From Growth to Development? The Influence of Politics, Religion and Economics On Prairie Agriculture in Canada Andrew N. Reed School of Politics and International Relations Queen Mary College Submitted in partial fulfilment of the requirements of the Degree of Doctor of Philosophy 2016 1 Abstract The Canadian government encouraged agricultural settlement on the prairies in the late nineteenth century. A few decades later the region was the world’s largest exporter of wheat. Many academics credit the ‘wheat boom’ with transforming Canada into a developed country and view the government’s role in promoting prairie agriculture in a positive light. The emergence of a broad-based agrarian populist movement, fueled by farmers’ discontent, and the collapse of the wheat boom during the Depression of the 1930s are inconsistent with this interpretation of events. Political pressure led to regulation of grain marketing, handling and transportation, and federal government institutions played a dominant role in prairie agriculture in the immediate post-war period. The unintended consequences of these interventions contributed to a second flare-up of popular discontent and ultimately led to a sharp reduction in government involvement in the sector. The unwinding of several key initiatives in recent decades illustrates the circumstances under which longstanding policy initiatives may be reversed in order to avert a looming crisis. The New Institutional Economics and the work of Joseph Schumpeter provide a framework for examining the reciprocal influence between institutions and economic performance. Schumpeter’s insights into why institutions are modified in ways that affect the trajectory and rate of technical change are used to explain how government intervention amplified the wheat boom, exacerbated the damage done during the ensuing downturn and contributed to the declining competitiveness of prairie agriculture after World War II. The history of prairie agriculture illustrates the origins of support for intervention, its enduring popularity, its cumulative economic costs and, ultimately, why it was unsustainable. It highlights the importance of the questions ‘who benefits?’, ‘who pays?’ and ‘who decides?’ when government intervention is advanced as a solution to an economic crisis. 2 Table of Contents Abstract ................................................................................................................................................ 2 Chapter 1 Introduction ......................................................................................................................... 8 1 Crises and Government Intervention ............................................................................................ 8 2 Why Prairie Agriculture makes a Good Case Study ................................................................... 10 3 Structure of the Study ................................................................................................................. 21 Chapter 2 Theory and Methodology .................................................................................................. 25 1 Theoretical Framework ............................................................................................................... 26 2 Methodology ............................................................................................................................... 52 3 The Model ................................................................................................................................... 54 Chapter 3 Canada and the Prairies before the ‘Wheat Boom’ 1813 – 1895 ...................................... 59 1 Historical Background to 1870 ................................................................................................... 59 2 The Crisis .................................................................................................................................... 61 3 Ideas and Ideologies .................................................................................................................... 63 4 Interests and Incentives ............................................................................................................... 65 5 Interventions ............................................................................................................................... 70 6 Consequences .............................................................................................................................. 74 7 Counterfactual ............................................................................................................................. 83 Chapter 4 The Settlement Boom and the Wheat Economy: 1896-1929 ............................................ 88 1 The Crisis .................................................................................................................................... 88 2 Ideas and Ideologies .................................................................................................................... 89 3 Interests and Incentives ............................................................................................................... 91 4 Interventions ............................................................................................................................... 95 5 Consequences ............................................................................................................................ 100 6 Counterfactual ........................................................................................................................... 115 Chapter 5 Collapse and Remediation: 1930 – 1969 ......................................................................... 118 1 The Crisis .................................................................................................................................. 118 2 Ideas and Ideologies .................................................................................................................. 120 3 Interests and Incentives ............................................................................................................. 122 4 Interventions ............................................................................................................................. 127 5 Consequences of Intervention in Response to the Depression .................................................. 133 6 Post-War Consequences ............................................................................................................ 137 7 Counterfactual ........................................................................................................................... 146 3 Chapter 6 Intervention Reversed: 1970-2013 .................................................................................. 150 1 The Crisis .................................................................................................................................. 152 2 Ideas .......................................................................................................................................... 155 3 Interests and Incentives ............................................................................................................. 159 4 Interventions ............................................................................................................................. 162 5 Consequences ............................................................................................................................ 165 6 Counterfactual ........................................................................................................................... 182 Chapter 7 Conclusion ....................................................................................................................... 189 1 The Model and Prairie Agriculture………………………………………………………. …..190 2 Comparative Examples of Institutional Change………………………………………….….. 193 3 The Counterfactual Argument…………………………………………………………….…..200 4 Why Policies Fail…………………………………………………………………………. ….203 5 Opportunities for Further Research………………………………………………………… ..209 6 Concluding Comment………...……………………………………………………………….211 Bibliography……………………………………………………………………………….………213 Tables Table 1 Interventions in Preparation for Prairie Settlement ............................................................... 71 Table 2 Interventions to Accelerate Railway Building ...................................................................... 73 Table 3 Interventions Affecting the Tariff Schedule ......................................................................... 74 Table 4 Interventions to Accelerate Settlement ................................................................................. 96 Table 5 Interventions Affecting Railways ......................................................................................... 98 Table 6 Interventions Affecting the Handling and Marketing of Wheat ........................................... 99 Table 7 Interventions Justified by World War I .............................................................................. 100 Table 8 Big Four Exporters Share of World Wheat Trade (%) 5 Year Annual Averages 1909–37 112 Table 9 Interventions to Assist Prairie Farmers ............................................................................... 128 Table 10 Interventions Affecting Railway Operations ...................................................................