Canadian economy in general flourished during the period in question and even later on because it realized and responded positively to external opportunities and pressures; on the domestic front it improved inland transportation, allowed immigration developed an atmosphere for enterprise and imported technology from Europe leading to a steady growth of an economic infrastructure.
One may argue that compared to Europe, the Canadian economic structure had peculiar characteristics comparable only with Australia. Canada has a small population living in an area which is endowed by the nature with plenty of raw material in high demand in Europe. Since there was no government emphasis on and efforts to developing the manufacturing sector, the Canadian entrepreneurs could focus on staples export to Europe and America.
After the Confederation was announced in 1970, Canada found itself in the throes of breaking away from British political influence yet having to depend on it for the sale of its staples and import of manufactured goods. It had to set its own policies as a quasi-independent country even when it cannot shrug off the mainly European heritage. This was also a period when Europe itself was passing through the epochal period of industrialization and attendant socio-political change. The cultural difference between the people who ran Canada (such as British and French) and the changing geographical aspects impeded a uniform growth in economy. For instance, if the growth was propelled in some regions by the export of staples to Europe, in other regions domestic progress fueled the economic growth. Also, the progress at the national level varied from one period to the other. One aspect of Canada's economic growth is also stated to be a combination of dependent and independent progress working in coordination yet historians have been able to distinguish periods when economic growth was dependent and when it was independent.
Therefore, studies of Canada's economic history revolve around H. A. Innis who proposed the development of staples export dependent on Europe and John Rae who was in favour of an independent model of growth. There are many versions of the staple theory proposed by Innis during the nineteenth century and of course many off-shoots of the independent John Rae's economic theory including the Nationalist School in the nineteenth century. But according to Neill, "the political fractionation and geographical expansion that constituted Confederation eventually tipped the balance, for Canada as a whole, in favour of growth dependent on primary product exportshowever, between 1866 and 1896, the central Canadian economy grew at a steady pace, unaided by any significant expansion of staple exports." (Neill, 1991)
At a time when Canada enjoyed good relations with Europe especially in terms of trade, it was faced with a threat from the United States which viewed Canada as a weak British colony.
Table 1: TRADE OF CANADA WITH VARIOUS COUNTRIES DURING 1886-1955