Political Economy of Financial Development: Canada and the United States in the Mirror of the Other, 1790-1840

A meeting of the Business History Conference in Toronto with "The Political Economy of Enterprise" as its theme provides an opportunity to consider some historical similarities and differences between the climates of enterprise in Canada and the United States. Because much of my recent work has been on financial development in the United States in the early decades, 1790–1840, I shall focus on that period. During that period, finance, enterprise, and economic development in the United States made great strides. Across the border in British North America, progress in all three areas was limited. The contrast sheds some light on the political conditions that favor financial development, flourishing enterprise, and modern economic growth.

Although Canada and the United States are two large and neighboring economies in North America, their histories are seldom compared, at least by American scholars. One reason is that Americans sometimes contend that U.S. history is so "exceptional" or unique that little can be gained from comparative studies. I think that is an excuse and perhaps even a sign of laziness. If U.S. history is unique or exceptional, we can know that only by engaging in comparative country studies.

It has been said that Americans will do anything for Latin America except read about it. Canada is still less fortunate. Americans tend not even to think, much less read, about it. Why? Perhaps the two countries are so similar that one cannot learn very much by comparing them. Something like this was suggested to me by a New York University MBA student from the United States who wrote about his experiences as a summer intern at a Canadian financial institution. He chose to take the internship because, he said, he was curious to learn the differences between Canadians and Americans. He decided after the summer that he could detect only one difference. A Canadian was essentially an American with a health card and without a gun.

Scholars in Canada, who have given more attention than Americans to comparing the histories of Canada and the United States, would disagree that differences between the two countries were and are minimal. One is Marc Egnal.¹ In New World Economies, Egnal compares developments in Canada under the French regime to 1760 with those in the Thirteen Colonies under the British regime to 1776. He finds that the French and British colonies in North America were rather similar and faced the same problems; the main difference between them was that developments in Canada mirrored those in France, whereas developments in the Thirteen Colonies mirrored those in Britain. In Divergent Paths, Egnal compares the economic development of French Canada, the original northern colonies that entered the American union, and the original southern colonies that joined with the northern colonies to form the United States. This study is quite relevant to my purpose here. In it Egnal seeks to answer a question: why three societies—early Canada, the North, and the South—whose standard of living was similar in 1750 became so dissimilar in their development. By the mid-nineteenth century the original northern states had surged ahead in their growth. The southern states and French Canada trailed far behind.² Egnal restricts his study, as it regards Canada, to French Canada, that is, what is sometimes called Lower Canada or Quebec. And he traces the economic differences that emerged, 1750–1850, between the northern U.S. states, on the one hand, and French Canada and the southern U.S. states (which he finds were alike in significant ways), on the other hand, to myriad differences in landholding, religion, labor, mobility, education, entrepreneurial spirit, and intellectual life.

Another Canadian historian who makes comparisons with the United States is our fellow business historian, H. V. Nelles. His highly illuminating book, A Little History of Canada, is surely the one book to read on Canada if you can read only one.³ Nelles cleverly spices his account of Canadian history with advice to Americans on how they could have avoided many problems if only they...