Bullshit

History in the Staples Approach

One of Canada's contributions to the history of ideas has been a kind of historical

economics influential also within Canada as a nationalist inspiration. Now a neglected

artefact within the history of economic thought, as economics has moved on to nonhistorical,

modelling approaches to understanding, the staples approach can serve to show

how economics can be enriched by a historical dimension.

What is the staples approach and what makes it especially suitable to an

investigation of how history informs economic understanding? The staple theory has

been Canada's original contribution to the world of economic ideas (along with the

notion of "effective protection" devised by Clarence Barber of the University of

Manitoba3). The observations of Harold Innis, and others, in the 1930s led to an

understanding that the nature of natural resource based industry differed from that of

other industrial sectors, so that a country heavily dependent on the export of natural

resources would tend to develop in ways shaped by the export staple.

In Canada the approach was for many years the leading one employed to explain

Canada's economic development (Phillips, 1985). The staples approach suggested that

the pattern, pace and nature of development of a natural resource exporting economy,

relying on one sort of commodity for a large part of its exports, would depend essentially

on the mode of production of the staple export - the staple being the name given to a

natural resource intensive export good (Neill, 1991, chap. 5).

By "mode of production" is meant the production function of neoclassical

economics and also an array of associated variables - the distribution of income, the

population and demographic effects of the staple, the institutions growing up around the

trade, the structure of costs (e.g. overhead cost) and so on. This then was a theory of

Canadian economic development, embellished at length by Professor Harold Innis of the

University of Toronto in the 1930s and 1940s in a series of books dealing with the

Canadian fishing, the fur trade and mining economy (Innis, 1930; Innis, 1936; Innis,

1940).

It should be emphasised that Harold Innis was an economist and the staples

approach he put forward was market driven, in the sense that prices for the staple and for

the inputs into its production were the dynamic motive force in triggering, and sustaining,

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the staple development. However, he was clear that Canada's development took place

with massive government intervention - the railways, the National Policy, the geological

survey - and accepted that without it Canada might never have come into existence as a

leading world power. Since The Wealth of Nations in 1776 economists had moved away

from a study of what induces economic development to a study of the allocation of

resources . One of the virtues of the staples thesis was its rounded approach to both

development and efficient allocation. In the language of Thomas Kuhn (1962) this was a

paradigm, reflecting a world view.

In Innis's staples approach considerable attention is directed towards the physical

characteristics of the particular staple product under consideration. One of his most

important works, The Fur Trade in Canada, has as its first chapter a short description of

the beaver and its typical locale, commencing with this passage:

The history of Canada has been profoundly influenced by the habits of an animal

which very fittingly occupies a prominent place on her coat of arms. The beaver

was of dominant importance in the beginnings of the Canadian fur trade. It is

impossible to understand the characteristic developments of the trade or of

Canadian history without some knowledge of its life and habits (Innis, 1930,1 ).

These physical attributes not only determine the geography of the staple's

production but also influence significantly the economics of the process. In particular

they help to determine the form which a particular mode of staple production will

assume. Will there be small independent producers or a labour force subject to industrial

discipline? Will there be large overhead costs or a trade based mainly on working capital?

Will private capital find it profitable to develop and exploit the resource, or will state

involvement be needed to set up infrastructure or to provide and train the required

labour? Of course, the physical qualities of the commodity do not alone ensure that the

production mode takes the form that it does, though they are an important determinant.

Also important are the prevailing technology, the industrial structure and the nature of the

demand for the exported staple (McCallum, 1980:118-20).