This entry is one of three survey entries on the economic history of Canada. (See also ​Economic History of Atlantic Canada and ​Economic History of Central Canada.)

Early Economy

Economic development in what is now Western Canada began with the fur trade. By the end of the 18th century, Métis and First Nations peoples on the prairies engaged in the trade. Fur-trade posts were scattered throughout the region; on Vancouver Island the city of Victoria began as an Hudson’s Bay Company trading post (see Fur Trade Routes).

Settled agriculture began in 1812 with Lord Selkirk’s Red River Colony. However, the building of the Canadian Pacific Railway (CPR) in the 1880s gave Manitoba a means of export and therefore a wheat economy. Winnipeg became a centre for commerce and railways, and soon acquired a few factories. In the late 1890s the prospects for development brightened as world prices rose, transport costs fell, methods of dryland farming improved, and more appropriate varieties of wheat became available (see Marquis Wheat; Red Fife Wheat). Until 1929, the Prairie provinces enjoyed an immense expansion of the wheat economy, onto which was grafted a very much larger rail system, a network of cities and towns, coal mining and ranching.

By 1914, the frontier of settlement had been pushed well toward the northwest, attracting migrants from many lands (see History of Settlement in the Canadian Prairies). The result was a regional economy that depended almost entirely upon the world price of a single crop and on local yields, both of which fluctuated greatly (see Commodity Trading). There was little diversification except in Alberta, which began to produce small quantities of oil and gas (see Petroleum Exploration and Production; Petroleum Industry).

Rapid Growth in BC

British Columbia’s economic evolution before 1929 was very different. There was little agricultural land, and most farm products were locally consumed. There were few European residents except fur traders until the Fraser River Gold Rush of the 1850s. After the gold rush, coal mining on Vancouver Island was no substitute, and until well after Confederation the population grew very slowly. However, with the construction of the CPR, followed by the Canadian Northern Railway and Grand Trunk Pacific Railway between 1900 and 1914, much more rapid development and urbanization occurred. Important activities were lumbering, the fisheries, and copper, silver, coal and base metal mining in the south. Ranching and fruit-growing were also established. Some industries, especially shipbuilding and repairing, were set up, and the great smelter at Trail came into operation in 1920.

With regular transpacific sailings to the Asia and Australasia, Vancouver became an important port, not only for the province’s own goods but for prairie grain. After the Panama Canal opened in 1914, trade with Britain became faster and much cheaper. Coastal shipping also developed, partly to serve the lumber trade. Thanks to urban growth, there was rapid development of hydroelectricity. There was very large immigration, not only from elsewhere in Canada but from Britain and Asia. Immigration from Asia was much feared and rigidly controlled, although significant Asian communities did develop (see Chinese Head Tax; Chinese Immigration Act).

War and Economic Depression

From 1914 to the late 1940s, especially during the Great Depression, conditions were often difficult. All four provinces felt themselves to be the victims of Canada’s tariff policy, which raised the price of the manufactured goods that came from elsewhere but did nothing for the price of the primary products and simple processed goods which they had to sell.

Prairie drought, adverse price movements and foreign protective tendencies, as in the 1920–22 recession and the slump of 1929–33, were serious matters. Ottawa provided relief money, protected the provincial governments from bankruptcy, and tried through trade negotiations to improve the conditions for western exports (see Ottawa Agreements).

After the collapse of the co-operative wheat pools in 1929–30, Ottawa also supported the marketing of prairie wheat, although until the middle of the Second World War the farmers could market their wheat through private channels if they wished (see Alberta Wheat Pool; Saskatchewan Wheat Pool). Wartime prosperity helped western farmers pay off their debts.

In BC, meanwhile, co-operative marketing increased for such goods as apples and peaches. But new manufacturing plants were slow to appear. By 1939, a Ford assembly plant near Vancouver supplied export markets in India and the Pacific, but when these markets vanished after 1939 the plant vanished too. The Second World War saw the rapid development of shipbuilding and aircraft construction on the West coast, but after the war these industries dwindled or vanished.

The Oil Boom

The years after 1945 saw new resource-based development, rapid urbanization and dramatic increases in standards of living. The most striking new projects were in oil, gas, pipeline-building and potash, which transformed the economies of Alberta and Saskatchewan. British Columbia began to produce oil and gas; BC and Manitoba acquired immense new hydroelectric plants, and aluminum smelting began at Kitimat, BC, in 1951. There were new export markets, as oil and gas moved to Ontario and the US, and as BC coal and lumber moved to Japan. Prairie wheat, which gradually lost its old markets in Britain and Europe, eventually found new markets in the USSR, China and in developing nations.

Federal policy was helpful: Ottawa began to make equalization payments to Manitoba and Saskatchewan, and it provided a protected Ontario market for expensive Alberta oil from 1960 to 1973, although thereafter it held oil prices below world levels. It also reduced or removed many tariffs. Lumbering and pulp and paper expanded, and most of the time did well because of the North American construction and communications booms. In 1967, the exploitation of Alberta’s oil sands began (see Bitumen).

By 1987, Alberta had developed a petrochemical industry and Manitoba was producing buses and light aircraft. Yet the western provinces remained heavily dependent on the export of a few primary products and on the investment activity that the primary industries could generate. The West remained “development-minded,” as it had been between 1896 and 1914.

By the 21st century, Alberta’s petroleum industry began anxiously to look to Asia for future markets. As the Macdonald-Laurier Institute, an independent Ottawa think tank noted, the province’s oil sector was designed to serve a monopsony (a demand-side monopoly) of one customer, the US, moving its energy product south, instead of west or east for Asian and even domestic markets. The Paris-based International Energy Authority said in 2012 that the US not only would become energy self-sufficient but would become the world’s top oil producer by 2020, because of emerging shale oil technologies and renewable energy sources such as solar and wind. As a result, new markets for Canadian energy exports became a sudden priority.

A major pipeline proposal by ​TransCanada PipeLines Limited, Keystone XL, to move Alberta oil south to refineries in Illinois and Texas shared government and public attention with two pipeline projects intended to connect Canadian oil supplies to Asian markets. Enbridge’s Northern Gateway and Kinder Morgan’s TransMountain Expansion Project were proposed to run to export terminals on the West coast. Other proposals raised the possibility of shipping Alberta oil eastward to be refined and exported from the facilities in Saint John, New Brunswick. However, by early 2018 all of these projects were either abandoned or still in the regulatory process.

Still, output from Alberta’s oil sands was expected to almost triple from 2012 to 2035. As a result, Alberta was expected to continue to dominate the Canadian economy. Another part of the shift in economic power to the West was the growth of Saskatchewan, because of its own shale oil reserves and its vast potash reserves used in making fertilizer.

Regional Economics — Summary

The four Western provinces (Manitoba, Saskatchewan, Alberta and British Columbia) contributed $721.8 billion, or 35 per cent of the country’s GDP in 2016. The West has seen the fastest growth of all Canadian regions (see Regional Economics). Much of the development has been resource-based. Heavy investment in Alberta’s oil sands has significantly boosted employment in the province, particularly in the Fort McMurray region and has added billions of dollars in revenues to provincial government coffers. Saskatchewan has been a big beneficiary of excellent farmland and the development of its uranium, potash, shale oil and other resources. A heavy reliance on commodity prices, however, makes these provinces highly vulnerable to depressed world prices for oil and other raw resources.

British Columbia, also rich in natural resources, continues to profit from an exceptionally strong real estate sector. Vancouver is a major Pacific shipping hub, and it and Calgary are important corporate and financial centers.