Staples Thesis still holds
A special Innis Memorial Column
BY Mel Watkins
Illustration by David Anderson
Harold Innis, who was to become the great economic historian of Canada, was born in 1894, near the end of a two-decade long period of slow and unsatisfactory growth of the Canadian economy. By the turn of the century, with the gold rush to the Klondike and the rising price of wheat on world markets, Canada was launched on a most impressive period of economic growth that came to be called the Wheat Boom. Notoriously, Prime Minister Wilfrid Laurier announced that the 20th century belonged to Canada and historians subsequently wrote about an economy transformed, about a newly mature Canada.
Innis, as economic historian, and his successors down to today (this writer included) argue otherwise. Canada was, and is, a staples economy, exporting its resources to whoever is currently running the world, growing by leaps and slumps. What is evident, in the language of the late W.T. Easterbrook, is not a pattern of transformation but a pattern of persistence or, as some dub it, a staples trap. After an impressive analysis of the data on Canadian trade, the young economist Erin Weir recently wrote: The Staples Thesis and other insights based on Canada’s resource dependence remain relevant to Canadian social science and public policy despite ‘new economy’ rhetoric.
Popular writing and talking about the Canadian economy is often misleading. (I exempt Jim Stanford, who has written of the resource bias of the economy in the pages of This Mag.) The Autopact in its day, and then the FTA and NAFTA, have greatly increased cross-border trade between Canada and the United States in manufactures, both exports and imports, and have created trade statistics that can be interpreted as showing manufactures to be a rising share of exports and resources, or staples, a falling share; this is then cited as evidence that free trade has transformed the Canadian economy by dramatically increasing the role of manufactures. But this is mostly an illusion and needs to be corrected by using figures for value-added exports, that remove import content, rather than gross exports. Weir explains: Because the movement of component parts back and forth across the border is heavily concentrated in the manufacturing sector, import content inflates exports of manufactured goods relative to exports of services and natural resources. Make the correction and Innis’s staples thesis is alive and well.
Which is, if you think about it, quite remarkable and surely justifies one more up-to-the-moment, just-in-time, Innis Memorial Column. In the memorable words of Dwight David Eisenhower: Things are more the way they were than they have ever been before.
There’s even a lesson here for the left, at least in terms of its economic analysis. Observing the slow and unsatisfactory performance of the Canadian economy in the late 20th century—just as in the late 19th century!—the blame is laid on free trade and neo-liberal policies. Fair enough, as far as it goes, but what is often missing from this story is that, until the day before yesterday with the great Oil and Gas Boom, resource exports were simply not strong enough to drive the Canadian economy. It is distinctly possible, indeed probable given what we know about the deeply entrenched resource bias of the economy, that this is what explains that lagging growth. The failure of free trade is that it failed to deliver the transformation of the economy that was promised by its advocates—something those of us who had drunk deeply of Innis and the staples theory predicted at the time—while vile neo-liberal policies manifest themselves more clearly in a worsening distribution of disposable income than in growth rates.
I risk being unfair to popular left analysis. Critics of free trade understood from the outset that the object of the exercise from the American point of view was to get assured access to Canadian resources, particularly energy. That the US surely got. Now we’re seeing the payoff, or whatever you want to call it, in the dark and dirty Oilsands Boom.
This happens to matter to more than just we Canadians, as staples exports always have. As John Watson reminds us in his magnificent biography of Innis, Marginal Man, Innis was not just concerned with how the staple hinterland became dependent on the imperial metropolis (from France to Britain to the US) but with the impact on the metropolis of its imports from the hinterland. Sometimes good: Canada supplied the hard wheat essential to the excellence of Italian pasta, and has long supplied, to the extent it is allowed to, softwood lumber for cheaper American homes. But sometimes bad, even ugly: uranium for the nuclear weapons dropped on Japan; a range of essential inputs for the American military-industrial complex; feeding the American appetite for fossil fuels that threatens to make the world too hot for human habitation.
Enough said. Innis continues to help us have insight into much. It’s up to us to decide what to do about it.
