Sunday, June 30, 2013

The Untold History of Canadian Confederation

Also available at mises.ca

“British businessmen played a crucial role in the achievement of Canadian Confederation. Without the support of a small but influential group of investors, Confederation would have not occurred in 1867, if at all.” [1]
 
That is how Andrew Smith begins his book, British Businessmen and Canadian Confederation. Published by McGill-Queens University Press in 2008, Smith focuses on the “role of economic factors in Confederation.” He approaches the subject as if “the Fathers of Confederation and their friends in the British investment community were self-interested and rational economic actors.” [2] In doing so, Smith has written a small, but densely compact book describing the events that led to Confederation. Unlike other works that portray the Fathers as god-like men and exalt Confederation to biblical proportions, Smith refrains from making his own value judgements. With access to journals, diaries and other primary sources ignored or forgotten by other historians, Smith tells the story of how – thanks to crony-capitalism – Canada became a country.



 
With the outbreak of the War between the States and a change in British trading policy [3], unprofitable and heavily subsidized British North American railways became even more unprofitable. While cross-border trade dwindled, British cronies were demanding more subsidizes from both the British government and the colonial governments. Thomas Baring was one of these men, a majority shareholder of the Grand Trunk Railway. This railway was expected to connect Montreal to the ice-free port of Halifax, so that British businessmen could bypass the United States of America. However despite Baring’s best efforts, the railway couldn’t even connect Montreal with the south shoreline of the St. Lawrence.
 
It was Nova Scotian politician and journalist Joseph Howe that first suggested the creation of an organization to promote the interests of the British investors in North America. Howe wrote to Thomas Baring on December 31st 1861 stating that the he had come to the conclusion that the “position of the British capitalists who have placed their money in the Canadian Companies which do not pay… ought to have some Association that will form a Common centre for the collection and diffusion of information about the Colonies.” This association would not consist of just “Grand Trunk people but combining all the British North American interests.” [4]
 
The British North American Association was formed in January of 1862. The BNAA included many influential figures in British finance: Thomas Baring, George Carr Glyn, Kirkman Daniel Hodgson (an MP, past Governor of the Bank of England and major investor in Grand Trunk securities) members of the International Financial Society as well as many others not directly connected to the Grand Trunk railway but who held financial interests in the British North American colonies. The BNAA was praised in the British media on the grounds that it would solve the problems of the Grand Trunk and ultimately connect the colonial province of Canada to the ice-free port of Halifax. The Herapath’s Railway and Commercial Journal considered the Intercolonial railway as “vastly more important to this country” than “many a line in India now rapidly progressing” and decried the lack of capital the railway “deserved.” [5]
 
The idea of a colonial union of the British North American colonies had been discussed for decades, but it wasn’t until powerful interest groups – the BNAA and investors in the Grand Trunk – that the idea became a reality. The Intercolonial railway could have been built without a political unification but by July 1862 these two ideas had become infused. Constitutional reform could solve many the problems the investors had in dealing with the decentralized colonial governments. The BNAA had succeeded in convincing Britain’s Colonial Office in favouring a union of the British North American colonies; a policy the Office had opposed as little as three years earlier. [6]
 
British financiers supported Confederation because it would consolidate their interests upon the continent.  Instead of defecting to Wall Street, London’s Lombard Street would remain Canada’s financial capital. But what about the “Fathers of Confederation” themselves?
 
Many of the “Fathers” were dependent on the continuing inflow of British capital. Confederation had virtually nothing to do with ‘independence’ as the British North American politicians didn’t acquire any new powers at the expense of the British Empire. In fact, British North Americans actually found themselves with less freedom following 1867 as many powers designated under provincial jurisdiction were reassigned to the newly created federal government. This government created by the Fathers was a state with unlimited authority over provincial jurisdiction, all matters not explicitly outlined in the Constitution and all forms of taxation and regulation. Confederation was a coup performed by British crony-capitalists and power-hungry politicians.
 
The Fathers agreed that liberty and democracy needed to be checked by a “stiff dose of aristocracy and monarchy.” [7] As Smith writes, “the Fathers were united by a common desire to centralize authority relative to the status quo of 1864.”  Most of the Fathers saw eye to eye with the British investors that the new federation required a strong central government with weak provinces. The political structure of the American Republic was discouraged.
 
It would be a mistake to assume that British investors had an active role in the meetings in Charlottetown and Quebec. British investors had a cozy relationship with the Colonial Office but they didn’t infiltrate the meetings to meet their end. They didn’t need to. The Fathers of Confederation were already political allies with the bankers via their investments and relationship to the Empire.

George-√Čtienne Cartier started off as a rebel, but by the 1860′s he was a well-paid solicitor of the Grand Trunk railway. John A. Macdonald was employed by the Trust and Loan Company of Upper Canada. Charles Tupper owned land near the projected route of the Intercolonial railway, which explains his vocal support for British financial assistance. [8] George Brown had been a supporter of economic decolonization, but defected when the Province of Canada’s securities took a beating in the British capital markets. [9]

In less than 200 pages, Andrew Smith describes these events in detail. He references other historians who have dismantled the previous theories of Confederation. Such as, Confederation happened because of Fenian raids or arguments over “representation by population.” British Businessmen and Canadian Confederation is an essential read for anyone interested in Canadian history. As Smith writes,

“Confederation was not created in an interest-group vacuum and economic forces help to explain why Canadian Confederation happened at all and why it took place when it did. … [it had] been proposed as early as the 1790s, but it was implemented in the 1860s because it suited the interests of British investors at that point…. in looking at the birth of the unnatural geographical entity called the Dominion of Canada, the role of the investment community needs to be acknowledged.” [10]

——

Smith, Andrew. British Businessmen and Canadian Confederation. Montreal & Kingston: McGill-Queen’s University Press, 2008. Print.

[1] page 3

[2] page 151

[3] page 22

[4] page 63

[5] page 68

[6] page 4

[7] page 130

[8] page 132

[9] page 77

[10] page 6-7

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