Unit 2: Canadian Staple Growth Theory

(A. Hecht)

It has been suggested that Canada has followed a somewhat unique path to its present day high standard of living [1], a pattern shared only by Australia and New Zealand. This path is illustrated by the Staple Growth Theory, which was first proposed by Harold Innis [2] in 1930. The theory suggests that Canada became wealthy through the sale of its abundant natural resources/staples. In fact, many people around the world still associate Canada with the extraction and export of natural resources [3]. This image has been so strong that the Canadian economy has often been described as individuals who were "hewers of wood and carriers of water". In comparison to other members of the G8 [4], the "resource image" is probably true. However, in Canada, the importance of natural resources [5] is actually declining when compared to other sectors of the economy.

Canada has harvested and exported a variety of different resources in its history [6]. This trend began with fish [7] in the early 1500s and was followed by fur, lumber, wheat, minerals and energy. As demand for each of these resources increased, especially in Europe and the United States, Canada harvested them and sold them on the world market. As long as natural resources contributed substantially to the total consumption of goods by individuals in the world and added value through labour and capital remained low, the export of raw materials was profitable for Canada. This sequential demand for resources provided Canada with a means of generating wealth, a pattern illustrated by the Staple Growth Theory.

Over time however, the importance of natural resources in the Canadian economy has declined, especially when viewed in terms of their value in the total economic output. In the western world, the importance of labour and capital in the creation of goods has increased substantially, which has affected the Canadian resource extraction sector. Further, not only has the absolute demand for natural resources declined, but so too has the relative financial importance of these exports in relation to total exports. This is especially true for finished products [8] as illustrated in the table below. This shift in resource importance has occurred only recently (last 25 years or so), and has resulted in a drastic transformation of the total Canadian export economy. Nevertheless, the export of natural resources from 1500 to about 1950 was very high and its importance should not be underestimated in Canada's development.