Abstract: Accepting Financial Globalization: The Canadian Debate on British Investment, 1836-1875

Andrew Smith

Abstract

Prior to the creation of the Canadian federation in 1867, British North America was a collection of separate British colonies with their own currencies, laws, and banking systems. The integration of the financial systems of the different colonies was a crucial part of the building of the Canadian nation-state. The "Bank Act of 1871" is widely regarded as having laid the legal foundations of the modern Canadian banking sector. By 1900, Canada's banking sector was dominated by a few large corporations, each of which had a branch network extending from the Atlantic to the Pacific. In contrast, the United States was served by a plethora of small banks. Today, business historians often contrast Canada's banking sector with that of the United States. This paper will examine the making of the 1871 banking law. It will show that banking legislation in Canada was shaped by the following forces: the powerful examples that had been set by the 1844 Bank Act in England and the 1863 National Bank Act in the United States; the rivalry between Toronto and Montreal for financial supremacy; and the hostility of a large section of the Canadian electorate to financiers. Attitudes to British investment also informed the debate about banking law. This paper aims to refine our understanding of the development of financial systems in North America. It will also explore the role of classical liberalism in Canadian politics after 1867.