LATE NINETEENTH CENTURY BUSINE,SS CYCLES

THE last third of the nineteenth century, covering the years from Confederation until the beginning of the era of rapid expansion on the Western prairies, was a formative period for Canada. It is surprising that this period has as yet received little attention from economic historians, for analyses of demographic and economic changes during these years may yield high returns in the form of a more sophisticated interpretation of Canadian development. One of a number of important yet neglected aspects of these years in Canada is the business cycle, and the purpose of this paper is to report some new research in this area. A study of business cycles, as opposed to panics, implies the existence of a clearly defined cyclical sequence that becomes apparent once an economy has reached a certain state of commercialization. While the process of commercialization in Canada generally lagged behind that in the United States it is clear that even before Confederation a viable market economy had been created in the united province of Ontario and Quebec. There is good reason to believe that by the time of Confederation factor and product markets were functioning quite smoothly and that the price system was playing a prominent role in allocating resources. The two most authoritative, though far from definitive, accounts of cycles and growth in the late nineteenth century are contained in the works of Breckenridge and Skelton.1 Other students of Canadian economic history have relied heavily upon Skelton's findings about the pace and nature of activity in the post-Confederation years. Skelton concludes that the short period from 1869 to 1873 was a prosperous one, despite the abrogation of reciprocity with the United States, because (1) exports to the latter were well maintained, (2) Canadian producers were successful in finding new domestic markets, and (3) there were expanding sales to the United Kingdom. In contrast the period from the mid-seventies through the mid-nineties he considered to be Days of Trial during which Canada waited grimly for a favorable turn in its economic fortunes. In the late nineties Canada's hour had struck with emerging opportunities for agricultural expansion in the prairie west.2

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