Published by EH.Net (September 2014)

Andrew Smith and Dimitry Anastakis, editors, Smart Globalization: The Canadian Business and Economic History Experience. Toronto: University of Toronto Press, 2014. xi + 239 pp.  $28 (paperback), ISBN: 978-1-4426-1612-7.

Reviewed for EH.Net by Marvin McInnis, Professor of Economics, Queen’s University.

This is a collection of studies presented at a conference held at the University of Waterloo in January 2010. The editors offer them as exemplifications of the positive results of selective or “smart” globalization. They build especially on the writing of Dani Rodrik (e.g., Rodrik 2011). The proposition is that nations facing the integration of their economies with the rest of the world may be best advised to pursue a selective policy of some openness and some protective measures. Smith and Anastakis claim that Canadian economic history offers good examples of just such a policy stance. Economists and historians who have mostly looked upon the Canadian response to late nineteenth century globalization as essentially protectionist will be surprised by this point of view.

The inherent nature of the Canadian economy meant that from the initial time of European settlement of the country it was closely integrated into a wider world economy. Much of Canadian economic policy was based upon the desire to benefit from its international trading relationships. The dominant fact, however, facing Canadians was that their closest and most promising trading partner, the United States, had taken a steep step in a protectionist direction. The Canadian response was essentially defensive. Canada, too, became protectionist. Was this “smart” or merely a matter of just jumping onto the protectionist wagon? Wherein lay the selectivity? The usual view of the Canadian tariff is that, in a blanket fashion, protection was offered to anyone who wanted it, and even some (like the agricultural implement manufacturers) who said that they did not need it. There is little in the studies presented here that would point to clever design in the implementation of the tariff.

If one really wanted to assess whether the Canadian case exemplifies a strategic or selective use of protectionist measures within a broader accommodation to exposure to the rest of the world, one would need to carry out a carefully structured investigation. Picking and choosing studies by scholars who had other objectives in mind does not make a convincing case. Too often we are left wondering what might have been the alternative outcome. That said, the individual studies in the collection are interesting and useful contributions to our understanding of Canadian economic history. They are worth reading in their own right.

Andrew Dilley shows how the province of Ontario was able to develop hydroelectric power production and distribution as a state enterprise despite severe opposition from financiers in London. It is not shown that this was accomplished with impunity. For the editors’ purposes it would be useful to learn how the experience of the neighboring province of Quebec, acquiescing on private enterprise, contrasted with the experience of Ontario. In his chapter, Mark Kuhlberg shows how the much vaunted “manufacturing condition” imposed on pulpwood was in fact subverted by other policy aims of the province of Ontario. The requirement that pulpwood cut on crown land in Ontario be manufactured in the province, a patently protectionist measure, is shown to have had little actual effect given the exemptions offered to encourage settlement in the northern forest area. Daryl White explains how, under the stress of national emergency during World War I, Canada effectively forced the International Nickel company to refine nickel in Canada, rather than in the then non-combatant United States, to assure that Canadian nickel would not be supplied to the enemy. It is an interesting incident in Canadian development but hardly contributes to the editors’ line of argument.

Livio Di Matteo, Herbert Emery and Martin Shanahan contrast the broader developmental effects of natural resource based development in South Australia with the experience of the much more limited and differently situated area of northwestern Ontario. That certainly relates to globalization but it is not at all clear that it has much to do with protectionism, selective or not. Michael Hinton examines the widely claimed assertion that the Canadian cotton textile manufacturing industry is an outstanding example of the failure of infant industry protection. Not so, declares Hinton. Rather it was the reverse. Behind substantial tariff protection cotton textile manufacturing grew rapidly in Canada and it became a relatively efficient industry, as gauged by total factor productivity. It was not, however, the much-touted National Policy tariff of 1879 that brought this about but the enactment of a protective tariff twenty years earlier. It is less clear that this earlier protective measure was selective nor that it was the leading cause of the development of the industry. Nevertheless, Hinton’s chapter is closest to providing support for the general claim of the editors. It calls for close attention and evaluation.

Greig Mordue looks at the development of Canada’s automobile manufacturing industry. It is a subject worthy of study but can hardly be dealt with adequately in a short article or book chapter. Mordue is particularly skimpy on the early years of the development of the industry. In the 1920s Canada was a prominent exporter of automobiles. How much that had to do with a protective environment, how much to do with shrewd entrepreneurship, and how much to do with the exploitation of privileged status within the British Empire is not sorted out. As much as anything, the chapter is intended to provide some background to the more recent and innovative development of integration of the North American automotive industry. It provides a starting point, but only that.

Graham Taylor provides an account of the success of Samuel Bronfman’s Seagram Corporation in becoming whiskey distributor to the world. As much as anything this is a story of careful tip-toeing around other countries’ protectionism. This is entrepreneurial history, including the ultimate “decline of empire.” It makes a good read. Almost as if for balance Matthew Bellamy tells about beer. The issue is why Canada’s oldest and in many ways most successful of North America’s brewing industries did not establish a world presence. It might have been expected to do that. Molson, Labatt, and Carling were, at least for a time, big names in beer. The U.S. market was difficult to penetrate and Carling did it only under unusual circumstances and by Americanizing, but ultimately was unable to sustain its presence. What Bellamy does not point out is that at the beginning of the twentieth century Anheuser-Busch’s Budweiser was more of a national brand in Canada than Molson (a much older company). How is it that Foster’s of Australia may have been more successful in gaining an international presence than Labatt of Canada? The particularized European market was a tough challenge to penetrate, but what about the third world? If Canadians were able to do so well in electrical utilities and banking in third world countries, why not in beer? A lot of questions remain to be answered. The great consolidation of brewing internationally is a very recent phenomenon.

In short, the individual chapters of this book make interesting and useful contributions to our understanding of Canadian economic history. From that point of view they are well worth examining. The editors of the volume are, however, unsuccessful in using these individual studies to make a case for the cogency of selective protectionism. There is too little attention to what might have been the course of development in the absence of protectionist measures. A structured analysis of the selective protection issue is lacking.

Dani Rodrik, 2011, The Globalization Paradox: Democracy and the Future of the World Economy, New York: Norton.

Marvin McInnis is professor of economics emeritus at Queen’s University, Canada. He is currently assembling a few of his previously unpublished papers into a book on Canadian economic development in the nineteenth and early twentieth centuries.

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