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Studies on the Canadian Constitution and Canadian Federalism


Last revised:
April 2005

The National Policy and Canadian Federalism


Claude Bélanger,
Department of History,
Marianopolis College

The National Policy was introduced by the government of John A. Macdonald in 1879 and remained, in one form or anothe,r government policy for a long time. Understood in its broadest sense, the policy contained three parts: 1) the building of the transcontinental railway - the CPR; 2) strong immigration policy to fill the West; 3) the protection of the infant Canadian industry with high tariffs. The plan was a comprehensive one and each of its parts provided an impetus and a justification for the other parts. The aim of the policy was to create a true country with a national economy. Macdonald thought that while a political framework had been created in 1867 the dreamed up union could only last if it was cemented by the creation of a strong national economy - one that would run east-west rather than north-south. The future of Confederation, he thought, hinged upon the development of the West. Without such development, the Americans would take over the West, encircle Canada and inevitably bring about its annexation. Hence, the dream of creating a sepearate, peaceful and orderly society on the northern half of the continent would die.

Macdonald perceived the occupation of the vast plains of the West as vital national interest. The building of the CPR would assure the sovereignty of Canada over the territory and eastern industry would have access to the resources and the customers of the West. The immigration policy was designed to maximize the investment in such an expensive railway and to provide customers to eastern industry. The high tariffs would ensure the development of a Canadian industry and assure a better standard of living and jobs for Canadians.

At first glance, the policy seems a remarkable one but upon closer examination one has to recognize many difficulties and consequences for the future. The first thing to note is that the national policy was not a "national" policy in some important respects. In an age of mounting imperialism, it was an imperialist policy. The heart of Macdonald's country was essentially Ontario and, to a lesser extent, Quebec where the important Montreal financial interests were found. The Montreal-Windsor axis was to be the heart of the country, its pole of development, and the policy was specifically designed to benefit its population. The Maritimes, and much of Quebec, would not benefit greatly from the policy. Their contribution would be largely to export men and resources to the center of Canada while importing its expensive industrial products. Railways would cross their territories but they would not be particularly designed to develop them. They would be called to pay taxes to buy the West and to subsidize heavily the building of the CPR, but would receive very little benefit from such undertakings.

It was hoped that immigrants by the hundreds of thousands would be attracted to the West. For that purpose, Canada eventually had hundreds of immigration officers, although nearly all of them were to be found in Great Britain, Ireland and in the United States. So while thousands of Québécois and other Canadians (close to one million from Quebec alone from 1830 to 1930) emigrated to the United States, Canada hoped to recruit large numbers of British, Irish and American immigrants to fill the West. It was plain for everyone to see that the federal government did not care sufficiently for the fate of the Quebecois and made too little effort to repatriate them. Immigration from Europe was subsidized (each immigrant received free land and, by the 1920’s, a train ticket for the West; Canadians who wished to go west had to buy their own tickets).

Macdonald's purpose was not to develop viable, autonomous communities in the West. This had to be avoided at all cost: industries were not to locate in the West, they would compete with eastern ones; railways were not to be established unless they were controlled by the CPR and they were not to link the West to the USA. Macdonald feared that Western farmers might buy their products there. Provinces were not to be created because the federal government would lose control of the whole operation. When the local indigenous population (Indians and Métis) protested the establishment of the newcomers on their land, they were pushed aside; the West was not to exist for its own sake but only as a useful appendage to Central Canada.

Nevertheless, provinces had to be created eventually and the federal government lost part of its control over the territory; natural resources were withdrawn (until 1930) from the control of the provincial governments in the West and the federal right to reservation and disallowance was used heavily to support the National Policy. As one author has written: "One of the most significant factors which emerges from a study of disallowance is that the power has been used primarily against the West... The West has always been Canada's empire. The expansion of Western Canada provided the life-blood of Eastern commerce, finance, manufacturing, and transportation. It furnished the market for the goods and services which, by permitting the economies of large-scale operations, made Eastern undertakings successful. To put it crudely, as Macdonald did, the Dominion had purchased the West and was entitled to the profits of its exploitation." [Alan Wilson, "Disallowance: The Threat to Western Canada," in Saskatchewan Law Review, Vol. 39 (1974-75):180-181].

What makes an examination of the operation of the National Policy so important and vital for the study of Canadian Constitutional history is the fact that it became a permanent factor in Canada's development. Could post-Macdonald governments deny the reality of the policy and undermine its economic objectives (as objectionable as they might have been in some respects) when it seemed that the economic well-being of Eastern Canada - jobs, profits, standard of living - came to be dependent on high tariff industries and the exploitation of entire regions of Canada (West, Maritimes and Eastern Quebec)? Political considerations must not be discounted either: the exploited regions were also the politically powerless ones while the benefiting regions actually controlled the majority of seats in the House of Commons. So the policy was maintained by successive administrations. Maritimers lost their natural New England market and sank economically into oblivion. For a long time, in fact until the development of the oil and gas industry, the West was condemned to virtual economic stagnation and its farmers were forced to buy expensive eastern products, thus lowering their standard of living (an author estimated, in 1934, that the tariff in effect subsidized each person in Ontario by $15.15 a year and in Quebec by $11.03 but cost each person in the other seven provinces as much as $11.67 in Nova Scotia or $28.16 in Saskatchewan - the average personal income of a Canadian at the time was around $300.00 a year). Montrealers benefited from the policy but the rest of the province of Quebec stagnated; rural depopulation was the result. Only Ontarians were fully satisfied with the policy as 68% of the most highly protected industries were located there (24% were located in Quebec).

So the country developed unequally under the National Policy and it gave rise to all sorts of regional problems: Westerners became alienated and have complained of unfairness since. They turned to new political parties and ideologies (United Farmers, Progressives, CCF, Social Credit, Reform and Alliance, etc.). Maritimers lost their traditional prosperity and with it their proud heritage of vigorous and autonomous government. Too poor to afford the social services to which we have all become accustomed, they have had to support centralization of powers in Ottawa in order to receive some of the benefits of Confederation. For them, economic development has been replaced by social welfare. Separatists in Quebec have argued the necessity of the break-up of Confederation on grounds that the system (National policy) profited Ontario at the expense of Quebec. From all of the neglected regions, there have been perpetual demands, since the XIXth century, for "better terms" in Confederation.

In the past seventy-five years there has been recognition of the problem: Royal Commissions were established (Duncan Report, 1926; White Report, 1935; Rowell-Sirois Report, 1940) that considered the economic problems of Canada or some of its regions and provinces and which pointed to the National Policy as partly the root-cause. Federal equalization grants were instituted in the late 1950's to, at least, lessen the tax burden which inevitably befell the citizens of low growth regions in Canada. In 1969, the federal government created the Department of Regional Economic Expansion (DREE) that distributes grants to overcome regional economic disparities. But, by and large, such policies are much too timid: they do not fundamentally seek to solve problems by creating regional growth centers but, rather, aim at lessening the most obnoxious effects of the National Policy. Many experts see the solution to the problem of regional economic disparity in massive federal involvement but this can only be done, ultimately, at the expense of weakening provincial control over local economies and societies - in other words by undermining even further Canadian federalism.

Canadians will need to invent imaginative solutions that would take into account all of the factors involved: Canada must take more into consideration regional disparities, encourage such growth as each region desires while respecting their local autonomy and environment. Only free and self-reliant people can happily accept to collaborate and live in harmony with other people.



Corn Laws

Free trade

Imperial Preference

National Policy




© 2005 Claude Bélanger, Marianopolis College