
(4) increasing competition from lower-cost staple regions
(5) evolution of development from 'pure' extraction to increased refining and secondary processing of resource commodities;
(6) increasing diversification of the industrial structure, with manufacturing, tourism, and local administration and services;
(7) evolution of settlements both within and outside the metropolis;
(8) increasing pressure from "environmental" groups to inhibit traditional modes of resource extraction and stimulate development alternatives.17
Thus, while these economies may still be characterized as "resource dependent", their economies are more diffused and diversified than in the past. According to post-staples theory, the late 20th century development of the Canadian economy reflects an uneven and continuing process of economic diversification. For example, while each province reflects unique circumstances of resource availability, historical settlement patterns, and governance, the provinces of Quebec and Ontario have experienced the greatest industrialization, becoming the core or metropolis in the Canadian economy. Yet resource extraction continues to play a significant role even in the centre, and megaprojects of recent decades such as the James Bay project in Quebec reflect a continuing, if shifting, base of resource extraction.
On the other hand, peripheral provinces once completely dependent on resource extraction have faced significant problems in making any kind of transition from their traditional staples base. The Maritime provinces and Newfoundland have been especially hard hit by the rapid decline of the fishery, and the 1993 closure of the cod fishery. British Columbia, too, is projecting rapid declines in the timber industry and the fishery.18 This would deem to presage the types of structural shifts identified by Hutton with a transition to a "post-staples economy":
(a) severe pressures on the province's critical resource sector;
(b) the prospect of even more substantial contractions in resource industries (…) reflecting structural supply and demand conditions, as well as increasing public concerns about resource depletion and environmental degradation;
(c) rapid sector shifts in the economy, including:
1. a shift to services;
2. rapid tertiarisation ...;
3. significant industrial expansion, in regional centres;
(d) an internal 'reconfiguration' of growth and development, with a significant increase in metropolitan shares of population and employment, the emergence of regional economic centres, but the decline of smaller resource-dependent communities;
(e) an external reorientation of key international relationships, characterized not merely by increasing trade and global markets, but a rapid integration within new markets, networks, and societies.19
The authors in this collection examine the post-staples thesis in detail, looking for evidence of the transition of traditional resource sector activity from a mature to a post-stapes phase. The book is organized into pairs of chapters examining different Canadian primary industries. One chapter in each pair provides an overview of the development of each sector, both in terms of the industry involved as well as government regulation, and the nature of the major problems it has faced. The second chapter in the pairing examines a specific contemporary issue in the sector which reveals much about the nature any transitions occurring in that sector. This analysis of the sectoral structure of the Canadian economy supports the idea that Canada is involved in a very uneven transitional process in a movement from a staples to a "post-staples" state.
Grace Skogstad and Elizabeth Moore examine the changes occurring in the Canadian agricultural sector. Skogstad’s overview of this staple industry discusses the programs and problems facing the farming and ranching communities in an increasingly competitive market place and the federal state’s policy response. Arguing that agriculture – specifically gran production – is a mature staples sector, Moore provides a detailed examination of the federal government’s support for genetically engineered crops as a possible technological benefit for the economic problems facing the industry. Her conclusions cast doubt on decades of national agricultural policy.
Gunhild Hoogensen and Michael Howlett and Jeremy Rayner focus their attention on the Atlantic and Pacific fisheries. One of the oldest extractive industries in the country, the fishing industry faces historically low levels of stocks at the same time as international competition has increased. Hoogensen discusses the problems facing the creation of a sustainable Canadian fishery and the political, social and economic impact of the decline of the traditional fishery. Howlett and Rayner assess the possibilities and problems facing fin and shellfish aquaculture on both coasts. They conclude that environmental and market issues have restricted the expansion of this technologically based post-staples industry.
Forestry is another traditional staples industry that has undergone extensive change through resources depletion, international competition and technological change. Jocelyn Thorpe and Anders Sandberg state that in several British Columbia coastal communities the model has changed from extractive to attractive. The rise of the environmental movement, native land claim and immigration have fundamentally altered the conditions necessary to maintain the traditional coastal forest industry. The new extractive model defines, they state, the post staples economy and all the political and social changes that it entails. In their chapter on forest certification, Benjamin Cashore, Graeme Auld, James Lawson and Deanna Newsom argue that the new non-state forms of governance signal the end of the staples economy in forestry. Their case study examines the impact of international environmental groups and voluntary regulatory regimes on the way Canadian forests are managed. The certification process in forest management appears to transcend the state – practices, laws, and even constitutional jurisdictions have been challenged by non state market driven governance systems. The authors claim that the international certification movement has provided a new model for the regulation of forest staples extraction which has altered the political and social context of the industry.
John McDougall tackles the issue of water. Though not usually considered a staple product, it has quickly become an issue both for Canadian-American trade relations and domestic politics. Comparing water with oil and gas exports to the United States, McDougall makes the claim that liquid hydrocarbons and water have many market similarities. The convergence of the political economy of oil and water are illustrated, he states, by the new or post staples state. Despite domestic political and environmental concerns, the United States may put pressure on the Canadian state to allow exports of fresh water through massive diversion projects. Alex Netherton expands the theme of water in his study of hydroelectricity generation in Canada. He traces the Canadian of hydro-electric power from a privately owned industry primarily for regional and local economic activity into an agent of provincial economic development to its current status as an export commodity tied to international distribution systems or grids. The capital intensity and long-term investment necessary for hydroelectric development created a situation of natural monopoly. When private ownership failed to meet market demand public ownership became an agent through which hydroelectricity markets were organized in Canada. Regulatory reform in the United States has, Netherton claims, has forced the restructuring of the Canadian industry. A technology based export product has emerged in a new post-staples environment. The political impact of these changes has affected Canada-U.S., federal-provincial and interprovincial relations. Not a traditional export staple, hydroelectricity has become a feature of the mature or post staples society.
Mary Louise McAllister tackles a traditional staples industry in mining. Despite a declining importance in the overall economic activity, the mineral sector remains an important industry for many rural communities. But low-cost competition, environmental concerns, new technologies and innovative labour processes such as long-distance commuting have transformed the industry and with it the communities which depend on it. The industry has responded to these challenges with innovative programs in community partnerships, sustainability, new work relations. The mining sector, she states, operates with an environment consistent with a mature staples economy. While McAllister focuses on the entire mineral sector, Patricia Fitzpatrick provides a case study of the new, but important diamond mining industry in Canada’s norther territories. The governance structures, environmental concerns and aboriginal land claim framework within which the diamond mining industry operates has created a very different model of development. The attempt to manage the pressure of resource extraction, minimize adverse social and environmental impacts, and balance the economic benefits among various groups describes the post-staples model.
In his chapter, Brownsey argues that the upstream oil and gas industry in the western sedimentary basin has followed a different pattern than the other resource industries. With the decline of conventional reserves, non-conventional resources such as the oil sands and coalbed methane are increasingly important. Technology, skilled labour, massive infusions of capital are all indicative of the post-staples model of development. But the small producers have aligned themselves with provincial governments – especially in Alberta – to push back against the regulatory and environmental incursions of the federal state. They simply do not have the ability to meet the new requirements. As a result of these political alignments, the producing provinces find themselves in conflict with the federal government over a range of issues from the Kyoto Protocol to worker training. Peter Clancy’s study of the Atlantic offshore examines a late-arrival staple. The various local interests compete with national and international forces to develop and regulate the industry. While local interests have struggled to have voice in resource development, the federal government has extended its offshore jurisdiction. At the same time, large capital is necessary to provide both the capital and expertise for offshore exploration and production. The influence of metropolitan and post-materialist political forces such as environmental concerns, workplace health and safety and aboriginal land claims illustrate an industry in transition from a mature to a post-staples paradigm.
Finally, the book closes with two chapters which review the classic staples approach to political economy as defined by Harold Innis in the 1920s and 1930s and define the post-staples paradigm. Adam Wellstead surveys the Innis approach to political economy while Thomas Hutton identifies the central themes of an emergent post-staples regime. Wellstead uses the concept of the competitive state in order to examine the link between the macro-level analysis with the policy making process. In his chapter, Hutton identifies the central themes of the post-staples state. He argues that the resource economy is in decline, supplanted by the rise of not simply urban regions but by the rise of international or metropolitan cities in the Canadian context.
Together these chapters present a picture of a changing political economy. No longer on the periphery of empire, Canada has become a mature staples state and in many of its regions – urban and rural – a post-staples society. The chapters begin the process of explaining and understanding the political, social and economic impact of this emerging paradigm
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