Ontario’s Early Economic Development: A Political Economic Analysis

When writing about her adopted home of Ontario in Roughing it in the Bush, settler Susanna Moodie recalls penning a letter to Lieutenant-Governor Sir George Arthur requesting that he continue her husband’s service in the militia in the aftermath of the Upper Canada Rebellion, so that the family could pay off their debts.[1] Debt was a significant social technology in Ontario’s early days. Inspired by the work of Albert Schrauwers, I contend here that the early economic development of Ontario was not primarily steered by the competitive forces of a mythical free market but by elites, who controlled much of the economic social relations through the extension of credit (debt). In northern Ontario, this meant attempting to indebt First Nations fur traders to European merchants in an attempt to get them to conform to a European-style work ethos in which they could be controlled via the purchase of consumer goods. Concurrently, elites in what would become southern Ontario, an oligarchic group of men known as the Family Compact, worked to ensure that capital and power came together as one and did so by leveraging the power they had by virtue of their seats in both the houses of government and the Bank of Upper Canada. The Compact and those they chose to empower ─ such as credit-extending merchants ─ exploited farmers, millers, journeymen and labourers via severe legal punishments for debt and ultimately controlled the means of production. Examined here is the nature of economic development in Ontario between the 18th Century and the period just before Confederation. I will first theoretically examine the economic forces at work through a Marxian paradigm. I will then trace Ontario’s economic development through three lenses: first, the fur trade, during which Europeans relied upon the Cree, in what would become Northern Ontario, to provide animal pelts for sale in Europe; second, the importance of agriculture and the production of timber in southern Ontario, known at the time as Upper Canada, which fuelled the export market; and finally, the development of mills, around which a burgeoning labour class was constructed. I will then trace an analysis of the class relations that formed around the economic development and finally analyze the implications of those interconnected economic and political relations.

York, Upper Canada

York, Upper Canada

An analysis of Marxian economic theory is helpful to understand the forces at work during the early economic development of Ontario. This section will also examine the so-called fictitious commodities of land, labour and capital, which are often intertwined and, during Ontario’s early days, all controlled by the same people. What is of particular relevance to the economic development of Upper Canada is what Marx would identify as the fallacy of the concept of a free market. Instead of an invisible hand that guides market relations, he argues it is property relations ─ the social relations ─ that gave rise to revenues.[2] It is property that permits capital to physically create workplaces but capital must first gain access to the property. When land began to be sold to farmers in Upper Canada, it was, consciously or not, assigned a use-value. As Karl Marx put it, “a use-value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialized in it.”[3]

It will be shown that the state, that is, the colonial government of Upper Canada, controlled capital’s access to property in the colony. Geoffrey Ingham interprets Marx’s critique of political economy as positing that the state exists to “ensure the dominance of capital and the subordination of labour.”[4] In Upper Canada, the state’s control over capital via the extension of credit alters the strict paradigm of the capital-labour relationship but not to the extent that it no longer exists. We will see that state-sanctioned corporations which dealt with supplying money and the control of property were administered by the very same men, the Family Compact, who ruled over the colony in the houses of government. Ingham tells us that in modern capitalism, the money, and capital markets are typically examined separately. The money market, he notes, is the “institutional creditor-debtor links between the state, the central bank and the banking system which co-ordinate the supply and demand for money.”[5] The capital market, meanwhile, encompasses the investment banks and stock markets, which convert the supply of money into “money-capital to meet the demand from producers for the financing of the productions of goods and services.”[6] These two markets create the necessary money supply to fuel a capitalist enterprise by turning a profit after money is invested into a commodity. In Upper Canada, the Family Compact had control over both the money and capital markets as well as the state.

Meanwhile, Schrauwers will tell us that the use of debt by the elites who controlled both the money supply and the land created a class conflict between this landed aristocracy ─ many of whom received grants of land from the Crown and did not have to plunge into debt to obtain it ─ and an “industrious class” of millers, printers, carpenters and others. This industrious class attempted to reproduce itself through the traditional master-journeyman relationship but the Family Compact used its influence to permit general contracting to undermine that relationship. Harsh penalties for debt also bound labourers to contractors. Meanwhile, it was the same on the farm, where farmers were bound to those who extended credit and expected a profitable return. This exploitation of those in debt and expected to reduce costs in the production process will be shown to be a harbinger of the development of a modern capitalist economy in Ontario, in which profit originates in production, as industrialization was just beginning.

Also of importance to this discussion is to understand the mercantilist nature of the European fur trade with the First Nations. The primary European fur trader discussed here is the Hudson’s Bay Company, a company chartered by English King Charles II in 1670.[7] The company’s posts facilitated the trade of fur trapped by the First Nations (The West Main Cree of northern Ontario in this discussion) for European goods such as metal tools. The fur was sent back to Europe where it was sold at a price greater than what it was valued at in the North America. This system enabled profit to be made by merchants taking advantage of the different modes of production.

The Colonial Economy: A profile

That the fur trade was important and prevalent in Lower Canada, or what is now Quebec, during the development of Canada’s early economy in the 1700s is well established.[8] And, in the northern regions of what would eventually become Ontario, the West Main Cree of the James and Hudson bays area worked closely with Europeans. The Europeans, through the Hudson Bay Company aimed to profit by trading manufactured goods, including metal tools, for furs[9], which would be sold in Europe. Despite encroachment by Europeans intending to do their own trapping, the fur trade with the West Main Cree continued into the 20th Century but “crashed” by the 1920s.[10] Further south in Upper Canada however, the consensus suggests that the fur trade was of negligible importance. By the late 1700s, the northwest fur trade was still expanding but supply routes moved via the Ottawa River ─ not through the settled areas of Upper Canada.[11] “The fur trade was an activity in which Montreal was dominant, and Upper Canada was largely irrelevant,” Kenneth Norrie, Douglas Owram and J.C. Herbert Emery note in A History of the Canadian Economy.[12] Even Upper Canada Governor John Graves Simcoe derided the fur trade in 1792: “I consider the fur trade on its present foundation to be of no use whatever to Upper Canada.”[13]

For a significant period of time, wheat was acknowledged as the core ─ and in some cases, the exclusive ─ cash-producing export staple of Upper Canada’s colonial economy. In her 1935 analysis of Canada’s economic development, Mary Quayle Innis goes as far as to note that “the settlers who crowded into the upper province were producing more what than they could use, and they were eager for a market.”[14] It is not to be denied that the production of wheat and timber was substantial. Statistics from the colonial period show the production of wheat increased significantly over more than a decade: from 7.5 million bushels in 1848 to 12.7 million bushels in 1851 and 24.6 million bushels in 1860.[15] Timber and other commodities pulled out of the forests meanwhile, “probably accounted for at least half of all the province’s export earnings between 1815 and 1840.”[16]

And while wheat and timber were both of clear importance to the economy of Upper Canada, recently, the contention that Upper Canada was reliant on a staple economy has come under scrutiny. Norrie and the other authors admit that “at least in its earliest phase, Upper Canada did not have a staple-based (or commodity-based) economy.”[17] Douglas McCalla, meanwhile, argues that claiming Upper Canada was a staples economy based solely around wheat and timber “yields a an oversimplified and fundamentally inaccurate view of the process of economic development” in the region.[18] Reliable census data about wheat output in Upper Canada was not available until 1842[19] but even still, McCalla argues that based an analysis of more than a dozen country merchants, Upper Canada “shows that from its earliest days, the provincial economy produced and exchanged many more commodities besides wheat.”[20] To that end, mixed farming was always important. Among the important commodities produced other than wheat was dairy products.[21] By the 1860s, barley and rye were also being exported in significant amounts from Ontario.[22]

The key for McCalla is that four other aspects of the early Ontario economy have not been given enough consideration: “1. there were other external influences besides the exports of wheat and timber, 2. the spending in the colony by both the British and Upper Canadian governments was significant, 3. local markets were important, and 4. exports other than wheat and timber should be emphasized.”[23] Wheat prices would collapse in Great Britain in the 1830s.[24] Norrie, Owram and Emery also argue that settlers who came to Upper Canada with money to buy tools were able to obtain credit to start farms kick-started other businesses such as mills ─ firstly, saw mills, then grist mills and flour mills.[25] The authors also identify a large amount of direct British investment into Upper Canada between 1800 and 1812, when war broke out with the United States.

The genesis of Ontario’s transition to capitalism can be seen as early as before the 1820s.[26] Financial infrastructure such, the Bank of Upper Canada, was chartered as early as 1821[27] and provided credit.[28] Through the 1830s, banks began opening across the colony in communities such as Kingston, the Midland District and The Gore.[29] Business was booming, McCalla tells us: “Invested capital in the province’s chartered banks increased over six-fold in the period from the beginning of 1830 to 1837.”[30] The promise of available credit drove the hopes and dreams of municipal leaders who were responding to demands for growth by residents.[31] As well, “by the 1830s, there was an emerging class of entrepreneurs who, through ties to the political elite of the colony, were forces in their own right.”[32] This merchant-capitalist class “was directly or indirectly dependent on agriculture exports.”[33]

The Bank of Upper Canada

The Bank of Upper Canada

Merchant millers set up shop along the Humber River in what is now the Greater Toronto Area in the early to mid-19th Century to sell flour and other commodities to Britain via the colonial pipeline in Montreal. With them came “blacksmiths, wheelwrights, wagon-makers and other craftsmen, who while not part of the permanent labour force of the mill, would settle near one merchant-mill circulating freely round the countryside plying their trades where needed.”[34] Grist mills, in particular, produced products in great volume for the export market.[35] By the 1850s, apprentices, journeymen and masters of smithing, carpentry, tailoring and shoemaking also worked in the colony in great numbers.[36] This period is an arguably significant turning point, during which free wage workers with technology sold their labour into the market. Capitalistic elements emerge in the mercantilism of British North America due to the decentralized British economic and political culture, relative to that of France.

The Colonial Politics: A profile

A class relations analysis of Ontario’s early development is useful to explore the politics of production and appropriation. Initially, Europeans and First Nations traders appear to have worked fairly closely and equally, at least in economic terms during the fur trade. Indeed, alliances appear to have been sealed by blood as well as trade, with Europeans (primarily English and Scottish) marrying Cree “country wives” as early as the 18th Century.[37] The Cree trappers of northern Ontario carried just enough fur to trade for what they needed.[38] Credit flowed easily to the Cree, who used it to purchase necessary goods from the Europeans for the hunt but not much more. This approach created tension with the Europeans, who noticed the lack of interest the Cree had in becoming more reliant on consumer goods. This, it appears was a political position by the Cree. “‘We are poor, tis true, but we shall not be slaves’ expresses the stability-seeking ethic held by some ─ probably most ─ Cree,” Peter J. George and Richard J. Preston, tell us in “Going in Between”: The Impact of European Technology on the Work Patterns of the West Main Cree of Northern Ontario.[39] At one stage, the beginning of the 1900s, Cree trappers working with the Hudson’s Bay Company, appeared to have the upper hand in trade, when “free traders” and another company, The Revillon Frères Co., moved into the north.[40] “The Cree responded to the new situation by seeking the best price and spreading their favors as a precaution against the uncertain outcome of the competition.”[41]  Much, much later, once the fur market collapsed in the 1920s and 30s, the symbiotic business relationship between Europeans and the First Nations would not to extend to feeling of social responsibility and some Cree would starve.[42]

Perhaps most striking class relationship was that between Upper Canada’s elite, The Family Compact, and that of the farmers, millers and other Ontarians. The Family Compact was an oligarchic[43] group of men who controlled Upper Canada’s governance from 1791 to 1841, when Upper and Lower Canada were united. They were as W. Stewart Wallace puts it: “a governing clique, prone to administer the affairs of the province at its own pleasure, and sometimes in its own interest.”[44] But some, such as Schrauwers, argue the control exercised by the Family Compact was not simply political but economic as well. Schrauwers asserts that in the run-up to the Upper Canada Rebellion of 1837, a confrontation between classes ─ “law sanctioned privilege” and “the power of honest industry”[45] ─ had come to a head. “Gentlemanly capitalists”, epitomized by the members of the Family Compact “had engineered the commodification of land, labour and money”[46] in Upper Canada. The class conflict did not pit master versus journeyman but rather those who were industrious versus those who controlled the credit and debt, he tells us.

Three companies: The Bank of Upper Canada (“which controlled the colony’s paper money), The Canada Company and the Clergy Company (which both sold land) were closely affiliated with members of the Family Compact,[47] so much so that several individuals who sat in Upper Canada’s houses of government also sat on the boards of the corporations.[48] “These corporations exercised an economic domination propped up by the legal authority of the state; together they regulated the politics of production in Upper Canada, applying a capitalist discipline to nominally independent farmers and tradesmen.”[49] They accomplished this several ways: one mechanism involved the Bank of Canada earned profit through interest on notes it leant out to clients favourable (ostensibly, both economically and politically) to the bank’s board.[50] Another involved the Bank of Canada lending to local retailers who extended credit to farms so long as those farms produced “salable wheat” as cheaply as possible.[51] Also of importance is that many members of the Family Compact were granted land in Upper Canada before sales of land were common and took control of reserve land for sale when it was placed in the trust of the Canada Company and Clergy Corporation.[52] The debt required to be taken on by farmers who settled in Upper Canada as a result of the transition to land sales in the colony is linked by Schrauwers to a phenomenon known as “wheat mining”[53] during which the land was exhausted by farmers trying to pay off loans. “In other words, although these farmers controlled the labour process, the larger politics of production, including debt formation for the ‘fictitious commodity’ of land, was used to entrap them in a commodity chain that applied a capitalist discipline their maximizing yields of that commodity,” Schrauwers tells us. “The land market created by the change in government policy and the land companies was a critical tool in the creation of a disciplined workforce ‘mass producing’ wheat.”[54]

Similarly, in the city, the master and journeyman worked together under the thumb of the elites, he notes. The development of general contracting allowed the contractor to hire both “masters and journeymen as labour only”[55] and employ workers without official qualifications, thus throwing a wrench into the journeyman –master system of reproduction of craftspeople and permitting the contractor to pay less in wages. Debt was also employed by contractors to bind labour via tardy wage payment.[56] Strikes by workers agitating for payment became more common. Meanwhile, the government of Upper Canada introduced a bill that established Houses of Industry in November 1836 ─ about one year before the Upper Canada Rebellion of 1837 ─ under the guise of a social program for the able-bodied unemployed. The Houses were modelled on a British relief system, which Schrauwers tells us was designed to create a labour class “by limiting relief to those who entered a workhouse.” The legislation was envisioned by Upper Canada Lieutenant-Governor Sir Frances Bond Head, who was involved in the drafting of amendments to the Poor Laws in England.[57] A section of the legislation allowed two magistrates to “commit” any unemployed person spending their time in a public house ─ where many trade associations met ─ to the Houses of Industry.[58] “This draconian measure allowed for the indefinite imprisonment of the unemployed ‘vagrant’ or striker in state institutions with no appeal and no jury.”[59]


The economic legacy of the early economic development of Ontario is that of a class of legally entitled appropriators wielding disproportionate power over a producing class. That legacy began with Europeans trading goods with the Cree in Northern Ontario and continued until the fur trade collapsed. At that stage, the wealth generated by the mercantilism of the Europeans, who appropriated Cree-trapped furs and sold them at a profit to Europeans, left the First Nations in the cold and starving when European demand dropped. It is exploitative in the extreme in the sense that the profits were not shared with the Cree, whose lives had become dependent on the fur trade. A fair price was never considered for the labour of the Cree, who were kept in the dark about the obviously high exchange value of the fur they were collecting for the Europeans. It was only after the market for the furs collected by the Cree in northern Ontario crashed that the Cree were cast aside like a used food can or a broken fork. The human labour of the Cree was the most exploited of resources during the fur trade as Ontario’s economy developed. It was a truly dehumanizing process ─ and one that left them undercompensated and undervalued by European merchants who knew the market and refused to share that insider information with those on whom they depended for the very products they needed to reproduce themselves. Despite this toxic business relationship, George and Preston, tell us that the Cree were not de-skilled. Instead, those skills were adapted, using European technology to improve “the efficiency of the hunt and the trapline.”[60]

Meanwhile, the nature of the Family Compact’s control over both the political and the financial in Upper Canada arguably allowed the group to function in a proto-capitalist role, with ultimate control over the means of production via the extension of credit. Its ability to wage war on both these fronts consolidated a tremendous amount of social relations power in their hands. The Family Compact also served as capitalist in the rural areas in that farmers were beholden to the debt they owed to the country financiers backed by the Bank of Upper Canada, which was controlled by the Compact. The farmers needed to produce surplus product beyond the product necessary to reproduce them in order to pay off their property debts. This surplus product was claimed by the financiers, who were backed by the Bank of Upper Canada, and in essence, served as the Compact’s hegemony enforcers.

The state’s role in disrupting the traditional journeyman-master system of reproduction in the urban areas is similarly exploitative. As previously mentioned, general contractor for large works were empowered by the Crown itself via the Lieutenant-Governor to weaken and “de-skill”[61] the journeyman through the hiring of cheaper workers. This worked to weaken a labour class that was in the initial stages of becoming politically conscious of itself in Upper Canada.  The consequences of introducing general contracting and the subsequent withholding of wages to the workers who faced increased labour competition, created a debt bondage system in which the general contractor held increasing control over the means of production ─ not physically but via the power of the state legal apparatus to institutionalize debtors and striking workers.

In the Communist Manifesto, Marx tells us that “the executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.”[62] And, indeed, those in charge of Upper Canada, including Family Compact men such as Bishop John Strachan, helped develop a class system in which landed gentry assumed the ranks of bourgeoisie and aristocratic legislator at once by the force of law. By contrast, legal punishments awaiting debtors both in the country and in the city who were unable to pay off their credit masters tipped the social relations scales to the great detriment of what Schrauwers called the “industrious class.” This was not a case of a classic labour versus capitalist paradigm, as if workers were streaming into a sweltering factory and working 18 hours a day but reproducing themselves in a mere eight or 10. In Upper Canada, the state, which was guided by bourgeoisie/aristocrats, played a much more direct and intertwined role in the economy ─ a schema likely the product of older European practices in which firms often conducted business only at the pleasure of the Crown. The state in Upper Canada not only functioned to serve the interests of capital in the colony ─ that being primarily financial capital ─ but, with the houses of government sharing directors with the Bank of Upper Canada, it was the interests of capital.


It can only be concluded from these facts that the stratified social structure that evolved in Ontario was directly related to its economic development, and vice versa. The type of social relations that governed the fur trade and later agriculture laid an exploitative groundwork to create a debt-bonded working class. There was no free market in the days of Ontario. The market was always controlled and, in many cases, coerced, by a few elites through the extension of credit (debt).  Fears of punishment for defaulting on that debt drove Ontarians to produce surpluses that were claimed by these wealthy elites. Changes by the state which interfered in the master-journeyman relationship and the debt labourers faced when their wages were held back also helped to undermine the ability of those we would now recognize as a working class to not only reproduce but also empower themselves, just as that class was getting off the ground in Upper Canada. Ultimately, as Schrauwers tells us, the social control exerted by debt gave those in charge of issuing it supreme control over the means of production, even if those means of production remained physically in the hands of the fur traders, farmers and labourers.

[1] Susanna Moodie, Roughing it in the Bush, (1871; Gravenhurst: Breller Books, 2011): 297.

[2] Geoffrey Ingham, Capitalism, (Cambridge: Polity Press, 2008): 57.

[3] Karl Marx, Capital: Volume One, A Critique of Political Economy, ed. Friedrich Engels, translated by Samuel Moore and Edward Aveling (1906; Minola, New York: Dover Publications, Inc., 2011): 45.

[4] Ingham, Capitalism, 59.

[5] Ibid., 148.

[6] Ibid.

[7] Hudson’s Bay Company, The Royal Charter of the Hudson’s Bay Company, http://www.hbcheritage.ca/hbcheritage/collections/archival/charter/ (Accessed on November 23, 2013).

[8] Carolyn Podruchny, “Unfair Masters and Rascally Servants? Labour Relations among Bourgeois, Clerks and Voyageurs in the Montréal Fur Trade, 1780-1821,” Labour/Le Travail, 43 (Spring, 1999): 44.

[9] Peter J. George and Richard J. Preston, “’Going in Between’”: The Impact of European Technology on the Work Patterns of the West Main Cree of Northern Ontario,” The Journal of Economic History, 47, no. 2, (June 1987): 449.

[10] Ibid., 451

[11] Kenneth Norrie, Douglas Owram and J.C. Emery, A History of the Canadian Economy, 4th ed. (Toronto: Nelson Education Ltd., 2008), 100.

[12] Ibid.

[13] Ibid.

[14] Mary Quayle Innis, An Economic History of Canada, 5th ed. (Toronto: The Ryerson Press, 1935): 146.

[15] Douglas McCalla, Planting the Province: The Economic History of Upper Canada, 1784-1870 (Toronto: University of Toronto Press, 1993): 267.

[16] Ibid., 64.

[17] Norrie, Owram and Emery, A History of the Canadian Economy, 101.

[18] McCalla, Planting the Province: The Economic History of Upper Canada, 1784-1870: 73.

[19] Ibid.

[20] Ibid., 77.

[21] Ibid., 88.

[22] Ibid., 223.

[23] Bill Marr, “Review: Planting the Province: The Economic History of Upper Canada, 1784-1870,” Canadian Journal of Regional Science, 16, no. 3, (Fall 1993): 526.

[24] Norrie, Owram and Emery, A History of the Canadian Economy, 116.

[25] Ibid., 101.

[26] Ibid., 112.

[27] Ibid.

[28] McCalla, Planting the Province: The Economic History of Upper Canada, 1784-1870, 150.

[29] Ibid., 151.

[30] Ibid., 152.

[31] Ibid., 154.

[32] Norrie, Owram and Emery, A History of the Canadian Economy, 112.

[33] Ibid.

[34] Sidney Thomson Fisher, The Merchant-Millers of the Humber Valley (Toronto: NC Press Ltd., 1985): Introduction xiv.

[35] McCalla, Planting the Province: The Economic History of Upper Canada, 1784-1870, 93.

[36] Ibid., 104.

[37] Jennifer S. H. Brown, “Métis, Halfbreeds, and Other Real People: Challenging Cultures and Categories,” The History Teacher 27, no. 1 (November, 1993): 20.

[38] George and Preston, “’Going in Between’”: The Impact of European Technology on the Work Patterns of the West Main Cree of Northern Ontario,” 451.

[39] Ibid., 454.

[40] Ibid. 451.

[41] Ibid.

[42] Ibid.

[43] W. Stewart Wallace, The Family Compact: A Chronicle of the Rebellion in Upper Canada (Toronto: Glasgow, Brook & Company, 1915): 1.

[44] Ibid., 2.

[45] Albert Schrauwers, “The Gentlemanly Order & the Politics of Production in the Transition to Capitalism in the Home District, Upper Canada,” Labour/Le Travail, 65 (Spring 2010): 43.

[46] Ibid.

[47] Ibid., 22.

[48] Ibid., 23.

[49] Ibid., 22.

[50] Ibid., 25.

[51] Ibid., 26.

[52] Ibid., 28.

[53] Ibid., 31.

[54] Ibid.

[55] Ibid., 36.

[56] Ibid., 37.

[57] Ibid., 40.

[58] Ibid., 41.

[59] Ibid., 41.

[60] George and Preston, “’Going in Between’”: The Impact of European Technology on the Work Patterns of the West Main Cree of Northern Ontario”: 459.

[61] Ibid., 33.

[62] Karl Marx and Friedrich Engels, “The Communist Manifesto,” Karl Marx: Selected Writings, ed. Lawrence H. Simon (1848; Indianapolis/Cambridge: Hackett Publishing Company, Inc., 1994): 161.


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