Canada 150: A lost 'Golden Age' and the decline of East Coast affluence

A house built in 1867 by shipbuilder John Ferguson, and a sign of prosperous times, is seen in Pictou, N.S. on Friday, May 12, 2017. The region was booming in the mid-1800s but for some on the East Coast, the start of the region's decline can be traced to a specific day almost 150 years ago: July 1, 1867, Dominion Day. (THE CANADIAN PRESS/Andrew Vaughan)

HALIFAX -- Built in 1867, the fully restored 4,500-square-foot Victorian-style home boasts five bedrooms, six working fireplaces, a carriage house and a modern kitchen with granite countertops and in-floor heating.

If this grand old house had been built in Toronto, it would be a showpiece worth millions.

Instead, it can be found on a three-quarter-acre lot in tiny Pictou, N.S., where it can be yours for $425,000 -- roughly the same price as a small Toronto condo.

"John Ferguson was the home's builder and first owner, and he was involved in shipbuilding -- and like the ships, this house was built to stand the test of time," says Norma Nixon, the home's current owner.

"It's definitely a symbol of prosperity."

As old as Confederation itself, the house serves as an apt symbol of how the Maritime region, at one time an economic engine that boasted the finest homes in the land, has long since fallen behind its wealthier neighbours to the west.

For some on the East Coast, the start of the region's decline can be traced to a specific day almost 150 years ago: July 1, 1867, Dominion Day.

In the 1860s, New Brunswick, Nova Scotia and Prince Edward Island were wealthy, confident, self-governing colonies that stood little to gain by uniting with the virtually bankrupt and politically deadlocked colonies that would later become Ontario and Quebec.

"Our standard of living and quality of life was as good as anybody's in British America," says Prof. Edward MacDonald, chairman of the history department at the University of Prince Edward Island. "We were full of confidence and had a sense of agency over our lives ... We felt we were in control."

The pre-Confederation years are known as the "Golden Age," when East Coast sailing ships ruled the seas, and Maritimers produced textiles, timber, foodstuffs and other products for New England, Britain, and the West Indies.

The Bank of Nova Scotia was born in Halifax in 1832. The Merchants Bank was established in Halifax in 1864, later to become RBC Royal Bank.

In September 1864, to capitalize on their good fortune, political leaders from the three colonies gathered in Charlottetown to create a Maritime union.

But the plan was derailed when politicians from the Province of Canada, led by Sir John A. Macdonald, showed up with a boatload of Champagne, a proposal for railway connections, and a plan for a larger federal union.

They called it Confederation.

After several days of meetings and late-night, liquor-soaked parties on the Island, the bleary-eyed delegates to the Charlottetown conference agreed in principle on Confederation.

Despite the show of unity, which is certain to be highlighted during this year's celebration of Canada's founding, there was little enthusiasm for the enterprise among Maritimers in general, especially after the deal was sealed at the Quebec conference later that year.

"The blueprint worked out at Quebec offered little to the region, and took away a great deal," said MacDonald.

"Everybody who was opposed to Confederation, and even those who supported it, recognized that the colonies would be giving up taxing power and giving up a considerable amount of legislative authority to a government in a central location where the Maritimes would be a minority partner."

The idea was so unpopular in P.E.I., it was rejected amid concerns over increased taxation and possible conscription.

In 1865, anti-Confederation forces won the provincial election in New Brunswick.

In Nova Scotia, outspoken politician and journalist Joseph Howe argued the province should be left alone to decide its own affairs, rather than give up power to "a little knot of politicians 800 miles away."

In one article, he asked: "Did anybody ever propose to unite Scotland with Poland or Hungary?"

On July 1, 1867, the Morning Chronicle in Halifax declared in a headline: "Died! Last night at 12 o'clock, the free and enlightened Province of Nova Scotia."

Confederation opponents won 36 of 38 seats in a provincial election two months later, and Howe was among 18 of 19 opponents who won Nova Scotia seats in a federal election soon after that.

But the British government wasn't interested in his protests, Howe failed to win support from New Brunswick, and Canada's first separatist movement fell away. Howe joined the federal cabinet in 1869.

Four years later, Prince Edward Island ran into financial trouble trying to build its own railway, and the province joined Canada after the federal government agreed to take on the Island's debt.

The region's economic and political decline accelerated in the 1870s as U.S. protectionist trade measures took their toll.

With a small population, little access to capital and distant markets, the Maritimes didn't stand a chance against more industrialized competitors in Ontario and Quebec.

More importantly, the federal government introduced the National Policy in 1879, which imposed tariffs on imported goods, mainly to shield Canadian manufacturers from Americans.

"The National Policy was not framed to help the Maritimes," said Doug Owram, professor emeritus at the University of British Columbia. "It was framed to help Central Canada, and Ontario's nascent industrial growth."

Under the National Policy, which remained in place until the First World War, the free flow of capital crippled Maritime financial institutions that could not compete with the larger Canadian banks. Between 1867 and 1916, the number of Maritime-controlled banks dropped from nine to one.

"With developmental money mostly spent in the West, manufacturing largely establishing itself in Central Canada and the savings of Maritimers drained to Montreal and Toronto, it became inevitable that the Maritimes would stagnate economically," Claude Belanger, history professor at Marianopolis College in Montreal, said in a 2001 research paper.

And to make matters worse, increased railway freight rates made Maritime products uncompetitive in Central Canada. In response to this and other discriminatory federal policies, the Maritime Rights movement emerged in the 1920s, a tangible sign of the region's declining influence in Confederation.

Delegations were dispatched to Ottawa. Economic conferences were held. And in 1926, then-prime minister Mackenzie King appointed a British lawyer to investigate. The result was freight-rate reductions, subsidy increases and a conclusion that the Maritimes' economic difficulties stemmed from "broad economic trends unrelated to Confederation."

The Maritime governments asked to regain control of trade and fisheries policies, but were rebuffed.

Instead of power, Ottawa began transferring wealth to help smaller provinces provide the same level of services as the larger ones. The Rowell--Sirois Commission, which reported in 1940, recommended the creation of what would become equalization and other transfer payments.

Unemployment insurance and public pensions helped raise the standard of living on the East Coast, but the region's economic fortunes continued to wane, despite a plethora of dubious regional economic development schemes.

In Newfoundland and Labrador, the situation was even worse. By the time Newfoundlanders and Labradorians voted to join Canada in 1949 -- by a narrow margin -- the province's economic fortunes remained weak, its average income one-third the Canadian average.

In the 1950s, federal money poured into the region to support coal mines, steel mills and other industries. At the time, regional economic development was thought to be the antidote to economic decline.

"Some of it was naive," said MacDonald. "We were making skis on Prince Edward Island, the one place in Canada with no ski hills ... Guess what? It didn't work."

There were many other failures, including the famous heavy water plant of Glace Bay, N.S.

"We now have 40 years of experience with it ... and that's a lot of data," said Finn Poschmann, CEO of the Halifax-based Atlantic Provinces Economic Council. "The evidence says it hasn't worked well so far."

The region has become dependent on federal support, with each province expected to receive between $3,200 and $3,900 in per-capita federal transfers in 2017-18, well above that national average at $1,986.

The region finds itself trapped in a perfect storm of economic and demographic decline.

In a November 2015 speech, former premier Frank McKenna cited a litany of grim statistics for New Brunswick.

"We are sinking under the weight of slow growth and declining population (and) we are being kept afloat only by alarming levels of government debt," said McKenna, deputy chairman of Toronto-Dominion Bank.

"Our destiny is looking increasingly desperate. A tsunami is coming and the early waves are starting to hit our shore. It is not hyperbole to say that we are literally facing an extinction event if we do not take action."

Even Nova Scotia, which has the region's largest economy, is in deep trouble. The province's population is expected to decline over the next 20 years as young people continue to leave the province to search for work. By 2036, the province expects to have 100,000 fewer working-age people than it did in 2010.

"It was perhaps inevitable that the region would suffer economic setbacks as its mid-nineteenth century prosperity rested on a set of circumstances that were already on the verge of disappearing at the time of Confederation," Belanger wrote in his research paper.

"It is a sad comment to make that a once-proud and self-reliant community has become, in less than four generations, structurally so economically depressed that its governments and its people have to rely so heavily and permanently upon the support of the federal government and the rest of the country."