Staples Theory In Canada

Question: Focus on one particular Political Economy Theory studied during the Course and apply it to the economic history of Canada. Criticize and/or Support its explanatory power and suggest possible avenues to improve the theoretical framework?

To understand, the history of Canada economically, it is important to examine the reasons why the country’s economy formed into its present form. The Staples theory is the most appropriate theory to use when looking into the economic history of Canada due to our vast use of natural resources over time. The theory is very relative and easy to analyze when it comes to the Canadian economy, because of the fact that it can still be used today as an explanatory tool for the Canadian
economy. The Theory does have a few flaws that will be outlined and explained. There are suggestions in order to change the theoretical framework of Staples theory from these criticisms. To help understand the strengths and weaknesses it is important to look at the views of both early theorists Harold Innis and W.A. Mackintosh The purpose of this paper is too to take Staples Theory and its explanatory power and apply it to the economic history of Canada.

The economic history of Canada is based on the Staples theory and the use of natural resources over time. Staples theory basically outlines how a country

Staples Theory Pg.3 uses a natural resource which they center their economy around. In Canada the progression from resource to resource went from: fish, furs, lumber, minerals, wheat, to oil (Migone, 2008). The staples are exported out of the country into international markets where the value of the material is high. The exports were used to pay wages and import other goods into Canada (Migone, 2008). The first communities in Canada revolved around cod fishing, with this being the main source of food and export back to Europe in the early 1600’s (Easterbrook et al, 1988). The small communities were established at first, as places where the fish would dry out before being exported, with the communities eventually reaching several thousand people. The fish supply eventually became depleted due to the over fishing at the time. Shortly after the fisheries began to cease in production, a positive shift in demand for furs in Europe occurred (Hayter et al). The furs became much more fashionable in Europe at the time, and Canada was home to many animals that the Europeans had not even seen yet. This caused a dominant staple shift; the country went from primarily fisheries to basing its exports on furs. Subsequently, the fur trade did not encourage a lot of settlement, as most of the workers were transient, trading with first nations. The first nation’s peoples controlled a lot of the fur trade, as they were the driving force behind retrieving the furs (Innis, 1935). With the increase in the fur trade, the Hudson’s bay company was developed, which created many trading posts and forts across Canada. As with everything, eventually the novelty of furs wore off in Europe, and the animals themselves became more scarce and harder to
Staples Theory Pg.4 gather. This caused a new dominant staple to emerge in Canada in the early 19th century. This was lumber, it emerged because the British had exhausted most of their timber supplies with the creation of their royal navy (Innis, 1935). This forced Britain to find a source of lumber elsewhere, and Canada was the seeming fit. Small groups of men were gathered up and set up in camps around the country to cut down trees, and send the timber to Quebec City, where it was then exported to Europe via the St. Lawrence (Hayter et al, 2001). The importing into Canada was down during this time; however Immigration rates went through the roof. Timber ships were selling places on their ships for their return voyage to Canada for extremely cheap, giving people a chance to start a new life. For example, in the mid 19th century there were over 15,000 Irish loggers working in the Gatineau region of Quebec (Easterbrook et al, 1988). This influx in workers caused a jolt in the Canadian economy, and surged the development in the country. The economy has had other dominant staples that the economy centers, such as wheat and minerals. When analyzing the extraction of wheat, where many farmers from eastern Europe were recruited into the prairies of Canada to start their life in agriculture (www.cfa-fca.com). The demand for all kinds of farm produce in the country had already created a lively demand for grain of all kinds (Innis, 1935). Agriculture continued to be a vital part of the Canadian economy, and it still contributes and in 1996 it contributed for 8.8% of the national GDP (Gross Domestic Product). This number is lower now because the dominant staple in Canada has shifted twice
Staples Theory Pg.5 since then.
The economy first shifted to focusing on the extraction of minerals, in particular iron ore. This was because of the invention of the steamboat, and the railway system. These both demanded that there be a massive amount of natural minerals for use. This fueled the completion of the CPR, and the development of many steam ships that transported across the Atlantic. The current staple goods in the Canadian economy today are oil and electricity. Oil is extracted from Alberta and Saskatchewan, and there is the potential for the tar-sands to hold up to three hundred billion barrels of oil (http://www.nationsencyclopedia.com). This influx of oil has resulted in prop communities to pop up with a majority transient male population. For example, to look at Fort McMurray there is a real problem with people taking the money they earn elsewhere, and not staying in Northern Alberta. Canada since the boom of the oil sands has become the leading distributor of oil to the United States (Hayter et al, 2001). Also, it is important to examine the increase in the creation of hydroelectricity mainly from British Columbia. Canada ranks among the top producers of electric power in the world and first in the production of hydroelectricity. In 2001, Canada's total net installed capacity reached 111.1 million kW (http://www.nationsencyclopedia.com). This power is also being harnessed and then exported to the United States. Over time it is clear that the Staples theory is the best way to
analyze the history and development of the Canadian Economy.

Staples Theory Pg.6
Staples theory has many valid aspects that make it easier to support, but it also has some gaping flaws that are easy to exploit. First, the theory has many great aspects that make it not difficult to follow and simply comprehendible. The theory, says that there are dominant staples that are extracted and then exported. The gains from exporting are what pay for the workers and importing goods. Staples theory does not have limitations with understanding such as liberalist and socialist theories (Migone, 2008). It is only necessary to look at the statistics provided about exporting from Canada in the last two hundred years to see that Staples theory is a reality. W.A. Mackintosh also supported Staples theory and argued that the staple exports would eventually lead to more manufacturing in Canada. Mackintosh argued that the regions that extracted the goods would not necessarily reap the benefits as the money would be
Re-distributed elsewhere. This allowed for more development, if the majority of money is in the hands of other people throughout the country. Mackintosh, was too optimistic, when looking at Staples theory, he thought that there would be tariffs and that government intervention would take place. However if you look today there are too many trade agreements that halt government intervention. Harold Innis however argued that Staples would drive the economy into a “staples trap,” in which the level of development in society would be very low. This view was too pessimistic, and assumed that we would eventually be doomed in our economy. Contrary to his belief, Canada is not doomed today, and our level of production and exportation is on par with the rest of the
Staples Theory Pg.7 economic powers in the world. He was in light, a pioneer with Staples and he opened the door for Mel Watkins to further explain and revise the linkages between staples and the economy. Watkins first talked about forward linkages where further investment was possible from the staple resource, such as wheat into beer. Second, he talked about backward linkages, which were investments in production necessary for the gathering of the resource such as Railways for transportation (Innis, 1935). The third linkage was named the final demand linkage, where “expenditure of income generated in the production of export of staples,” (Migone, 2008). The staples theory is very good at explaining the export mentality, which is what formulated the way the Canadian economy is shaped today. The export mentality meant that as a Nation we would export all of our goods off to the highest bidder, and then essentially we buy back manufactured goods from more industrialized countries. The staples do not allow for effective the development of secondary and tertiary industries. Moreover, this leads us into the criticisms of the staples theory to date. The first criticism of Staples theory is that it is very deterministic, meaning that the country’s fate is already predisposed depending on geography, and technological factors. This does not take into fact the idea of innovation, and resource management. Japan does not have very many natural resources, yet they are one of the richest countries in the world. The theory also does not take into account the political factors at hand. For example, if something were to happen to our relationship with the United States, our exportation of oil would
Staples Theory Pg.8 be altered severely. Lastly, the staples theory puts the government in a reactive only role, only allowing them to jump from one staple to the next. If this were so then why is less that 15% of Canada’s GDP from natural resources? It is because the state does play a proactive role in the economic balance of Canada. To sum up, Staples theory has many valid aspects to it which help our understanding of the development of Canada to date. Staples Theory is a very valid way to explain the development of the Canadian Economy to date. However, There are a couple things that that should be put into the theoretical framework to give the theory some more stability.
First, The role of the Government should play a much more major role in the Staples theory, because governments have the power to promote development and tax certain staples. Also, the theory needs to have a little more of a liberal approach to it and realize that yes staples do play a major part in the society, however people would not work and governments would not buy imports if it was not positive sum trade. This theory has the ‘staples trap’ element to it, but in reality there is no such thing as a staples trap, no economy will put all of its financial resources into one area. There has to be alternative means of production in every society. Staples theory also needs to account for the development of non resource based industries on the economy. The theory should take into account the technological developments not only in the labour market, but also things such as the development of the internet and new
Staples Theory Pg.9 transport measures. Part of this is because of the theory being developed so many years ago, that it does lose some relevance today if examined in its classical sense. The government should not be looked upon as reactive to geographical, economic, and technological factors; the government should get more proactive recognition as mentioned before. The staples theory also needs to open up to account for countries that do not rely heavily on natural resources such as Japan, or the United States. It also needs to account for regional disparity among different parts of the country. If you look at the film industry, Ontario and British Columbia are at tax war to see who can have the lowest tax, so the majority of films will come to a certain province. Industry can be spread across a nation, and certain economic sectors are not needed for a successful society to run.
In certain, Staples Theory is a very valid way to explain the development of the Canadian Economy to date it just needs a little revision to account for all aspects, and to give the theoretical framework some more stability.

To understand, the history of Canada economically, it is important to examine the reasons why the country’s economy formed into its present form. The Staples theory is the most appropriate theory to use when looking into the economic history of Canada due to our vast use of natural resources over time. The theory is very relative and easy to analyze when it comes to the Canadian economy, because of the fact that it can still be used today as an explanatory
Staples Theory Pg.10 tool for the Canadian economy. The Theory does have a few flaws that were outlined and explained. There are several suggestions put forth in order to change the theoretical framework of Staples theory from these criticisms. To help understand the strengths and weaknesses it is important to look at the views of both early theorists Harold Innis and W.A. Mackintosh The purpose of this paper was too to take Staples Theory and its explanatory power and apply it to the economic history of Canada. Staples Theory has fueled the analytical approaches to the Canadian political
economy.

Reference

Easterbrook, W. Aitken, H.(1988) Canadian Economic History, Toronto: 25, 2.
Hayter, R. Barnes, T. (2001) The Canadian Geographer: Canada’s Resource Economy, 45(1), 36-41
Innis, M. (1935). An Economic History of Canada. Ryerson Press, Toronto, 236-240
Migone, A. (2008) Staples Theory. Retrieved April 3, 2008 from lecture notes.

Canada, Energy and Power, Retrieved April 5,2008 from http://www.nationsencyclopedia.com/Americas/Canada-ENERGY-AND-POWER.html
Impact of Agriculture on the Economy, Retrieved April 5, 2008 from http://www.cfa-fca.ca/pages/index.php?main_id=72