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History : 100 years of Québec economy

In the beginning...

Isaïe PréfontaineOn March 14, 1909, Isaïe Préfontaine, president of the Chambre de commerce du district de Montreal, sent his sister boards of trade a circular letter announcing the first meeting of what would become the Fédération des chambres de commerce de la province de Québec (FCCPQ) on April 15, 1909. FCCQ founder Préfontaine, an affluent Montreal real estate developer, also helped spearhead the founding of the École des Hautes Études Commerciales and was the first to chair the Board of Governors of that French-language graduate business school.

The founding constitution of the FCCQ was adopted "to improve the efficiency and effectiveness of boards of trade and other incorporated associations – those established in the Province of Québec for general commercial purposes – in order to provide consistency in the practice of business." Consequently, all boards of trade in the province could take out membership in the new Federation.

The need for the FCCQ cannot be clearly understood without knowing the economic and social conditions back then. This special report provides an overview of how the Québec economy has evolved in the past 100 years. The presence and involvement of the FCCQ have helped shape a winning vision for Québec since 1909.

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Late 1800s and early 1900s: the development of industrial capitalism

The economic environment

Montreal became a bona fide industrial metropolis in the late nineteenth century, with railroads, flour mills, sugar refineries and textiles among its leading industrial sectors. Subsequently, new forms of energy, cutting-edge technologies, fast-growing industrial production, the concentration of capital and ownership and the advent of monopolies provided strong impetus for development of the middle class.

In that context, industry took on prominence as it grew increasingly specialized and mechanized. While that was happening, the agricultural sector was slowing down. That trend became more pronounced in the early twentieth century even though technology significantly boosted farm productivity. According to historians Dickinson and Young, that sector employed 45.5% of the workforce in 1891, but only 19.3% by 1941.

The population of Montreal doubled during the period 1896-1911, and urban centres rose up mostly in the regions richly endowed with natural resources. Around 1900, development of those resources boosted the value of industrial production in Québec, the lead sectors including hydroelectricity, pulp and paper, and asbestos. Dickinson and Young further write that hydroelectric development in the south of the province was the main determinant in maturation of the Québec economy at the time.

That vibrant economic growth set the stage for the development of Québec capital, as well as the conditions for the emergence of a new Francophone business elite. Still, most economic power in the early twentieth century was wielded by Anglophone investors in Montreal and Toronto. The French-speaking middle class controlled only a very small share of that capital. Regionally, however, it held sway over the machinery of government and over industrial, commercial and financial power. Important financial bridges were built between Church, State and industrial capital at the time.

Liberal values in the forefront

The Francophone business community espoused a liberal-based ideology at the turn of the twentieth century. That ideology consisted of a set of values and principles, including the following :

  • Progress. Happiness can be attained through progress. Consequently, the pursuit of personal success is an important factor for the successful development of society.
  • Success. The primary meaning assigned to success is material success, which is measured in terms of abundance. But if material success is to be obligatory, it must be within everyone's reach.
  • Competition. Fair competition is healthy in that it enables human beings to excel and give the best of themselves. It is requisite for progress and growth.
  • Family. As a rule, business and family should remain separate and distinct.
  • Right of association. This right provides for preserving open and fair competition and is therefore a safeguard in the personal struggle for existence. Given this, business people will find regular attendance at their board of trade meetings and events a good means of developing knowledge.
  • Education. Education provides support for individuals, as well as preparation and protection in the struggle for existence.
Government intervention

In the opinion of the business community, individual freedom and pursuit of success should not be stifled by inordinate government intervention. Business people believed that progress was driven by personal initiative and were therefore concerned that sustained intervention by government would dampen progress.

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Nationalism

Most French-Canadian businessmen at the time felt it important to champion the interests of their ethnolinguistic group. Still, they rejected a style of nationalism apt to turn them inward. In the opinion of the Chambre de commerce du district de Montreal, French Canadians could not blame their economic inferiority on the Conquest or the political and economic system. They were all free and equal and therefore responsible for their circumstances. Rather than brew animosity with English Canadians, the Chambre de commerce felt that French Canadians should emulate their economic vitality.

Education

The business community pressed for easier access to education and a higher quality of instruction and criticized the grip of the Catholic Church on education. It wanted a more modern approach to education, which should be available to the greatest possible number of people and geared to practical knowledge that would serve them well on the job. It also questioned educators' over-emphasis on the liberal professions.

Industrial development picks up pace

During the years of Liberal government, premiers Lomer Gouin (1905-1920) and Louis-Alexandre Taschereau (1920-1936) sought to reconcile the interests of nationalist conservatives and industrial capitalists. They undertook a series of measures to encourage industrial development :

Building
  • » development of natural resources ;
  • » A lighter fiscal framework ;
  • » Minimum government intervention ;
  • » A fatherly attitude towards labour ;
  • » A commitment to attract U.S. capital.

Those two government administrations also made a point of sustaining good relations with the religious authorities since they, too, were promoting industrial development.

This was the vibrant environment in which 13 boards of trade established the Fédération des chambres de commerce de la province de Québec (FCCPQ) on April 15, 1909, "to make boards of trade in the province more effective" and "to ensure unity and harmony of the measures taken in the common interest."

The 13 founding boards of trade :

  • La Chambre de commerce du district de Montréal
  • The Board of Trade of Metropolitan Montreal
  • La Chambre de commerce de Québec
  • La Chambre de commerce française au Canada
  • La Chambre de commerce de Trois-Rivières
  • La Chambre de commerce de Hull
  • La Chambre de commerce de Saint-Hyacinthe
  • La Chambre de commerce de Nicolet
  • La Chambre de commerce région de Mégantic
  • La Chambre de commerce de Marieville
  • La Chambre de commerce de Drummond
  • La Chambre de commerce de Roberval
  • La Chambre de commerce de Ville-Marie

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1929-1960: from the Depression to Duplessis era
An economy in crisis

After the Great Depression of 1929, the settlement approach was seen as a solution to prevailing social problems, for it was a solution compatible with industrialization and urban development. By way of example, settlement was a means of opening up roads and rail lines and stimulating development of mining and forestry regions.

cartThe Government of Canada introduced the Gordon Plan in 1932 to encourage a return to the land. Despite that initiative, the agricultural sector changed radically after 1930. The number of farming operations plummeted as mechanization in the forestry industry wiped out much of the salaried seasonal work which farmers had done in the off-season. Many farmers left their land as a result. Urban sprawl in the Québec City and Montreal region occurred to the disadvantage of fertile farmland.

Between 1941 and 1951, factory work permanently replaced farming as the leading occupation for men. That was also when Montreal lost its standing as the Canadian metropolis and when Toronto picked up that title.

World War II and the post-war years

According to historians, World War II paved the way for a social economy of information, services and mass communication. Provincial and federal powers as defined by the British North America Act of 1867 were also challenged at that time. The federal government managed to broaden its powers in order to coordinate war efforts in the industrial and financial sectors. But after the war, it attempted to make that new power sharing permanent by creating a centralized social security system and redefining the place and role of the public sphere in regulating social relationships. That caused some weakening of Liberal type social regulation wherein responsibility for social matters lay with the private sphere.

The first Quiet Revolution

Concurrently, respect for provincial autonomy for Québec was sought in the province on behalf of the "French-Canadian race" of Catholic persuasion. Thus, the period 1939-1944 was the backdrop for the "first Quiet Revolution," as historians named it. The government of Adélard Godbout scored a number of achievements, including establishing Hydro-Québec, legislating compulsory education and granting women the right to vote.

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The Duplessis era: 1944-1959

From the social vantage, historians agree that the government of Maurice Duplessis sought to maintain order with the support of the Church. From the economic standpoint, however, Duplessis was interested in promoting the development of a Francophone middle class with ties to U.S. corporate capital.

Maurice Duplessis in 1959In the Duplessis vision, tradition and progress were not necessarily opposed. On the contrary, tradition factors into developing well-being and prosperity. For Duplessis, real sustainable progress provided a vision which tied success and affluence to economic growth through industrialization. The premier saw private enterprise as vital to the advancement of the province. To take an example, the vigorous tourism industry of that time spurred the development of public services and roads. Duplessis saw education as another factor for progress and therefore advocated fiercely for the financial stability of universities.

Until the 1950s, the Church rejected public intervention in the private sector when it came to social regulation. It also opposed excessive government intrusion in the economy, contending that such interference would stifle the liberty of those working in their own interests and homeland interests.

1952

On November 26, 1952, a 600-member delegation from the FCCQ submitted a brief calling for the appointment of a royal commission of inquiry on constitutional and fiscal matters. That brief emphasized the importance of opposing centralist propaganda and allowing the provinces full autonomy in matters of direct taxation.

That major development led to appointment of the Tremblay Commission, which tabled its report in 1956 and gave rise to 253 briefs. In the opinion of former premier Daniel Johnson, that was the most objective inventory ever produced in Québec, one that fully portrayed the distinctiveness of Québec within Canadian Confederation. As he saw it, that was also when Quebecers began to see themselves as a nation taking root in Québec.

Building road infrastructures

The FCCQ took a great many measures during its first 60 years in operation (1910-1970) to build and upgrade road infrastructures throughout Québec. In 1961, it published a key paper on roadway requirements in the province. Almost all of the recommendations contained in that paper were carried out.

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The 1960s: Maîtres chez nous
The economic environment

Historians see the 1960s as a transitional phase that led ten years later to the establishment of Québec's multinational corporations (the famous "Québec Inc."). Conversely, some family-owned empires suffered financial reverses during those changing times.

Those setbacks sparked debate over government's role in economic development. The government set out to lay the ground for a purchasing policy and industrial development strategy aimed at stopping erosion of the province's economic weight and solidifying the influence of Francophone businessmen. The Lesage Administration sought in this same vein to promote Francophone economic forces in the financial and industrial sectors of Québec. The business community and the government sealed an alliance, and business people were asked for the first time ever to share in framing economic policy for Québec.

The Quiet Revolution

In 1960, the Liberal Party under Jean Lesage won handily over Duplessis' Union Nationale, the party in power since 1944. That victory gave the Liberals the go-ahead to embark on reforms that transformed the very foundations of Québec society. In reaction to the Duplessis regime, Quebecers in fact demanded improvements in access to education, working conditions and teacher qualification. Although the fundaments of the Liberal economic system were not challenged, the government was asked to make good the shortcomings of that system, keep a rein on the activities of capitalist entrepreneurs, monitor inflation and bring in more equitable taxation.

There is no forgetting the campaign slogan coined by Lesage's Liberal Party: Maîtres chez nous (masters of our own house). That government administration sought chiefly to re-appropriate the province's natural resources, by nationalizing hydroelectricity, for one. However, the management of hydroelectric resources polarized the population, and Jean Lesage called early general elections in September 1962 to ensure that his actions had popular backing. He carried the day at the polls and the next year nationalized the last privately owned electric power companies, capping the work begun by Adélard Godbout.

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1961-1966

Convinced of the importance of education as the way to prosperity and development for Québec, the FCCQ had a hand in establishing the Parent Commission (1961-1966), which led to creation of the Department of Education by the Lesage Administration.

The Caisse de dépôt et placement du Québec

Cardinal Paul-Émile Léger,
Jean Drapeau and Jean LesageThe institutions instrumental in the economic development of the province include the Caisse de dépôt et placement du Québec, which was established primarily to manage the reserve of the Québec Pension Plan. The Caisse was also tasked with stabilizing Québec's financial market and funnelling part of the funds under its management into developing Québec's economy and businesses. Within a few short years, the Caisse had the largest portfolio of the kind in Canada. Its investment flexibility freed the Québec government from reliance on Canadian financial capital.

The Société générale de financement du Québec

The Société générale de financement du Québec (SGF) was founded in 1962 to modernize Québec businesses by broadening the base of Québec's economic structure, quickening the pace of industrial growth in the province and contributing to full employment.

The SGF did not hold to being only a financing institution; it was often a corporate shareholder and even took over administrative control in some cases. Among its initiatives, the SGF favoured investment in metallurgy, mining, housing, gaming, logging, oil drilling, industrial development, agri-food and asbestos.

Co-operatives take off

With passage of the new Savings and Credit Unions Act, the Lesage Administration was able to chart new courses of action in the co-operative sector. This form of capital ownership reflected the ideals conveyed by the Quiet Revolution. In that particular area, the Liberal government sought to encourage the creation of groups able to stand against outside competition and take the reins in their respective sectors. Several co-operative movements, such as the Mouvement Desjardins, the caisses d’entraide économique and the Coopérative fédérée du Québec, posted strong growth in the 1960s.

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The 1970s: the development of Francophone capital
The economic environment

The 1960s ushered in significant structural changes in Québec, and there was more emphasis on developing the service sector. From 1970 on, industrial-scale natural-resource mining was in decline. Many factories closed as a result of repeated recessions in the U.S. market, the relocation of international corporations to developing countries providing cheap labour, and health threats, especially from asbestos.

Additionally, the government of Robert Bourassa saw the Montreal Exchange slump at the start of that new decade. According to historians Dickinson and Young, the pan-Canadian status of Montreal had steadily waned since opening of the St. Lawrence Seaway, which triggered a decline in port and railway activities. On top of those developments, the large-scale exodus of corporate head offices to Toronto picked up pace at the time, undermining the financial standing of Montreal.

Given the waning influence of the metropolis within Canada, social forces in the city felt the need to develop opportunities in outside markets. Many business people, tired of the quarrelling between Québec and Canada, decided to turn to the U.S. market to liberate the province from dependency on Canada.

A 1973-74 study by the Department of Industry and Trade pointed up a trend toward more and greater Québec investment in the sectors where the major companies were developing. That study further revealed that the road travelled since the Quiet Revolution had given Francophone capital a stronger place in the economy and provided for growing leadership in the investment sector. Thanks to the strong growth of Québec businesses, Francophone capital was in a better position vis-à-vis the challenges and choices associated with Québec's domestic market and international markets as well.

The period spanning the late 1960s and early 1970s saw growth in Francophone capital input in such traditional sectors as agri-food, finance, wood and furniture. New sectors were opening up, including transportation equipment (Bombardier, Provost, Manac, Davie and Témisko), plastics (G.M. Plastic), printing and publishing (Quebecor and Unimédia), non-metallic ores (Shockbeton), primary metals (Sidbec-Dosco) and engineering (SNC-Lavalin, ABBDL and Warren-Rousseau).

Rémi Marcoux Jean Coutu Pierre Péladeau

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The political environment

In the late 1960s, the Royal Commission on Bilingualism and Biculturalism, supported by the Gendron Commission a few years later in 1972, underlined the economic inferiority of Francophones in Canada, and even in Québec. Indeed, English was still the predominant language of work, especially in Montreal.

In 1968, the election of Pierre Elliott Trudeau meant that a Francophone team could finally play an important role in the federal arena, thereby giving Francophones easier access to decision making positions.

In 1974, the Liberal government of Robert Bourassa made French the official language of Québec to turn things around once and for all. It also pressed for the use of French in the workplace. With the rise to power of Parti Québécois leader René Lévesque two years later and adoption of the Charter of the French Language (Bill 101), the French language quickly made inroads as the language of work, instruction, communication, commerce and business.

The union movement

Laurent BeaudoinA move to deconfessionalize trade unions in Québec was set in motion at the start of the Quiet Revolution. The unions took on growing importance in relation to international unions. A new Labour Code took effect in 1964, giving the trade unions innovative guarantees, ensuring their financial independence and giving public-sector workers the right to strike.

Unionization wielded more influence in the 1970s, and there were more, larger and longer strikes than ever before. The new Labour Code enacted in 1977 made it unlawful to hire strike-breakers and required employers to withhold union dues from paycheques.

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From 1980 to now: A strong economic recovery
The economic environment

demonstratorsThe late 1970s saw a large wave of bankruptcies that hit small and medium-sized enterprises (SME) especially hard. Some large corporations seized that opportunity to make acquisitions; others declared bankruptcy after wandering off course. The crisis affected different sectors in different ways. Still, government intervention (often through publicly owned corporations) provided for the survival of many businesses.

Authors Pierre Bélanger and Yves Fournier write that the government played a key part in preserving some of the ground gained by Francophone capital, especially through many joint venture projects. The Québec government also capitalized on the situation, building up its influence, economic weight and interaction relative to private capital. In those authors' opinion, that was when barriers between the private, co-op and public sectors were all but razed.

It was also when the government stepped into several sectors and initiated recovery strategies focused on Québec capital. However, many private entrepreneurs denounced that government intrusion.

Corporate social responsibility

Prior to the 1980s, lawmakers bandied about the expression "corporate social responsibility" (CSR) any way they liked in blaming business for society's ills. The FCCQ then became the first organization to propose a clear definition of CSR based primarily on two absolutes: the rule of law and profitability. This definition is recognized worldwide nowadays, and all business organizations that care about being seen as socially responsible are still drawing on the work of the Federation.

Sectorial growth

Various sectors experienced significant change during the recession. Many Francophone companies operating in fields tied to natural-resource development, for instance, were able to survive and improve their position. The energy sector posted strong growth. During the 1980s, an economic development policy centred on hydroelectricity was framed, and lucrative contracts for exporting that resource were signed with the United States. In the mining sector, the necessary gold mining infrastructure was set up. That provided an entry for Francophone private capital which stymied the dominance of large Canadian and foreign corporations in that area of activity.

Francophone agri-food companies also experienced growth, thanks especially to government strategies implemented in support of processing, financing and marketing. Between 1971 and 1987, the value of agricultural production soared from $305 million to $3 billion.

The transportation equipment sector also had the support of provincial and federal institutions. According to Arnaud Sales, only 7.2% of that sector was in the hands of Francophones in 1960. That figure stood at 60% in 1987. In the service industries, Francophone entrepreneurship had a key role in expansion of retail pharmacy stores. The hardware sector saw the advent of more and more superstores, forcing small hardware businesses to amalgamate.

Francophone advertising agencies also experienced lightning growth over a 10-year period, owing to a number of factors, including the rise of nationalism and the affirmation of Francophone Québec identity as of the late 1970s. Starting in 1980, the Government of Québec awarded all of its advertising contracts to Québec agencies. Thus, the large firms were another help in development of the advertising sector. However, the crisis of the 1980s hit that sector hard, while at the same time encouraging a move towards concentration.

That trend was among the factors explaining the success of service businesses. The recession of the early 1980s gave impetus to business concentration. The success of the small Francophone firms can be attributed to their ability to come together and take the franchise route. Noteworthy, too, were the broader involvement of financial institutions and the greater role of the Québec government in business support. The government simultaneously encouraged the establishment of Francophone business corporations and the move toward small-business concentration.

ReactorAs for the financial sector, a series of transactions during the period 1975-1980 brought five major financial centres to the fore (National Bank, Mouvement Desjardins, Laurentian Bank, Caisse de dépôt et placement du Québec and Prenor Trust Company). The advent of those financial groups boosted the economic power of Francophone entrepreneurs. In 1977, Québec firms controlled savings of $32.1 billion in Québec. By 1983, that figure had mushroomed to $82.4 billion. Additionally, in 1976 Francophone entrepreneurs owned an estimated 55% of controlling shares locally, a figure that had risen to 62% by 1987.

In the 1960s, the FCCQ was among the first organizations to promote the liberalization of trade with the United States in order to gain more export opportunities for Québec businesses. In the late 1980s, the FCCQ therefore came out strongly in favour of the free trade agreement with the United States and supported the signing of NAFTA early in the next decade.

Since 2000, the FCCQ has shared directly in forging trade corridors with the business communities of Québec's three main trading partners – New York State, New England and Ontario.

The Québec-New York Trade Corridor was established in 2001. The Québec-New England Trade Corridor is being set up: an agreement was signed with Vermont in 2006 and another with New Hampshire on May 12, 2008. The FCCQ and the Ontario Chamber of Commerce signed the Québec-Ontario Trade Corridor agreement on March 19, 2008.

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Development of Canadian and international markets

The lack of interaction with English-Canadian capital seriously curbed the growth of Québec businesses beyond provincial borders. This explains why a number of businesses made every effort in the 1970s and 1980s to connect with the Canadian market, especially by buying up non-Québec companies.

During those years, Francophone businesses also sought to draw closer to a few Montreal-based English-Canadian corporations. That form of internationalization spelled a metamorphosis among the Francophone economic elite of Québec. Indeed, between 1960 and 1970, there was a general trend towards trade liberalization that opened onto dramatic growth in international trade.

The General Agreement on Tariffs and Trade (GATT, 1980 round of negotiations) furthered that trend. The Government of Québec, too, encouraged the development of foreign markets and promoted export trade. In the early 1970s, Canada and Québec exported natural resources and semi-manufactured goods. As the 1980s drew to a close, the focus shifted to the processing industry, with the bulk of exports consisting of manufactured and semi-manufactured goods.

Seeking to support international trade, Québec entrepreneurs concentrated on export specialization, looking to sectors – including transportation equipment, engineering, and pulp and paper, among others – in which they could hope for significant earnings.

Challenges today and beyond

Since the end of the 1990s, Québec companies have had to operate in a business environment that grows increasingly complex and competitive, especially when considered against the backdrop of market globalization, keener competition from emerging economies, lagging productivity growth, skilled-labour shortage, population aging or the precarious state of public finance.

That prompted the 2006 publication of Pour un Québec gagnant, the FCCQ's first economic vision paper, meant to keep the Québec economy healthy and vibrant and to revitalize entrepreneurship in the province. Where the Québec business community is concerned, being competitive is not enough; it's all about winning. Our vision of a winning Québec is primarily the vision of an innovating Québec that bases its prosperity on better utilization of its assets, the growth of its enterprises and sustained cooperation with its economic partners. The diversity typical of this vision is clear from the areas of intervention and sectors which FCCQ members see as strategic for business growth. Based on its strategic plan for 2008-12 and the findings of a wide-ranging consultation of its membership, the FCCQ has decided to prioritize four areas that relate directly to the competitiveness and growth of Québec businesses, i.e. productivity and innovation, the work force, internationalization and sustainable development.

As the FCCQ prepares to mark 100 years in the service of Québec business people and businesses, its many achievements show willingness and pride as it continues providing winning conditions for making Québec businesses more competitive. The FCCQ commits to staying this course for the next 100 years.

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