Recent Developments in Economic History: Some Implications for Local and Regional History
MHS Transactions, Series 3, Number 24, 1967-68 season
The ideal address for this occasion, when historians of the Red River Valley have gathered together, would concern itself with some aspect of the Valley's history. Unfortunately my own work, besides being more general than regional or local, has had to do with Central Canada and Britain; except by personal observation I have no original knowledge of the history of the West. I have to confess to you also that I am an economic historian and labour historian rather than a proper or straight historian. How, with these handicaps, to present a paper of value and interest to the present audience? What I propose to do is talk about the relationships between general and local history in the context of the views that economic historians have held about the development of our region, and of some recent studies that have boldly challenged these views. My hope is that a critical discussion of these views and their implications may offer some assistance in the orientation of your local and regional studies.
General versus Local History - There is often considerable coolness and lack of comprehension as between local and general historians. Some professional historians, dealing in the great sweeps of change of national and international history, are rather contemptuous of regional and, especially, of local history. In adopting such attitudes they are neglecting sources and insights of the greatest importance and show, indeed, that they do not know their craft very well. For great national and international movements are made up of many local developments, and to understand them fully it is essential to get down to what was happening to the local village and the individual man. In my own work, for instance, I have been interested in Canada's massive canal building program between 1820 and 1850, and it is important to know global things like how many miles of canal were dug, how many thousands of men were required to dig them, how much it cost, and how much traffic and settlement resulted. But there is a remoteness and over-simplification about this general information. In many ways, one learns a great deal more by studying the record of individual canal workers: how many days and for what hours they worked; how much they were paid; how much they paid for food; what sort of shanties they lived in; and what strikes they took part in. Again, in considering the great boom of the 1850s in Ontario, one wants to know the amount of capital investment, how many miles of railway were built, how much the marketing of farm products increased, how many immigrants came, and so on. But one of the most useful sources to me was a simple local history of an Ontario village telling what it was like to run a store there when the railroad came to town.
Nor is local history only useful to round out a picture whose general outline is already known. In Europe, where local history is well established as a thriving pursuit of professional as well as amateur historians, local studies during the last couple of decades have revolutionized the conception of various periods.
The Middle Ages turns out to be very different from what used to be - I fear still is - taught in our schools - expansionist, commercial and remarkably modern before 1350; terribly depressed after 1350. Similarly, the seventeenth century emerges as a sick period of sudden death, population decline, and economic stagnation. Yet general historians missed all this for a long time - one might say because they paid too much attention to what kings said and not enough to local history.
So much for the sins of general historians who neglect local history. But local historians sin as well. If you have read much local history, you will know why some grow weary and impatient of it. For a local history is frequently rambling, badly written to the point of incoherence, unreliable, anecdotal, and genealogical. Worse, the author often lacks the remotest knowledge of general history and of the context of the events he is recording. Hence he may display a tantalizing vagueness about matters of key importance for regional and general history, such as the introduction of new farm techniques or the evolution of local government.
Even when bad, local history is still the indispensable foundation for the construction of regional history and national or international history. There is wheat among the chaff, and what people once thought important to talk about is a kind of historical evidence too. But the most useful local history is always the product of authors with an understanding of the general historical movements affecting the locality about which they are writing. A secure understanding of general historical movements is, alas, a difficult acquisition even for the full time professional historian, and harder still for the amateur with a lot of other things to think about! Nevertheless I assume that all us historians, professional and amateur, want to understand the context of our local and regional history as well as we can. It is on this basis that I report some recent innovations in economic history that pertain to our region. By "our region" I am referring to the Red River Valley and its contiguous territories, including the prairies of Canada and the United States. There is a certain geographic unity of this region that ignores international boundaries. On the other hand, both the old Northwest of the United States and the Canadian Prairie region played important roles in the development of their respective economies, and we must pay attention to this aspect.
The Traditional View - Before looking at new views, we should be sure what the old ones were. I propose to set out, very sketchily, the traditional view of the role played by the Red River Valley and the Prairie Region in the national development of the United States and of Canada. By seniority as well as courtesy, the United States comes first.
The development of the United States, in the view of Frederick Jackson Turner, rested on the westward march of the frontier of agricultural settlement.  Turner was interested in the frontier as the recurrent guarantor of American democracy, and good land was available to make the continuous frontier a reality at least to and through the prairie region. To another famous son of the West, Thorstein Veblen, the honest Scandinavian farmers who settled the Red River Valley and its environs had the less democratic and less glamorous function of furnishing prey for blood-sucking merchant vultures from New England. For most economic historians, the old Northwest played still another role. It was another, and. very important, one of those regions added to the United States, whose agricultural potential and settlement gave vitality to the whole growth of the nation. Settlement of the area furnished ample investment opportunities, both for the residents and others. Soon its agricultural exports were providing new increments of wealth and export earnings, while its burgeoning population provided a fat additional market for lumber and manufactured goods. Like other northern regions, it soon developed a substantial manufacturing sector of its own. Generally, its growth in population, in consumption, in output, was an important stimulus to the general growth of the United States. 
But the settlement of this region was not like the movement into Ohio, or even the early settlement of Illinois. Frontier settlement in the east involved a search for wood and water, and produced a kind of self-sufficient, low-productivity, agriculture. On the open prairie, there was no wood or water, rainfall was lower, and self-sufficient farming was a kind of lunacy. In the traditional view, settlement of the prairies depended on a new conjuncture of forces; the railway to carry out the surplus of farm products and bring in supplies; the mechanical reaper and other new farm implements to allow an extensive but high productivity agriculture; a commercial-minded farmer who was willing to produce and sell grain and buy almost everything else. 
The key innovation was the railroad. To be sure, some farmers could ship their produce down the Mississippi. For most, however, the key to success was a railroad that could carry their produce to markets thousands of miles away and still allow them enough to live on. They were equally dependent on the railroad for supplies. The railroad, as it happens, was also the agency that bound American farmers to Chicago and New York in preference to the St. Lawrence waterway system. The railroad, then, is basic to the American economy.
For Canada, the traditional vehicle for interpreting development is the staple thesis, originated by Harold Innis. It was already emerging in Innis' first work on the history of the Canadian Pacific Railway.  Innis observed that Canada, land of the C.P.R., was not a geographical accident but rather the heritage of the fur trade based in the first place on the St. Lawrence waterway system, assisted by the Hudson's Bay system. The country had been shaped, then, by the character of one export commodity, fur, around which every facet of life in Canada had developed. The staple theme was further developed in the classic Fur Trade in Canada and in the Cod Fisheries, the erudite study of the fish staple that was the basis of life in Canada's Atlantic region.  Innis and others developed the theme in various other directions to delineate the timber and lumber staples that supported important regions in the nineteenth century, the wheat staple which was the foundation of prairie Canada and of the whole Canadian economy in the early twentieth century, and lesser staples such as minerals.  Only with Canadian industrial development and diversification did Innis have much trouble. To handle this, Innis was inclined to make the railroad a staple, as American scholars in effect had done; but that is really straining the thesis.
It is important to notice that Innis came to his staple thesis because no other available approach provided an adequate explanation of Canadian development. Yet a staple economy is the normal result when Europeans settle in a new country and carry on trade with the established metropolitan society from which they came. Their tendency is to look for the most profitable and easily-exploited resource, and to concentrate on exporting this one commodity and importing most other things. People not directly in the staple trade are tied to it indirectly, as the people of Red River, for instance, provided food supplies and transport services for the fur trade. Hence the nature, welfare and growth of the colonial society rests squarely on the fortunes of the staple trade. For a great deal of Canadian history, the thesis fits extremely well. But it obviously fits well in some other countries too. Why was it not used earlier to deal with the tobacco society of Virginia, or the sugar societies of the Caribbean?
Recently, Douglass North has applied the staple thesis to the United States. The staple he has in mind is cotton, which he regards as the key to the growth of the United States between 1800 and 1860, and especially between 1820 and 1840. Not, of course, that everyone in the United States was in the cotton business. But cotton was the leading sector. promoting the finance and trade of New York, the manufactures of the north-east, and settlement of the Northwest which became a food supplier to southern plantations. In North's view, cotton was important particularly as the great source of export earnings, providing a base for the imports and investment that supported the whole breathless expansion of the United States. 
The idea that a strong export staple or sector is the key to growth is far from new. In respect to the British Industrial Revolution, for example, it has long been argued whether the important support was the buoyant domestic market, that took 90% of all Britain's growing manufactures, or the extra push and foreign earnings provided by the 10% that was exported.  In Canada, there has been ready acceptance that the ups and downs of export earnings control our growth rate, and the argument has been applied particularly to wheat between 1900 and 1914. A similar argument can be and has been made about the export of agricultural products from the North Central and Western parts of the United States. Underdeveloped countries at the moment are urging the developed countries to create good markets for their staple exports of cocoa, coffee, sugar, and what not, on the ground that only with strong staple exports can their countries get the foreign currency and momentum to achieve rapid development. 
Here, then, are some of the ideas that might at the moment be called traditional. I am sure they are familiar to you, especially as they affect our region. You know that our early history is the history of the fur trade, which governed our early settlement and its economic and social life. Then came agricultural settlement, developed to some extent on the basis of water transport or self-sufficiency, but flowering; really with the coming of the railroad and of mechanized farming. Expanded opportunities brought floods of settlers, including many Canadian settlers in the United States and many American settlers in Canada. The new settlements of the Red River Valley and contiguous prairies supported local towns, cities, commerce and some manufactures. But they also provided, by their export commodities and their strong demands for goods, a substantial support to the whole growth of their respective economies.
The trouble is that some people are now saying it wasn't so. In the remainder of this paper, I want to report briefly on these new views.
Fogel on Railroads - The most revolutionary challenge to accepted ideas about American development has been issued by Professor Robert Fogel. He is one of those who have recently developed a new method called econometric economic history. In this method one takes some important historical question about which the statistics are inadequate, makes estimates and inferences to supply the numbers that are missing, and after elaborate calculations arrive at a mathematical verdict. One such provocative study of this type, "The Economics of Slavery" purports to prove that slavery was still highly profitable to slave owners and slave-breeders up to 1860.  Americans, at least, will appreciate how often the contrary has been stated, primarily to argue that the Civil War was pointless.
Fogel's book on "Railroads and American Economic Growth" is even more provocative.  The question is whether, as everyone has said, railroads played a crucial role in the development of the United States by opening up new farm areas and by promoting commerce and manufacturing. Fogel denies it, asserting that railways expanded the commercial agriculture and population of the United States by only 4%, and made a similarly negligible contribution to the growth of American manufacturing. His argument is that if there had been no railroads, nearly all of the really productive and populous parts of the United States - he is thinking particularly of the Mid-West - could have been reached just as well by water transport on rivers and canals, and that the transport costs involved would often enough have been lower than for railroads.
Now, I must tell you that I think Fogel's argument is greatly overdone. The valid part is that a great many places were reached or could have been reached by water routes, and that water transport was and generally still is cheaper than rail transport. But the success of the railways did depend on cheapness - it depended on speed and reliability in year-round service. Steamboats on the western rivers were picturesque, but the fact is that they could only operate on many rivers for a few weeks in the spring, navigation being prohibited in summer by dryness and in winter by freezing. Settlers would hardly have relished this once-a-year communication, nor would they have thought highly of Fogel's idea that it was practicable for them to haul their produce forty miles by wagon to the waterways, even though, as Fogel suggests, this might have led to earlier improvement of local roads and earlier use of the internal combustion engine.  Then, there is the question whether large parts of the Dakotas and Saskatchewan could ever have been reached by a practicable water route. Finally, the promotion of manufacturing and machine industries by the railroads may have been much greater than Fogel allows; it is all a question of how much indirect effect one is willing to admit.
You may find it intriguing, nevertheless, to consider what our region would have been like without railways. Some of the country we can imagine criss-crossed with waterways, other parts abandoned to ranching. In winter, with the transportation system frozen up, we would be reduced to local self-sufficiency, as people were before the coming of the railway. Would the whole trade of the American Red River basin have been drawn north through Winnipeg to Hudson's Bay? Would the trade of the north-central states have been carried down the St. Lawrence system, at the expense of New York?
The Wheat Staple in Canadian Development - Just when historians of other countries are turning to use of the staple thesis, the Canadians who invented it are doing a certain amount of back-tracking. They have not, to be sure, abandoned the thesis, and still agree that the concept of a fish staple and fur staple provide the best vehicle for handling various parts of our history. But it has been stressed that the thesis only applies well to countries with rich natural resources and a sparse population, such as Canada, the United States, and Australia at an early period.  More particularly, it is being questioned whether the wheat staple and the settlement and export earnings connected with it were the vital engine of Canadian growth in the early part of this century.  Here then, is a challenge something like Fogel's - Fogel says railroads were not really important, and now it is said that wheat - obviously related to railroads - was not very important either.
The argument, again, is a statistical one. It holds that while staple exports appear to have made a substantial contribution to Canadians in certain periods (the 1850s, 1860s, and 1890s) they failed to do so in the great era of prairie settlement and expansion of prairie wheat production, (1898 - 1912). In that period, they contributed only about 5 % to growth of Canada's Gross National Product.
It is very discouraging for us residents of Canada's prairie region to be told that even in our period of great expansion we added very little to Canadian output, and that if we had ever existed, the country would scarcely have noticed the difference. By implication, the same argument says that settlement and development of Minnesota and the Dakotas mattered very little to the United States. And one of the studies to which I am referring, specifically denies that cotton exports were the driving force of the American economy at any time after 1819. 
Do not become completely discouraged, however. Whether or not development of our region was important to our respective nations, it was important to us. It provided the pioneering foundations from which the societies we live in have developed; and there is every reason why we should continue to interest ourselves in that development.
More than this, the argument for the importance of the wheat staple does not and never did rest primarily on the contribution of wheat to exports, even though the wonder and virtue of exports has been grossly exaggerated in Canada. It rested, rather, on the indirect effects of western settlement - on railway buildings and other capital investment, on the increase in population and consumer demand, on the growth of manufactures in Ontario and Illinois to provide farm implements and a great many other things for the thriving and ambitious population of the new west. The indirect effects of the cotton plantation economy are much less evident; but those of the wheat economy are very prominent, as the authors I am citing agree. 
I have told you about these challenges, to the view that railroads were important, or wheat was important, so that when you are developing our local and regional history you will be more wary of some of the deep historical questions involved. Wary, for instance, of the idea that a growth of population for extension of settlement automatically increases per capita wealth - there is lots of evidence to the contrary. Wary of the view that population growth expands economic opportunity - the more correct relationship, I suggest, is that expansion of economic opportunity leads to population growth. Wary of the physiocratic view that there is something inherently superior about the expansion of agricultural output, as compared with an expansion of manufacturing. Wary of the notion, perhaps not widespread in the United States but very common in Canada. that there is some marvellous benefit of production for export beyond the benefit from production for the domestic market.
On the positive side, I hope when you work at local and regional history you will watch closely the influence of railroads, wonder whether waterways would have done instead, and contemplate the economics of wagon haulage. I hope you will watch for the influence of new kinds of farm machinery, and its effect on the size of farm holdings. In particular, it is worth noticing why bonanza farms arose, why they failed to survive, and the character imposed on a society by a generality of family-sized farms. The ethnic character of settlement is worth considerable attention - settlers of different ethnic origin have behaved in significantly different ways. And there is always the river, and the flat fertile flood-plain that surrounds it. Much ingenuity has been exercised to argue that every society is the child of its geography, and it will be worth your while to consider whether the people you write about have been uniquely formed by the geography of their region.
1. Frederick Jackson Turner, The Frontier in American History, (New York, 1920 & c.).
2. e.g., Douglass C. North, The Economic Growth of the United States, 1790-1860 (Englewood Cliffs, N.J., 1961). In the 1930s the argument was advanced in its reverse form, that it was the end of easy extensive expansion in the United States that brought about the Great Depression of the 1930s (Alvin H. Hansen, Fiscal Policy and Business Cycles, New York, 1941). Earlier it had been argued that it was the decline of the railway construction that brought about the Long Depression after 1873.
3. See Harold A. Innis, "Industrialism and Settlement in Western Canada" in Problems of Staple Production in Canada (Toronto, 1933). On farm machinery, e.g., Andrew Stewart, The Economy of Machine Production in Agriculture (Essays on Canadian Economic Problems, Vol. IV, Montreal, 1931).
4. Innis, A History of the Canadian Pacific Railway (London, 1923).
5. Innis, The Fur Trade in Canada (Toronto, 1930); The Cod Fisheries, (Toronto, 1940).
6. A. R. M. Lower, et al., The North American Assault on the Canadian Forest (Toronto, 1938) ; Lower and Innis, Settlement and the Forest and Mining Frontiers (Toronto, 1936); G. E. Britnell, The Wheat Economy (Toronto, 1939); Vernon C. Fowke, Canadian Agricultural Policy: The Historical Pattern (Toronto, 1946). For a general treatment see W. T. Easterbrook and H. G. J. Aitken, Canadian Economic History (Toronto, 1958).
7. North, The Economic Growth of the United States, 1790-1860.
8. E. W. Gilboy, "Demand as a Factor in the Industrial Revolution" in A. H. Cole & c. (eds.), Facts and Factors in Economic History, (Cambridge, Mass., 1932).
9. This argument is advanced particularly by Latin American spokesmen, notably Raul Prebisch.
10. A. H. Conrad and J. R. Meyer, The Economics of Slavery and Other Studies in Econometric History (Chicago, 1964).
11. Robert W. Fogel, Railroads and American Economic Growth: Essays in Econometric History (Baltimore, 1964).
12. Op. cit., 14, 107-110. On the other hand, North presents some striking evidence of how land-locked counties in Illinois languished before the railway came and flourished afterwards (North, op. cit., 146-153).
13. Melville H. Watkins, "A Staple Theory of Economic Growth", Canadian Journal of Economic and Political Science, May, 1963, 141-158.
14. A. Anastasopoulos and W. E. Vickery, "Exports and North American Economic Growth: The 'Structuralist' Model in Historical Perspective" (mimeo., a paper presented at the meetings of the Canadian Economics Association, June, 1967); E. J. Chambers and D. F. Gordon, "Primary Products and Economic Growth: An Empirical Measurement", Journal of Political Economy, Aug., 1966, 315-332; G. W. Bertram, "Economic Growth in Canadian Industry, 1870-1915: The Staple Model and the Take-Off Thesis", Canadian Journal of Economics and Political Science, May, 1963, 159-184.
15. Anastasopoulis and Vickery, op. cit., 15-17. Fogel, op. cit., is also very critical of the cotton staple thesis.
16. Anastasopoulis and Vickery, op. cit., 25; Bertram, op. cit., 180.
Page revised: 22 May 2010