Mercantilism is an economic theory and policy practised during Canada’s colonial periods. The theory of mercantilism holds that there is a fixed amount of wealth in the world. A nation’s wealth is thus dependent on exporting (selling to other countries) more than it imports (buying from others). European nations — including France and England (later Great Britain) — used this system to their advantage from the 16th century through the mid-19th century. The purpose was to extract as much wealth as possible from the colonies without investing much into them. The Atlantic slave trade is also inextricably linked to mercantilism. (See Black Enslavement in Canada.)
Mercantilism in New France
Mercantilism developed as the primary economic model in New France (1534–1763). This model attempted to export as much wealth as possible out of Canada back to Europe for the least amount of investment. Because of this economic model, New France developed slowly compared with other European colonies in the Americas. Well into the mid-18th century, the colony’s population was a small fraction of the British Thirteen Colonies, even though the territory claimed by France was many times larger. The settlements of New France also had a significant gender imbalance, since nearly all the vocations in New France — such as soldiers and trappers — were held by men. (See Population Settlement of New France.)
This highlighted the differences between the policy of mercantilism and the political and religious interests of the French crown. The former focused on extracting wealth from Canada, while the latter wished to settle it. Cardinal Richelieu, France’s powerful Secretary of State for Commerce and the Marine, organized the Company of One Hundred Associates as a trading and colonization project. The company was granted an exclusive monopoly on the fur trade in New France. The company would fail by the mid-1660s, at which point New France became a province under France’s direct administration.
Like France, England also practised mercantilism, albeit not as strictly. England had a complex set of laws dating back to 1651 regulating shipping and trade. These were designed to establish military and economic supremacy, but also supported mercantilist economic policies. The Navigation Acts made the shipping and marketing of colonial goods the monopoly of England (later Great Britain); this helped England maintain a positive economic balance. The basic economic model — wherein colonies sent raw materials back to the European power — remained after Britain conquered New France during the Seven Years’ War (see The Conquest of New France).
Mercantilism was primarily intended to enrich European powers, though it also benefitted some colonists. Major fur traders of the late 18th century, like James McGill and Simon McTavish, gained immensely from their positions within the mercantilist economy. They exported furs to England (see Fur Trade in Canada) and imported goods from the Caribbean otherwise unavailable in British North America such as sugar, rum and cotton. While mercantilism provided protected markets that benefitted high-ranking colonial officials and other elites, the policy may have also hampered Canada’s early economic development. Canada became overly dependent on exporting certain key resources — or staples — rather than developing a more diversified economy or developing local industry.
In the early 20th century, economic historians Harold Innis and W.A. Mackintosh developed their Staple Thesis. They argued that this over-dependence on economic staples had a pervasive effect on the development of Canada’s economy, well beyond the era of mercantilism.
Hudson’s Bay Company
The Hudson’s Bay Company was a good example of a mercantilist corporation. The trading company was founded in 1670 to access the Canadian interior by way of Hudson Bay, rather than the St. Lawrence and Ottawa river valleys. The company was granted a monopoly by the English crown on trading rights in all the land whose rivers drained into Hudson Bay — an area that was known as Rupert’s Land until 1870. The Hudson’s Bay Company was predominantly focused on trapping beaver furs (see Fur Trading) to be sent back to England. It did little to develop permanent settlements in the Canadian interior.
Critical to the success of this economic model was maximizing the value extracted from the colonies and maintaining a trade balance favourable to the European powers. In order to do so, the European powers were active participants in the transatlantic slave trade, enslaving people in Africa and taking them to work in European colonies.
France and England were actively involved in slavery from the 16th century until the early 19th century. The labour of enslaved people was used to pick cotton or harvest sugar, which was then sent back to Europe. Those goods were then converted into consumer products. Though this kind of plantation slavery was not typically practised in Canada, enslaved people were exploited in other ways as part of New France’s and British North America’s colonial economies (see Black Enslavement in Canada). The enslavement of Indigenous people by Europeans was also common during both the French and British colonial periods. Enslaved people were used in a variety of labour roles and economic activities, including the fur trade, where they either assisted traders or were traded for furs.
End of Mercantilism
Mercantilism fell out of favour as an economic theory beginning in the late 18th century. The repeal of the Corn Laws and the Navigation Acts in the mid-19th century permanently ended mercantilist practices in the British Empire. Mercantilism was sharply criticized by philosopher and economist Adam Smith in his seminal treatise, The Wealth of Nations, which is now considered a cornerstone of classical economics.
Canada’s population grew rapidly after the American Revolution (see Loyalists in Canada; Black Loyalists in British North America). Immigration brought a large settler population of farmers, craftsmen and artisans whose economic activity largely fell outside of mercantilism. As opposed to previously, British authorities were now keen to invest in the development of Canada to prevent an American invasion. As the 19th century progressed, there was a need for more diversified local economic activity (such as the processing of raw agricultural products into food, construction, manufacturing of household goods, etc.). While Canada continued exporting economic staples back to the United Kingdom (and elsewhere), it also began exporting manufactured goods. Major infrastructure projects of the 19th century — such as the building of railways, bridges and canals — stimulated the development of heavy industry in Canada. As the population grew, the economy became increasingly diversified and better suited to local needs. In the process, Canada’s economy was transformed from its mercantilist origins into the capitalist economy of the modern period.