What was the National Policy of 1879?

The National Policy of 1879 was Sir John A. Macdonald's federal economic strategy combining protective tariffs, the Canadian Pacific Railway, and large-scale immigration to settle the prairies. Introduced through the federal budget of March 14, 1879 by Finance Minister Sir Samuel Leonard Tilley, the National Policy became the dominant economic framework of Canada from 1879 into the mid-20th century. Macdonald had run on the National Policy in the 1878 federal election, defeating Alexander Mackenzie's Liberal government on a platform of tariff protection.

The protective tariff component imposed high duties on imported manufactured goods (typically 17.5 to 30 per cent ad valorem) to encourage Canadian industry. Tilley's 1879 budget raised tariffs on most manufactured goods to about 25 per cent, compared to about 17.5 per cent before. The tariffs encouraged the development of Canadian manufacturing in southern Ontario and Quebec, particularly in textiles, footwear, agricultural implements, and iron and steel. By 1900 Canada had a substantial manufacturing base that did not exist in 1878. Critics argued the tariffs benefited industrialists at the expense of farmers and consumers.

The Canadian Pacific Railway component built a transcontinental railway from Montreal to the Pacific coast. The CPR was incorporated by statute on February 16, 1881 with George Stephen as president. The federal government provided subsidies of 25 million dollars in cash and 25 million acres of prairie land. Construction was directed by William Cornelius Van Horne. The line was completed at Craigellachie, BC on November 7, 1885 when Donald Smith drove the last spike, more than a year ahead of the contract deadline. The CPR's completion fulfilled the British Columbia Confederation commitment of 1871 and bound the country together economically.

The immigration component aimed to populate the prairies with European farmers who would buy Canadian manufactured goods and ship grain east on the CPR. The federal Immigration Branch, particularly under Sir Clifford Sifton (Minister of the Interior 1896 to 1905), aggressively recruited European immigrants, including unusual groups like Mennonites, Doukhobors, and Ukrainian homesteaders. Between 1896 and 1914 about 3 million immigrants arrived. Free homesteads of 160 acres were available under the Dominion Lands Act of 1872 to anyone who would clear and farm the land for three years. The National Policy as a whole transformed Canada from a struggling colonial economy into an industrial and agricultural nation. Critics including the Reciprocity advocates of 1911 and Western farmer movements of the early 20th century argued that the tariffs and freight rate structure imposed unfair costs on prairie farmers. The National Policy framework was gradually dismantled by the Mulroney government's Free Trade Agreement with the United States in 1989.