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The Seeds of Divergence: the Economy of French North America, 1688 to 1760

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The Seeds of Divergence: the Economy of French North America, 1688 to 1760 THE SEEDS OF DIVERGENCE: THE ECONOMY OF FRENCH NORTH AMERICA, 1688 TO 1760 by Vincent Geloso B.S (Economics and Politics - Université de Montréal) 2009 M.Sc (Economic History - London School of Economics and Political Science) 2010 A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in ECONOMIC HISTORY in the DEPARTMENT OF ECONOMIC HISTORY of the LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE OCTOBER 2016 2 SEEDS OF DIVERGENCE: THE ECONOMY OF FRENCH NORTH AMERICA, 1688 TO 1760 ABSTRACT: Generally, Canada has been ignored in the literature on the colonial origins of divergence with most of the attention going to the United States. Late nineteenth century estimates of income per capita show that Canada was relatively poorer than the United States and that within Canada, the French and Catholic population of Quebec was considerably poorer. Was this gap long standing? Some evidence has been advanced for earlier periods, but it is quite limited and not well-suited for comparison with other societies. This thesis aims to contribute both to Canadian economic history and to comparative work on inequality across nations during the early modern period. With the use of novel prices and wages from Quebec—which was then the largest settlement in Canada and under French rule—a price index, a series of real wages and a measurement of Gross Domestic Product (GDP) are constructed. They are used to shed light both on the course of economic development until the French were defeated by the British in 1760 and on standards of living in that colony relative to the mother country, France, as well as the American colonies. The work is divided into three components. The first component relates to the construction of a price index. The absence of such an index has been a thorn in the side of Canadian historians as it has limited the ability of historians to obtain real values of wages, output and living standards. This index shows that prices did not follow any trend and remained at a stable level. However, there were episodes of wide swings—mostly due to wars and the monetary experiment of playing card money. The creation of this index lays the foundation of the next component. The second component constructs a standardized real wage series in the form of welfare ratios (a consumption basket divided by nominal wage rate multiplied by length of work year) to compare Canada with France, England and Colonial America. Two measures are derived. The first relies on a “bare bones” definition of consumption with a large share of land-intensive goods. This measure indicates that Canada was poorer than England and Colonial America and not appreciably richer than France. However, this measure overestimates the relative position of Canada to the Old World because of the strong presence of land-intensive goods. A second measure is created using a “respectable” definition of consumption in which the basket includes a larger share of manufactured goods and capital-intensive goods. This second basket better reflects differences in 3 living standards since the abundance of land in Canada (and Colonial America) made it easy to achieve bare subsistence, but the scarcity of capital and skilled labor made the consumption of luxuries and manufactured goods (clothing, lighting, imported goods) highly expensive. With this measure, the advantage of New France over France evaporates and turns slightly negative. In comparison with Britain and Colonial America, the gap widens appreciably. This element is the most important for future research. By showing a reversal because of a shift to a different type of basket, it shows that Old World and New World comparisons are very sensitive to how we measure the cost of living. Furthermore, there are no sustained improvements in living standards over the period regardless of the measure used. Gaps in living standards observed later in the nineteenth century existed as far back as the seventeenth century. In a wider American perspective that includes the Spanish colonies, Canada fares better. The third component computes a new series for Gross Domestic Product (GDP). This is to avoid problems associated with using real wages in the form of welfare ratios which assume a constant labor supply. This assumption is hard to defend in the case of Colonial Canada as there were many signs of increasing industriousness during the eighteenth and nineteenth centuries. The GDP series suggest no long-run trend in living standards (from 1688 to circa 1765). The long peace era of 1713 to 1740 was marked by modest economic growth which offset a steady decline that had started in 1688, but by 1760 (as a result of constant warfare) living standards had sunk below their 1688 levels. These developments are accompanied by observations that suggest that other indicators of living standard declined. The flat-lining of incomes is accompanied by substantial increases in the amount of time worked, rising mortality and rising infant mortality. In addition, comparisons of incomes with the American colonies confirm the results obtained with wages— Canada was considerably poorer. At the end, a long conclusion is provides an exploratory discussion of why Canada would have diverged early on. In structural terms, it is argued that the French colony was plagued by the problem of a small population which prohibited the existence of scale effects. In combination with the fact that it was dispersed throughout the territory, the small population of New France limited the scope for specialization and economies of scale. However, this problem was in part created, and in part aggravated, by institutional factors like seigneurial tenure. The colonial origins of French America’s divergence from the rest of North America are thus partly institutional. NOTE 1: Four appendixes provide a full discussion of the data collected NOTE 2: In this dissertation, I will use the words “Canada”, “Quebec” and “New France” interchangeably to refer to the same area which is the basin of French settlements alongside the banks of the St-Lawrence River. 4 ACKNOWLEDGEMENTS In the redaction of this document, three fellow graduate students have constantly supported me in improving my own research. Vadim Kufenko of Hoheinheim University has helped me considerably with the wage data and has become a tremendously pleasant research partner and friend. Youcef Msaid has also been a great discussion partner past whom I could run my ideas. Julien Gagnon from the University of Cambridge has also provided important insights. At the London School of Economics, the helpful comments of Edward Kerby, Katja Fuder, Pinar Ceylan, Judy Stephenson and Gerardo Serra allowed me on many occasions to avoid continuing on wrong tracks. Some professors require important acknowledgements. The first is my close friend, mentor and constant supporter Germain Belzile of HEC Montreal who has been a tremendous help in validating (and invalidating) some of my ideas and who provided numerous other ideas to extend and complete my work. The second is Gilles Paquet of the University of Ottawa. As the foremost economic historian on early Canada, Mr. Paquet pointed me in the right direction on many occasions and shared his works, allowing me to pick up where he left off. Moreover, he has allowed me to prepare a research agenda on Canadian economic history that may sustain me for many years. My two supervisors, Chris Minns and Stephen Broadberry have also been very helpful in the production of this work. Their respective expertise helped me avoid many pitfalls and wrong starts. Professors Jeffrey Williamson and Peter Lindert have provided very insightful comments in the late stages of my research. I kept this dissertation’s aims modest in order to avoid tackling more than I could handle. However, both professors persuaded me to organize the data collected here in order to extend my research to the issues of price volatility, international trade, market integration, demography and its impact on labor force participation, and urban-rural relations. This, I hope, will occupy the next few years of my career. In addition, Michael Huberman of the University of Montreal, Catherine Desbarats of McGill University and Jari Eloranta of Appalachian State University have been very supportive in my endeavours. The comments of these individuals have allowed me to focus more precisely on what mattered and on how to build robust research. Professors Jeffrey Williamson and Peter Lindert provided considerably helpful comments during the late stages of my research to bring it up to form. The organizers of the conferences of the Canadian Economic History Network, the Economic History Society, the Economic History Association and the Economic and Business History Society, the Centre Interuniversitaire de Recherche Économique du Québec, Institute of Applied Economics at HEC Montréal and the department of Economics at Université du Québec à Montréal are also to be thanked for allowing me to present my papers to fellow academics in order to receive feedback. The Journal de Montréal also warrants acknowledgement. Through Michel Dumais, the Journal de Montréal hired me as an economics columnist while I was writing my thesis. Through 5 this job, I was able to fund my research without resorting to government grants—something from which I derive great pride. Special acknowledgements go to Alexandra Foucher, my kinder and quite patient better half, who generously supported me throughout the process of this thesis.
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