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By Harold. A. Innis

Adam Smith in An Inquiry into the Nature and Causes of the Wealth of Nations stated significantly that “defence . . . is of much more importance than opulence.” The utilization of natural resources in the interests of defence assumes a knowledge of military and naval strategy which the present writer cannot pretend. But Adam Smith was concerned throughout his great work with opulence, and the problems involved in a study of the utilization of natural resources from this point of view can at least be approached by those without a knowledge of tactics, important as that is. The classical system outlined by Adam Smith attempts a study of compromise between opulence and defence.

The mercantilist systems prior to Adam Smith were exhausted in militaristic organization. In New France, fortifications were built to check competition from the English colonies on the Atlantic seaboard, and to resist encroachment from the Atlantic; and attacks were made on English posts on Hudson Bay. The collapse of the French Empire made it possible for Adam Smith to declare “the act of navigation . . . perhaps, the wisest of all the commercial regulations of England.” In spite of the revolt of the American colonies, he would probably have continued to insist, in the relative position of the British fleet, on the accuracy of his statement. The development of the United States, the long supremacy of free trade, and the devolution from the British Empire to the Commonwealth of Nations have been influenced by the power of the navy.

The significance of imperial domination under the French and the British empires was evident in the location of settlement with a view to defence, in land policy, and in the regulation of production and trade in ship-building materials such as timber. During the Napoleonic Wars the disappearance of Baltic exports necessitated substantial imperial preferences to build up the timber trade of the British American colonies. The colonies were divided into small units such as Cape Breton, Nova Scotia, Prince Edward Island, New Brunswick, Quebec, and Ontario, and natural resources were placed in each under the control of the Governor and Council representing Crown and Parliament. In contrast, in the United States natural resources outside the old states were placed under control of the federal government. In the region of British North America beyond the colonies the land drained by rivers flowing into Hudson Bay was controlled under a charter from the Crown, and after 1821 that by rivers flowing to the Pacific under a licence for twenty-one years by the Hudson’s Bay Company. After amalgamation with the North West Company, an attempt was made to recruit the fur-bearing regions which had been exhausted during the period of intense competition. But along the frontiers of its vast areas, as on the Columbia River and the Red River, where competition with American traders continued, a ruthless system of exploitation was introduced. In monopoly territory, which had not been exhausted as in the Mackenzie River, conservation was disregarded. Conservation was a practice pursued in the interests of higher returns in specific areas and at specific times. Settlement brought increased competition and systematic exploitation as a device for checking free traders.

The necessity for organizing a large number of small colonies as nuclei of defence and mobilization during the War of 1812 contributed to the difficulties of the movement toward free trade in England and the accompanying achievement of responsible government in Canada. Nova Scotia with New England traditions of an Assembly inherited from the pre-revolutionary period pressed rigorously for the rights conceded by Parliament in the Colonial Tax Repeal Act of 1778. The denial of an Assembly prior to the Constitutional Act of 1791 and the crucial character of the War of 1812 on the St. Lawrence left the Governor and Executive more strongly entrenched. Their control over land provided a source of revenue enabling them to resist the demands of the Assembly. The final concession of responsible government placed the control over natural resources in the hands of each colony.^[1]

With the end of compromise arrangements in the United States and the outbreak of Civil War, the demand for free soil in the North became imperative. The Homestead Act of 1862 opened the lands of the West and deprived the federal government of a source of revenue; and the expenditures of the Civil War accentuated the demands for revenue to be met by tariffs. The United Provinces of the St. Lawrence were shut off from the American market with the abrogation of the Reciprocity Treaty in 1866, and were compelled to increase tariffs to support substantial improvements in transportation in the form of deepening of canals and construction of railways. Confederation facilitated the extension of the St. Lawrence system to the Maritimes in the East and to British Columbia in the West. Control of natural resources in Manitoba and in the region which became Saskatchewan and Alberta was assumed by the federal government, but competition with the free land of the United States compelled free land in Western Canada.

Federation with British Columbia involved an agreement for a Canadian Pacific Railway. Its rapid construction and protection from competition by American railways led to the choice of a southern route across the prairies near the American boundary, and settlement of a region which could be quickly occupied and broken into wheat fields. The policy of the Canadian Pacific Railway and of the government favoured rapid settlement in areas tributary to the railway and delay in occupation of the northern area through which the railway had been expected to go in the surveys by Sandford Fleming. After 1900 the substantial earnings of the Canadian Pacific Railway, and large revenues from the tariff, supported construction of the Canadian Northern and the Grand Trunk Pacific Railways in the occupied areas to the north. Disequilibrium which followed government support of the Canadian Pacific Railway, evident in substantial earnings, brought difficulty in lack of attention to settlement in relation to soil in the North, and accentuated concentration on a single staple product (wheat) in the South. The problems of the drought areas have not been unrelated to the policy of the federal government. Those provincial governments that controlled their own natural resources supported federal policies, especially in railway construction, which facilitated exploitation, and introduced their own policies in building provincial railways, in imposing embargoes on exports of logs and pulpwood, in fostering land settlement and migration schemes, and in developing hydro-electric power systems. Administration of natural resources by the provinces became efficient with experience, whereas the federal government withdrew from control in the Prairie Provinces and failed to utilize provincial experience, notably in the difficulties with placer mining in the Yukon as compared with British Columbia. The state represented by either the federal or the provincial governments has been an important instrument in the development of disequilibrium^[2] and the rapid exploitation of natural resources which has accompanied it.

Competition with the United States involved the emergence of constitutional structures in Canada designed to foster rapid exploitation of natural resources. Disequilibrium, characteristic of intervention by the state, brought exhaustion and the necessity of adjustments in the interest of conservation. As competition with the United States brought exhaustion, so conservation implied co-operation with the United States. In the fishing industry division between the nations bordering the Atlantic and particularly the opposition of France have precluded effective conservation policies. National organizations have been concerned with the possibilities of defeating each other by treaties, tariffs, and subsidies. In Canada the demand for effective protection from other nations has weakened conservation measures by limiting the active interest of the provinces. The necessity of active intervention of the federal government on the Atlantic has handicapped an interest in conservation on the Pacific.^[3] Powers of state governments in the United States brought delay over a long period in the adoption of conservation measures in the two countries to protect the Fraser River salmon industry. On the other hand, the existence of only the two national jurisdictions on the Pacific facilitated measures in the protection of halibut. Protection of the seal fishery in Bering Sea indicated the possibilities of co-operation between more than two nationalities.

The significance of relations with the United States has been less evident in the forest industries, but not less important. The provinces with control over forest lands have pursued vigorously with embargoes on exports of pulpwood cut on Crown lands a policy of compelling the pulp and paper industry to migrate to Canadian territory. But their success was a result of the power of newspapers as a political influence in the United States. President Theodore Roosevelt capitalized that influence by an active interest in conservation, President Taft secured lower tariffs in the Reciprocity Treaty, and President Wilson free newsprint. A Canadian Conservation Commission was appointed by the federal government, but its powers were extremely limited because of the control of resources by the provinces. Forest lands alienated to private hands have been cultivated by rotation cutting rather than by the extremely expensive methods of reforestation. Lands owned by the provinces have been protected by regulations for cutting under lease or licence. Again disequilibrium following activity by the governments of the United States and of the Canadian provinces accentuated the difficulties of the depression. Provincial governments were compelled to exercise a restraining hand, and newsprint production was allocated on a quota basis as a means of securing continued operation and employment for established communities.

Concentration by the Canadian federal government on the task of deepening canals and building waterways as a means of strengthening the position of the St. Lawrence increased the importance of American capital^[4] in the development of mining in Eastern Canada and of Canadian capital in British Columbia. Provincial governments hastened expansion, especially in Ontario, by construction of the Temiskaming and Northern Ontario Railway and by encouragement of hydro-electric power development. In the base metal industry and in the later stages of precious metal mining large-scale national and international organizations have gained by the acquisition of techniques matured in the United States and elsewhere. Rapidity of exploitation in some mining regions hastened the exploitation of others. The demands of more highly industrialized areas in the United States, Great Britain, and Europe contributed to the growth of the base metal industry, and governmental policy of the United States led to the opening of new mines and the extension of life of old mines in the production of precious metals. The dominance of engineering as contrasted with finance has lengthened the life of old properties, and mobility of population has lowered the costs characteristic of abandoned mining camps.

The provincial government of Ontario has attempted to offset dependence on high-cost Canadian coal mined in Nova Scotia by actively fostering the development of hydro-electric power. Provincial governments have undertaken directly and indirectly to support the utilization of power sites for the development of the newsprint industry, the mining industry, and manufacturing. Storage basins have been enlarged, streams improved, generators installed, and rate adjustments supervised—all with a view to continuous operation and long-run efficient utilization of the power available at given power sites. Enormous capital investments on the part of private enterprise and the provinces, and the absence of coal mines in the highly industrial areas of the St. Lawrence, compel a continuous active interest in regularity of demand.

The effectiveness of co-operation with the United States in the common task of conservation depends in part on the efficiency of the political system and on the possibility of adapting a system built up in relation to exploitation to conditions demanding conservation. Natural resources such as land tend to receive early attention because of the feudalistic character of our political structure. A liberal government has been solicitous of the problems of the drought areas in Saskatchewan because of the implications to voting strength. Fittingly enough, in spite of the return of natural resources to the Prairie Provinces in 1930, the federal government in its attention to rehabilitation problems has recognized that it contributed to their difficulties by encouraging a southern location of the Canadian Pacific Railway and the occupation of the southern dry areas near the American boundary by settlers. A large number of small units scattered over wide areas results in effective political action. On the other hand, the increasing urbanization of population has tended to offset the advantages of a political system adapted to land. The farm vote becomes less powerful in offsetting the increasing powers of bureaucracy under industrialization. It is only necessary to point to the burdens of industrialism in the rigidities of wages and railway rates to appreciate their effects on industries exposed to the fluctuations of external markets and internal yields.

Non-urban populations without effective political representation have been placed in an even weaker position. The disastrous effects of rapid exploitation of fur-bearing animals and of the drastic cultural changes which have accompanied extension of the fur trade have been met by limited remedial measures such as the creation of reserves, trapping regulations, and the encouragement of animal life, as in the case of the movement of reindeer from Alaska to the Mackenzie Delta. Despite the interest of private enterprise in protecting the aborigines, it has been only recently that attention has been given to the implications of a training in anthropology. In spite of the crucial position of these peoples in the opening of new frontiers, traders, missionaries, doctors, or police have had little incentive to acquire a knowledge of even the rudiments of the subject, jurisdiction over the fur trade is divided between nations and between the federal and provincial governments, and the consequent inability to secure effective conservation measures has encouraged private interests to participate in fur-farming. Rise in price of furs, partly a result of exploitation of wildlife, hastens the expansion of fur-farming and increases the difficulties of aborigines dependent on the fur trade.

The population of highly industrialized and urban centres has increased in political power. These communities have secured measures designed to conserve human resources, ranging from workmen’s compensation acts to unemployment insurance, public works programmes, and direct relief. Labour legislation and extension of social services reflect the change. Large-scale blanket policies have been evident in monetary devices, including open market operations and financing by deficits. The discussion by economic theorists and civil servants of devices to secure the most rapid possible exploitation of natural resources to secure full employment has led to the increasing utilization of capital equipment for the conservation of human resources. Rigidities within the price system which threaten delay in the rate of depletion of natural resources are submerged by policies directed toward increased economic activity.

The task of utilizing resources has been complicated by the decline in the rate of increase of populations in European countries. The effects of the medical revolution in offsetting lower birth rates by increasing the length of life and replacing a large, young, and vigorous population by a smaller, more stable, and older population are far reaching in character. The energies of women in bearing and raising children are conserved and women are playing an increasingly important role especially in democratic countries. The removal of the powerful dynamic effects of a rapidly expanding population increases the difficulties of securing utilization of natural resources.

Broad policies in the interests of full utilization of resources are handicapped by the early role of governments in supporting utilization to the point that disequilibrium has been involved and the resources exploited to the state of exhaustion. Consequently, renewed efforts to secure full utilization to which governments find themselves committed by political pressure imply diseconomies and waste of funds. High-cost Nova Scotia coal regions supported by tariffs, direct subventions, and indirect contributions to railways are maintained in spite of low standards of living, bitter labour relations, and the closing down of mines. The preservation of communities involves heavy economic costs. Quotas used by provincial governments to maintain pulp and paper communities involve keeping open high-cost mills. The difficulties have become more acute in the war period. Vast sums were paid to maintain settlement in the drought areas of the southern prairie regions, and during the war sums are paid to keep farmers from raising wheat. The reversal of policy from the fostering of production to the restriction of production makes enormous demands on human credulity and on administrative efficiency.

The problem of restriction is linked to the problem of carry-overs. In the case of wheat and gold, direct government intervention is involved. Conservation of enormous carry-overs of wheat has significant effects on problems of conservation in production. In the case of base metals private enterprise, particularly through international cartels, is concerned. Price policies designed to restrict production to prevent the accumulation of scrap metal or to sustain operation of high-cost mining properties in the face of pressure from quantities of scrap toward lower prices have been characteristic developments.^[5] The world’s gold supply and the enormous importance of scrap in determining the price of base metals suggest that conservation of the finished product may increase or check the rate of exploitation of the raw material and affect the problems of employment in mining areas.

The complexity of the problems of conservation of natural resources has been in part responsible for the most serious depletion of the cultural resources of western civilization. The spread in the influence of machine industry and of materialism has led to an interest in planning, which while professing concern with the importance of the individual assumes his complete subordination. The cultural heritage of the Anglo-Saxon race is endangered far more from within than from without. The enormous and notoriously superficial^[6] literature on the conservation of material resources is an indication of the scant interest in human resources.

Conservation has tended to mean an interest in the rate of exploitation from the long-run rather than the short-run point of view. The interest of private enterprise has therefore preceded and reinforced the interest of the state. The conservation interests of private enterprise have been conspicuous under conditions in which there is an important element of monopoly control, a prospect of longevity of the organization or the corporate form of control, and a product for which there is an important and continuing but possibly sharply fluctuating demand. The increasing concern of the state has necessitated concentration on the probability of political trends rather than on technological details. The activity of the state in its efforts to meet the extremely complex problems created by a highly elaborated credit superstructure has hastened the trend. Keynesian imperialism has pointed to the possibilities of outlays for offence and defence as means of stimulating opulence.

In North America exploitation of natural resources has reached the stage in which exhaustion through competition between Canada and the United States has necessitated concentration on conservation and in turn on co-operation. The increased strength of the executive in the United States during the depression and the war and of a small group in the Cabinet in the House of Commons in Canada has facilitated the establishment of joint committees and the extension of procedure elaborated in the International Joint Commission. These developments become tolerable only with concentration on political organization. The task of conservation is not one of technology but of culture.^[7]

TRANSCRIBER NOTES

Misspelled words and printer errors have been corrected. Where multiple spellings occur, majority use has been employed.

Punctuation has been maintained except where obvious printer errors occur.

A cover which is placed in the public domain was created for this ebook.

[The end of The Economic Aspect, by Harold A. Innis]