Abstract

This paper will identify how the development of the legal system in Canada, specifically the Constitution, has influenced Canada’s economy. This theory was developed in response to a general misunderstanding behind the fundamental reasons for the division of powers, and their subsequent influence on Canada’s economy. By examining Canada’s economic history through the “Staples Thesis” developed by Harold Innis, and extending the analysis through the complimentary paradigm of critical legal geography using “nomospheric” perspectives, we discover areas of inequality which have been created and maintained due to the unequal power relationships entrenched in Canada’s constitutions. In its entirety, the paper will demonstrate how Canada as a geographically-bound country, cannot be separated from Canada as a legal authority, which cannot be separated from Canada as an international capitalist economy. In application, Canada’s legal system continues to increase inequality amongst its citizens due to the socio-economic rigidities created through inefficient economic policymaking as constrained by the legal-spatial provisions in the constitution.

The Constitution: Economics Over Rights

The British North America Act, 1867[1] (BNA Act) was established to provide a legal system in the “new world” claimed by the British Empire. The constitution has been amended and expanded over time, however it remains a tool to unify Canada’s provinces into a single, federal legal-system, and creates legal boundaries around our governments’ powers. The evolution of our constitution purposes to secure substantial individual rights for our citizens and protect them from state intrusion, however – the nature of our constitution has only strengthened our reliance on the capitalist economic system, to the detriment of regional/minority populations.

This paper generally takes a critical legal-geographical perspective in examining the interconnectedness between the legal-spatial provisions in the BNA Act and the socio-economic spaces they create. The legal structure creates a system by which each province is governed by both federal and provincial governments divided along the separation of jurisdictional powers. The situations and settings of conflict arise through the manifestation of policy decisions in the legal-economic sphere; which become evident in the precedential structure and implicit hierarchies embedded in the interpretation of our constitution.

Canada: Forever a Colony

Following prolonged conflict and consolidation between Canadian merchant capitalists, Canada’s confederation in 1867 brought together the provinces’ separate resources to establish a federally-uniform government, similar to that of the UK. As Peter Hogg points out in “Interpreting Constitutions” The final drafting of the BNA Act, was performed in London (with the benefit of Westminster draftsmen) who clearly intended to maintain a strong “central” [UK] government.

Confused and Exploited

The legal-spatial provisions of the Canadian constitution, as interpreted through a post-colonial mapping, warrant a jurisdictional inquiry of Innis’ historical-economic perspective. The spatial ordering of our legal system as defined within the constitution’s complicated jurisdictional division of powers further entrenches power imbalances. The aim of providing regional protection to provinces was achieved by simultaneously providing protection to the federal government; scaling-down small communities’ ability to affect greater social change through the “unwritten” amending procedures. The residuary clauses benefitting the federal parliament were certainly calculated to create problems[2], and were exploited as often as necessary to strengthen federal control over the economy. Due to the provinces’ inability to independently request/veto constitutional amendments, federal power was further entrenched through their subsequent economic-policy decisions.

Canada’s economy has largely been developed though its international status as a staple-provider. It has been largely subjected to global economic influences, which are known to give rise to both inequality (though the exploitation of space), and nationalism, in order to achieve protection from external influences.[3] The borders of Canadian jurisdiction have been determined by the UK who maintained their territorial influence in the division of powers jurisprudence and codified in the reversionary, repugnancy, and expansionary provisions in the constitution.

Mercantilism and Corporatism: Leading up to the British North America Act

Canada was first dominated by mercantilism and corporatism since the Hudson’s Bay Co. (HBC) first began operations in the early 1600’s.[4] HBC was offered charter-guaranteed land to acquire and trade goods in any land whose rivers fed into the Bay. These areas were occupied with resource development, an activity based on monopoly and monopolized sectors, instead of competition.[5] The result is a development of commercial relations (focused on exchange and distribution) instead of industrial relations (means of production) and a lack of integrated development.[6] In addition, due to the fact that Canada was dominated by foreign-owned companies, the profits gained from exploiting Canadian resources did not benefit Canadians and instead flowed back to their country of origin.[7]

The UK: Buy Low, Sell High

The economic situation in Canada was developing through violent competition between the two monopolies held by HBC and the North-West Company. The “centre” economy was considered to be in the UK, as they determined both the demand for goods as well as the price for such materials. Canada as a whole maintained its status as a periphery economy (or “hinterland”) in subordination to the UK, until Canada became too costly for the British parliament to control from overseas. The monopolization of industries in Canada during the economic downturn, caused by the global-recession period leading up to the BNA Act, can be highlighted for both the UK’s decision to push Canada into a federal union, and for their decision to retain Canada as a quasi-colony/hinterland. By geographically repositioning parliament, the UK was able to avoid the heavy costs associated with developing the Canadian economy geographically, and in addition, this continued imperial relationship is what allowed the UK to maintain ultimate control over the future of Canadian government and economic status.

The pre-confederation period was indicative of an economic exploitation of Canadian staple-goods by the UK – eventually shifting from merchant control to parliamentary control due to violent outbursts. Confederation marked the transfer of ownership and control over the basic modes of economic production to the new Canadian federal government, which remained ultimately in British control. In addition, the choice over determining to use a federal government structure did nothing to help economic development; and the subsequent exploitation of this structure by the UK further demonstrates the location of Canada’s economic status in the international economy in the periphery / “hinterland”.

Conflicting Purposes: The Compromise of Confederation

As Robert Howse put it “to understand the political foundations of markets, we must begin with the constitution conceived here as the set of institutions governing policy decision-making.”[8] The BNA Act explicitly and implicitly entrenched four different legal decision-making institutions: the executive, judiciary, and legislative governments in Canada; and the British parliament as the ultimate constitutional authority.

BRITISH North America

Parliament became geographically located in Canada, but this imperial statute only crated a new dominion colony, intentionally leaving the British parliament as the “common arbiter” between Canada’s domestic governments. In its effect, Innis believed that “Confederation became an effective credit institution with the demands for long-term securities which accompanied the rise of industrialism especially as shown in transportation. The rise of Canada was… a result of the demand for adequate imperial costing accounting”.[9] The amalgamation of Canadian debt in section 8 of the BNA Act, and the explicit commercial-based provisions in the division of powers are clear representations of this theory.

Debt = Obligation

“The crystallization of capital in fixed charges might be compared to the hardening of the arteries for the empire.”[10] The constitution also provided for long-term debt repayments from the provinces to the federal government generating higher fixed costs for the provinces. This resulted in slower growth in the periphery due to capital expenditures’ failure to fully attain their purpose. The result is a prolonged dominance of one staple-good in the economy. This further benefits the older centre economies due to their ability to dump old technology to reduce their own costs.

Rigidities benefitting the UK had already institutionalized in Canada’s social and political arrangements. “Confederation was a direct response to the continuing development crisis Canada faced in the nineteenth century from capital indebtedness and pricing problems.”[11] However, these problems would be fated to repeat due to the constitutional structure’s lack of strength to deal with repetitive assaults against social policy decision-making.

Further, the constitution was created in and by the UK, left to be interpreted by the Privy Council (a British judiciary) until 1875. Canada was also bound by the repugnancy doctrine, forcing the Dominion’s submission to imperial laws currently in force. Additionally, Canada was faced by further structural issues in the fact that the choice for a majority, parliamentary, federal democracy was prone to issues for: (1) multicultural populations;[12] (2) corruption and collusion;[13] and (4) businesses playing off competition between regional governments.[14]

Fine-Tuning British Power: Judicial Interpretation of the Constitution

“To survive, federalism requires self-enforcing restrictions, ones that make it in the interests of national political actors to honour them.”[15] These restrictions, came in the form of our division of powers which restrict policymaking via limits on the discretion of the government. That discretionary power, left intentionally confusing, was exploited by UK dominance in decision-making through challenges to the sovereign powers held by the different levels of governments.

The UK Built the Foundations of the Interpretation of our Constitution

The unequal power relationship dominated by UK interests is demonstrated by the early jurisprudence on the division of powers where the Privy Council (PC) interpreted the federal powers over regulation of trade and commerce to be restricted to power over international trade and the “flow” of goods between provinces. This reading down raised concerns over the federal government’s insufficient capacity to intervene in market ordering, thereby reducing its ability to build a socially progressive state.[16] In most federations, federal economic control is its most powerful instrument in the attainment of economic union. The PC and the subsequent Supreme Court of Canada (SCC) decisions ensured a muddled state of affairs in these areas, further, any economic policy decisions would be forced to be made in regard to existing imperial statutes until the repugnancy doctrine was eliminated by the Statute of Westminster[17] in 1931.

Provinces Must Suffer for Cost-Effective Resource Extraction

Further, provincial power over commercial activity was interpreted so that many basic responsibilities for economic regulation fell within provincial jurisdiction, especially regulation of any single industry and social/adjustment policies. This resulted in provinces only wanting to recruit or train labour for their individual industries, and not for those of other provinces. Further, the economic inefficiencies created by national policies would fall onto the provinces’ social-insurance jurisdiction due to Privy Council jurisprudence.[18] This put countrywide resource allocation in tension with maximizing intra-provincial wealth. The legacies offered to Canada by the PC and SCC respectively are: (1) a resulting shortfall in legislative authority over the economy; and (2) the POGG residuary powers of parliament were extended beyond emergency measures to those of ‘national concern’.[19]

“Power is valuable to the sovereign”[20] as are successful transgressions to sovereignty. This situation is made more complicated when “the game is repeated… virtually any outcome can be sustained as an equilibrium of the repeated game.”[21] As demonstrated until the Statute of Westminster, the sovereignty of British law was repeatedly challenged in Canadian courts to the detriment of Canadian market ordering, and caused increased government costs from repeatedly funding litigation.

Canada Learns Its Place: Economic Policy Reflected Through the Division of Powers

“The structure of Canada’s economy was an extension of European and British economies, with a consequent increase in efficiency guaranteed by cheap water transport, imperial preferences, and the opening of new resources. It was handicapped by the extent of government intervention, the rigidity of government indebtedness, railway rates, and tariffs, and dependence on a commodity subject to wide fluctuations in yield and price.” [22]

What Innis considered an economy’s “motor of development” at the time was: (1) railway building; (2) expansion of the domestic market; (3) replacing foreign-manufactured goods with domestic goods; and (4) increasing processing of raw materials (linked closely with demand). A commonality between these economic-drivers are that they fall closely within Canadian federal jurisdiction, and ultimately UK control.

Economic Development Compromised by Federal Powers

Railway building resulted in a reinforced monopoly causing an increased reliance on imported manufactured goods. The domestic market was subjected to foreign investment and therefore strong backflows of profits resulting in further UK centre exploitation of periphery resources needed to expand its own mode of production. The terms of trade (demand) was fixed by the UK, who was thus in a position to determine both the economic future for Canada and its rate of development. “Exports that are destined for the centre cannot grow faster than demand at the centre – that is approximately at the rate of growth of the centre”[23]

When Sir John A. MacDonald gained power under the BNA Act, his decision to utilize neo-classical economic theory in a developing staple-economy would prove to have the opposite effects intended by his government.[24] The “National Policy” was a protectionist measure adopted by early Canada in order to reduce reliance on foreign manufacturing. The assumed effects would bolster Canada’s infant-industry sectors through an increased reliance on domestic products, thereby boosting Canadian industry development in order to meet the increased demand. In effect however, with the addition of new provinces, “costs of co-ordination [of policies] among jurisdictions may be expected to increase as jurisdictional size decreases and number of jurisdictions increases”.[25] By increasing the geographical size of the federal government’s jurisdiction, accompanied by jurisprudence which added new classifications for parliamentary legislation through POGG powers[26] and thereby the number of jurisdictions, the result matches with the theory of increasing costs nationally. This financial burden was given more weight as Canada’s protectionist policies would prove detrimental as the international community entered a recession and aggregate demand for Canadian products declined.

Parliament Sows their Seeds of Trade

By the “Great Depression,” Canada had proven itself to be over-reliant on the European community for demand of its products, and sought a new trading partner. Post-depression spending power offered by the SCC to the federal government (through a POGG interpretation) allowed the federal government to impose their priorities onto provincial governments. A strong national economic policy must have co-operation between regions, however the federal spending power has been described as one of the key political instruments used to force national compromises. As the international economic landscape began to shift away from the gold-standard, the United States’ industrial revolution would determine it to be the focus of Canada’s reliance in its new position as international specialists in the staples sphere of exchange.

“Patriation” of the Constitution & The Fate of Canada

“The sheltered metropolitan areas tend to impose burdens on regions exposed to world fluctuations, whose effects would be profound and immediate.”[27] As, noted in “A New Division of Powers for Canada” policy issues in the contemporary political environment display a complexity which simply precludes any attempt to pigeonhole a single policy field as exclusively “local” versus “national”. This reality, combined with the complications arising from the effects from the structure of our constitution, created strong rigidities in social and economic policy decisions – resulting in the solidification of industries in the new periphery. The provinces today continue to reflect the division of labour created in early Canada; Ontario remains at the centre of development, while the other provinces continue to rely on natural resource extraction to their detriment of international commodity price fluctuations.

Inherent in the capitalist system is the constant need for an increasing rate of capital accumulation. In order for one party to succeed in this endeavour, another party must be deprived of their resources. Canada was developed through this economic context as the deprived party to the ultimate benefit of Europe and the UK. The new unanimity amending requirement places a chokehold on federal jurisdiction expansion, causing the ability for Canadians to achieve true economic unity to be almost entirely destroyed.

By highlighting the historical development of the Canadian legal system and its governments’ resulting social and economic policy decisions, the evidence of capitalist integration and dependency displays the inherent values reflected in today’s society. Inequality is prevalent, and persists with an unrelenting passion due to the constitutional filter through which our governments’ decisions are made.

 

 

[1] British North America Act, 1867 (UK), 30 & 31 Vict, c 3.

[2] Patrick Monahan, Lynda Covello & Nicola Smith, A New Division of Powers for Canada (North York: York University Centre for Public Law and Public Policy, 1992) at 9.

[3] Kieth Aoki, “Space Invaders: Critical Geography, the “Third World” in International Law and Critical Race Theory” (2000) 45 Vill L Rev 913.

[4] Harold A Innis, The fur trade in Canada: an introduction to Canadian economic history, at 280.

[5] See generally Daniel Drache, “Harold Innis and Canadian Capitalist Development” (1982) 6:2 Can J Poli & Social Theory 35.

[6] Ibid at 53.

[7] Ibid at 49.

[8] Robert Howse, Economic Union, Social Justtice, and Constitutional Reform: Toawrds a High But Level Playing Field (North York: York University Centre for Public Law and Public Policy, 1992) at 2.

[9] Supra note 5 at 47.

[10] Ibid at 48.

[11] Ibid at 47.

[12] Richard A Epstein, Economics of Constitutional Law, vol 1 (Cheltenham: Edward Elgar, 2009) at xiii.

[13] Torsten Persson & Guido Tabellini, The Economic Effects of Constitutions (Cambridge: MIT Press, 2005) at 273.

[14] Supra note 8 at 102.

[15] Ibid at 246.

[16] Ibid at 61.

[17] Statute of Westminster, 1931 (UK), 22 & 23 Geo V, c 4.

[18] Supra note 8 at 108.

[19] Peter A Hogg, “Canada: Privy Council to Supreme Court” in Jeffrey Goldsworthy, ed, Interpreting Constitutions (New York: Oxford University Press, 2006) 55 at 65.

[20] Supra note 8 at 254.

[21] Ibid at 255.

[22] Supra note 5 at 48.

[23] Ibid at 49.

[24] Ibid at 40.

[25] Supra note 12 at 391.

[26] Supra note 19 at 65.

[27] Supra note 5 at 50.